By TIOL News Service

MUMBAI, NOV 02, 2018: THESE are Revenue appeals.

The respondents were appointed by the Court Receiver (CR) of Bombay High Courtand the Debt Recovery Tribunal for the purpose of guarding the suit properties filed by the parties such as banks and financial institutions for recovery of debts.

As per the direction of the Courts, the CR is under judicial and legal obligation to take over the custody and possession of the suit properties, guard/maintain those properties and further dispose of the same as per the directions of the Courts for relieving the debt.

Since the office of CR is not equipped for guarding such suit properties they had appointed the respondents for accomplishing the said purpose.

The activities undertaken by the respondents for deploying manpower for guarding the property on behalf of the CR was interpreted by the department as falling under the taxable category of "Security Agency Service".

Service tax demand(s) were confirmed against the respondent(s) but in appeal, the Commissioner (A) set aside the demands holding that the CR appointed by the Court should not be considered as "client" for the appellant, in order to fall within the ambit of definition under 'Security Agency Service'; that in absence of nexus between the service providers and the client, the activities undertaken by the appellants should not be subjected to levy of tax under such category of service.

Revenue has assailed the impugned order on the ground that the security services provided by the respondents cannot be termed as sovereign function of the State and there is no specific exemption provided in the service tax statute for not taxing the said service. It is further contended that since ultimatelypayments were made by the banks for the security services provided by the appellant, such services should be considered as taxable under the category of Security Agency Service.

The Bench considered the submissions and observed thus -

++ The facts are not in dispute that the appellants were - engaged by the CR for providing taxable services and in no way, they were connected with the banks / financial institution, who ultimately reimbursed the expenses to the CR as per the applicable rules and instructions of the Court.

++ Thus, the CR appointed by the Court for guarding the suit records cannot be considered as "client" of the appellant, in order to fall under the category of Security Agency Service. In this case, the service receiver is the CR, who performs the judicial functions as per the Court.

++ Hence, the activity undertaken by the appellant can be considered as sovereign function of the State inasmuch as the Court performs according to the mandate of the Constitution of India.

Concluding that the order passed by the Commissioner(A) setting aside the adjudication orders cannot be interfered with, the Revenue appeals were dismissed.

(See 2018-TIOL-3325-CESTAT-MUM)