In Security Guards Board for Greater Bombay & Thane Dist. V. Commissioner of Central Excise, Thane-II, the division bench of the Mumbai CESTAT held that the appellant Security Guards Board for Greater Bombay & Thane is not a public authority and therefore, the services rendered by them are chargeable to Service Tax under the provisions of the Finance Act, 1994.
The appellants are constituted under Section 6 of the Maharashtra Private Security Guards (Regulation of Employment & Welfare) Act, 1981, and are engaged in providing security guards to the Industries in their jurisdiction. The appellants are collecting wages and allowances of the security guard and 5% administration charges from their clients. The Revenue observed that the appellants are liable to pay Service Tax under the head of “Security Agency and Manpower Recruitment Agency Services”. Consequently, penalty under sections 77, 78 and 79 were imposed on the assessee.
Before the Tribunal, the appellants argued that the appellants are providing statutory functions and therefore cannot be considered providers of services. Learned Counsel argued that as per provisions of Sections 6 & 8 of the Maharashtra Private Security Guards (Regulation of Employment & Welfare) Act, 1981. The appellants are statutory body established by the Government of Maharashtra for regulating the employees of Security Guards employed in the State of Maharashtra. The function of the Board is to ensure better provisions for the terms and conditions of the employment and welfare of the security guards. Learned Counsel argued that these functions are statutory in nature. The learned Counsel argued that the same cannot be treated as business to qualify under the definition of Security Agency.
The appellants relied up on various decisions and CBEC circular dated 18.12.2006 in which it was stated that fee collected by any sovereign/public authorities for performing any activity which is in the nature of compulsory levy as per the provisions of the relevant statute, and it is deposited into the Government Treasury does not consist provisions of taxable services per se. They further argued that security service is provided by the security guards and the appellants are just a statutory body for making better provisions of the employment and welfare in the interest of the security guards. He argued that in the impugned case, the Hon’ble High Court has granted stay. He further argued that in these circumstances, imposition of penalty is not warranted.
Analyzing the provisions of the Maharashtra Private Security Guards (Regulation of Employment & Welfare) Act, the bench noted that no Director is paid by the Government of Maharashtra, the levy is collected and is determined by the Board in terms of clause 40. All the expenses and salaries of the said Board are not charged to the Consolidated Fund but are charged to the amount recovered under the said Scheme.
“In view of the above, it cannot be said that the Board is a Public Authority or Statutory Authority. Thus the service provided by them is not a statutory function and charges collected by them are not statutory levy. In view of above, they are chargeable to Service Tax as a regular service provider. Clause 31 of the Maharashtra Private Security Guards (Regulation of Employment & Welfare) Scheme, 2002 provides as follows: –
“Disbursement of wages and other allowances to registered Security Guards of the Board.- The wage and other allowances payable to the registered Security Guards of the Board every month by the registered principal employer shall be remitted by the registered principal employers by cheque to Secretary, of the Board, within such time after the end of the month, as may be specified by the Board. The Secretary thereupon shall arrange to disburse the wages and other dues, if any to the registered Security Guards of the Board on specified days every month subject to deductions, if any, recoverable from them under the Scheme; Provided that the Board may, if it thinks fit, and subject to such conditions as may be laid down by it, allow a registered principal employer to pay directly to the Security Guards the wages and other allowances after making such deductions as may be authorized and recoverable from them under the Scheme, within such time and in such manner as may be specified by the Board.”
“From the above clause, it is apparent that the wages and allowances are collected by the Board as an Agency for payment to the concerned persons/authorities. Therefore, the wages and allowances are excludible from the value of service tax. Thus, the taxable value for the purpose of levy needs to exclude these charges. The demand is modified to that extent.”
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