In Supdt. of Police v. CCE & ST, Jaipur-I, the Delhi bench of the CESTAT held that service tax cannot be imposed on the State Police since it cannot be considered to be a “person” engaged in the business of running security services for the purpose of the Finance Act, 1994.
In the instant case, the service tax department levied tax on the State Police alleging that they have been engaged in providing Security Agency Service covered under Section 65(105)(w) of the Finance Act, 1994 without having the registration for the services.
As per Section 65(94) of the Finance Act, 1994, Security Agency means any person engaged in the business of rendering services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity, whether of a personal nature or otherwise, including the services of providing security personnel.
The bench relied on the decision of the Tribunal in their own case wherein it was held that the police department, which is an agency of the State Govt., cannot be considered to be a “person” engaged in the business of running security services. Consequently, the activity undertaken by the police is not covered by the definition of Security Agency under Section 64(94) of the Act.
The bench, in that case, also found that in terms of CBEC circular on this subject, the fees collected by the police department is in the nature of fee prescribed for performing statutory function, which has been deposited into the Govt. treasury. In the light of the CBEC circular also, there can be no levy of service tax on such activities carried out by the police department.