By TIOL News Service

MUMBAI, NOVEMBER 03, 2014: AGAINST the Mumbai Police, the Commissioner, Service Tax-I, Mumbai confirmed a Service tax demand of Rs.13,54,03,947/- along with interest and also imposed a penalty of Rs.10.88 crores. The period of demand is from 01/5/2006 to 31/02/2012.

The CST, Mumbai is of the view that the services provided by Mumbai Police to individuals or organizations in conducting various private and public events come under the purview of 'Security Agency Services'.

Before the CESTAT with a stay application, the applicant submitted -

+ The aforesaid services are undertaken by the Mumbai Police in terms of the provisions of section 47 & 48 of the Mumbai Police Act, 1951. In terms of the aforesaid provisions, the Competent Authority, on an application by any person, may depute additional number of Police to keep the peace, to preserve order and to enforce any of the provisions of the said Act for the period specified therein and the cost of such provisions shall be borne by the person who makes the application.

+ Under section 48, employment of additional Police is made at large works which is being carried on or any public amusement, which is being conducted, if it is likely to impede the traffic or to attract large number of people and the behaviour or a reasonable apprehension of the behaviour of the persons employed necessitate employment of additional Police, the Competent authority shall employ the police force at such place for such period and the cost of such deployment has to be borne by the person, who undertakes the work.

+ The cost for such provision of services paid by the recipients, gets credited to the Consolidated fund of the State and does not go into the kitty of the Bombay Police. Similarly, the expenditure for deployment of forces has to be met from the budget allotted to the Mumbai Police. Therefore the nature of the activity undertaken by the Bombay Police is of the nature of a sovereign function relating to maintenance of law and order and the said service does not fall within the category of 'Security Agency Services'.

+ Reliance is placed on the Tribunal decision in Dy. Comm. Police vs. Commissioner of C.Ex., Jaipur-II - 2013-TIOL-1380-CESTAT-DEL where in identical circumstances, stay has been granted. And also the decision of Bombay High Court in the case of Security Guards Board vs. CCE, Thane-II - 2011-TIOL-653-HC-MUM-ST where it is held that a statutory body is not liable to service tax under section 65(94) of the FA, 1994.

The AR reiterated the finding of the adjudicating authority and also submitted that Central Industrial Security Forces (CISF), which provides security services to various central government establishments including government departments, has been held to be a service provider in the category of 'Security Agency Service' and they have been discharging service tax liability. The CBEC letter F.No. 137/131/2010-CX.4 dated 20th May, 2011 is referred to where it is clarified that the services provided by the state police in providing 'Escort' service to banks and other establishments could not be said to be statutory and sovereign functions and, therefore, such services are liable to service tax under 'Security Agency Services'.

The Bench observed -

"6. We have read the provisions of the section 47 and 48 of the Mumbai Police Act, 1951. The said provisions, prima facie, suggest that the services provided by deployment of additional police force, either to individuals or for public events, partakes the nature of maintenance of peace and preservation of order. Further, the costs paid by the service recipients gets credited to the consolidated fund of the State, which is also suggestive of statutory/sovereign nature of the function. Further, the issue whether security services provided by the Police is also a security service is a triable issue. Both the Tribunal and the Hon'ble Bombay High Court in the cases cited (supra) have taken a prima facie view that such services may not be liable for service tax. Thus, the appellant has made a strong case for grant of stay. Accordingly, we grant unconditional waiver from pre-deposit of the dues adjudged against appellant and stay recovery thereon during the pendency of the appeal. Since, Revenue involved is substantial both side are at liberty to seek early hearing of the appeal."

In fine, pre-deposit was waived and stay was granted.

In passing: Ad-hoc exemption order 1/1/2011 dated July 1, 2011 [F.No.137/14/2008-CX.4] -

And whereas, after consultation with the Law Ministry it was decided that the services provided by CISF to Public Sector Undertakings and State Governments are liable for payment of service tax under the "Security Agency's Service" and CISF thereafter started paying service tax with effect from 01.04.2009;

Due to the above reasons, CISF did not collect the service tax amount from the service recipients for the period upto 31.03.2009.

Now therefore, in exercise of the powers conferred by sub-section (2) of section 93 of the Finance Act,1994 (32 of 1994), the Central Government, on being satisfied that it is necessary in the public interest to do so, hereby exempts the taxable service provided, to any person by Central Industrial Security Force in relation to 'Security Agency's service' falling under sub-clause (w) of clause (105) of section 65 of Finance Act, 1994, during the period 16.10.1998 to 31.03.2009 from the whole of the service tax leviable thereon under section 66 of the Finance Act, 1994.

(See 2014-TIOL-2173-CESTAT-MUM)