By TIOL News Service

MUMBAI, MAY 06, 2017: THE Petitioner is a statutory authority constituted u/s 6 of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981.

This Act has been enacted by the State legislature for regulating the employment of private security guards employed in factories and establishments in the State of Maharashtra and for making better provisions for their terms and conditions of employment and welfare, through the establishment of a Board.

In pursuance of the provisions of the Act, the State Government has made a scheme called the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Scheme, 2002.

The Security Guards Board, constituted under Section 6, is responsible for administering the scheme and is statutorily required to exercise such powers and to perform and discharge such duties and functions as may be conferred on it by the Scheme.

Under the Scheme, the wages and allowances payable to the security guards by the Principal employer have been prescribed. Both, the Principal employers and the Security Guards are registered with the Board. The establishments are liable to remit to the Board the stipulated amounts every month for the payment of wages and allowances to the Security Guards besides which a levy is recovered to meet the expenses of administering the scheme.

Prior to 1 May, 2006 the expression "Security Agency" was defined in the FA, 1994 as follows:

65(94) Security Agency means any commercial concern engaged in the business of rendering services, relating to the security of any property, movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any facts of activity, whether of personal nature of otherwise, including services of providing security personnel.

The Finance Act, 2006 amended the definition to read:

65(94) Security Agency means any person engaged in the business of rendering services, relating to the security of any property, movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any facts or activity, whether of personal nature or otherwise, including services of providing security personnel.

In the present case, SCNs dated 31st March, 2015 and 26th April, 2016 were issued raising a service tax demand of Rs.49,10,73,448/- and Rs.55,11,86,197/- respectively.

By an order-in-original dated 21 st December 2016, the demands were confirmed.

A Writ Petition is filed by the Security Guards Board with a prayer for issuance of a writ of certiorari to call for records and quash and set aside the order dated 21st December, 2016.

The High Court invited the attention of the petitioner to the remedy of an appeal available under the Central Excise Act, 1944.

To this, the petitioner submitted that the remedy of appeal is conditional. Inasmuch as the appeal can be entertained only when there is compliance reported with the pre-condition of deposit of 7.5% amount of service tax confirmed together with interest and penalty and the same is highly arbitrary and excessive given the nature of the functions performed by the Security Guards Board and it being a statutory authority.

It is further informed that the petitioners have been brought under the service tax net only by an amendment and in these circumstances, compelling the petitioners to abide by this pre-condition of the statute and of securing the demand to the extent of 7.5% of the tax and interest/penalty demanded would negate the right of appeal; that the Board has no finance and resources of its own; that it would face enormous difficulties in making arrangements for this deposit and in these circumstances, the High Court should interfere and grant necessary safeguards and protection.

The High Court observed that it is unable to agree with the Petitioner.

After extracting the provisions of section 35F of the CEA, 1944 before and after the amendment by the Finance Act, 2014, the Bench added -

+ A Division Bench of this court … had an occasion to consider the argument that by the prior regime, it was open for the Tribunal to dispense with the requirement of pre-deposit and it was possible for the appellant to seek a waiver therefrom. Now, such a stipulation is absent. Now, it is mandated that 7.5% of the duty demanded or penalty imposed or both has to be deposited. If the Tribunal finds that there is no compliance with this requirement, then, it cannot entertain the appeal.

+ The precise argument that there would be prejudice caused to the appellants and who may be statutory bodies, authorities, public sector undertakings and Government companies etc. was considered. The Division Bench found and while agreeing with another Division Bench of the High Court of Allahabad that this condition has been imposed advisedly. That is to curtail litigation. That is because earlier the stay applications consumed enormous time of the Tribunal and equally of the higher courts. Now, a reasonable condition has been imposed. Now, it is not necessary to go into any issues or merits and once there is a security in the form of deposit, then, the appeal can be entertained and adjudicated on merits. Fruitless and avoidable litigation generated by interim/stay applications has been now curtailed.

+ Even otherwise, we do not find any substance in the argument …that it is impossible for the Board to arrange and make any deposit. What we have found from a perusal of the 1981 Act is that the Board is set up and established in the State of Maharashtra by a statute. That statute of 1981 enables, by section 6, constitution of a Board. It could be a single member Board. Its powers and duties are enumerated in section 8 and what is clear from the provisions is that it can submit its accounts to the State Government. The accounts are audited and even the determination of moneys due from employers, principal employers and security guards enables the Board to generate funds. Equally, it is not as if the State Government cannot contribute anything. In appropriate cases, the Board can approach the State Government and for necessary financial assistance or grant.

+ We do not think that there is a financial hardship and of such nature as would enable us to hold that the statute imposes an excessive or onerous condition so as to avail of the right of appeal.

+ Once we find that there is an alternative and equally efficacious remedy, where all issues of fact and law can be considered, then, there is no need to entertain this writ petition .

The writ petition was dismissed.

Nonetheless, considering the prayer made by the petitioner, they were given additional time of six weeks to comply with the statutory pre-condition of making pre-deposit and pursuant to which the appeal would be entertained and heard on merits by the CESTAT.

In passing: Also see -

2011-TIOL-1428-CESTAT-MUM.

2011-TIOL-653-HC-MUM-ST.

2017-TIOL-69-CESTAT-MUM.

(See 2017-TIOL-853-HC-MUM-ST)