[Order per : Raju, Member (T)]. - The appellant, Security Guards Board for Greater Bombay & Thane Dist. constituted under Section 6 of the Maharashtra Private Security Guards (Regulation of Employment & Welfare) Act, 1981, 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. Revenue issued a show cause notice to them seeking to recover Service Tax under the head of ‘Security Agency’ and ‘Manpower Recruitment Agency Services’ alleging that the appellant provided the said services to their clients. Demand was raised on the entire amount of wages and allowances and administration fee received from the clients. The entire demand was confirmed by the Commissioner and equivalent amount of penalty under Section 76 was imposed. Penalty of Rs. 20 crores was also imposed under Section 78 of the Finance Act, 1994. Penalty was also imposed under Section 77 of the Finance Act, 1994. Aggrieved by the said order, the appellants are in appeal before this Tribunal.
2. Learned Counsel for 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. Learned Counsel relied on the decision of Hon’ble Mumbai High Court in the case of Hussain Mithu Mhasvadkar v. Bombay Iron & Steel Labour Board and Others - (1991) 93 BOMLR 805 = 1991 (62) FLR 199. The said decision of Hon’ble High Court was upheld by the Hon’ble Supreme Court in Civil Appeal No. 11189 of 1995 vide its order dated 7-9-2001. Learned Counsel also relied on decision of Hon’ble Supreme Court in the case of Vizagapatnam Dock Labour Board v. Stevedores Association Vishakhapatnam - AIR 1970 SC 1626. It was argued that the C.B.E. & C. Circular No. 89/7/2006-S.T., dated 18-12-2006 prescribed 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. He 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.
3. Learned AR relied on the impugned order.
4. We have gone through the rival submissions. We find that the appellants are a Board constituted under Section 6 of the Maharashtra Private Security Guards (Regulation of Employment & Welfare) Act, 1981. Under clause 40 of the Maharashtra Private Security Guards (Regulation of Employment & Welfare) Scheme, 2002, following has been prescribed :-
“40. Cost of operating the Scheme and provision for amenities and benefits to the registered Security Guards of the Board. - (1) The cost of operating this Scheme and for providing different benefits, facilities and amenities to the registered Security Guards of the board as provided in the Act and under this Scheme, shall be defrayed by payment made by the registered principal employers to the Board. Every registered principal employer shall pay to the Board such amount by way of levy in respect of registered Security Guards of the Board allotted to and engaged by him as the Board may, from time to time, specify by public notice or written order to the registered principal employers and in such manner and at such time as the Board may direct. The Board may require the registered principal employers to pay the levy retrospectively or prospectively as it may deem fit.
(2) As Principal employer to whom this Scheme applies shall pay the levy as specified by the Board, from time to time, from the date from which the Scheme applies to him irrespective whether he gets himself registered within the time limit laid down in clause 13 of this Scheme or any time thereafter.
(3) In determining what payments are to be made by the registered principal employers under sub-clause (1), the Board may fix different rates of levy for different categories of registered Security Guards of the Board provided that, the levy shall be special that the same rate of levy will apply to all registered principal employers who are in like circumstances.
(4) The Board shall not sanction any levy exceeding fifty per cent of the total wage bill without the prior approval of the State Government.
(5) A registered principal employer shall on demand make a payment to the Board by way of deposit or provide such other security for the due payment of the amount referred to in sub-clause (1) as the Board may consider necessary.
(6) The Secretary shall furnish, from time to time, to the Board such statistics and other information as may reasonably be required in connection with the operation and financing of this Scheme.
(7) If a registered principal employer fails to make the payment due from him under sub-clause (1) within the time specified by the Board the Secretary shall serve a notice on the principal employer to the effect that unless he pays his dues within three days from the date of receipt of the notice, the supply of registered Security Guards of the Board to him shall be suspended. On the expiry of the notice period the Secretary shall suspend the supply of registered Security Guards of the Board to a defaulting principal employer until he pays his dues.”
4.1 Further, under Section 6 of the Maharashtra Private Security Guards (Regulation of Employment & Welfare) Act, 1981, following has been provided :-
6. Constitution of Board. - (1) The State Government may, by notification in the Official Gazette, establish a Board to be known by such name as may be specified in the notification for any Security Guard in any area. One or more Boards may be established for one or more classes of Security Guards or for one or more areas.
(2) Every such Board shall be a body corporate with the name aforesaid, having perpetual succession and common seal, with power to acquire, hold and dispose of property, and to contract, and may, by that name, sue or be sued.
(3) The Board shall consist of members nominated, from time to time, by the State Government representing the 2 (principal employers) the Security Guards and the State Government.
(4) The members representing the principal employers, and the Security Guards shall be equal in number, and the members, representing the State Government shall not exceed one-third of the total number of members representing principal employers and Security Guards.
(5) The Chairman of the Board shall be one of the members appointed to represent the State Government; nominated in this behalf by the State Government.
(6) After nomination of all the members of the Board including the Chairman, the State Government, shall, by notification in the Official Gazzette, publish the names of all the members of the Board.
(7) The term of office of members of the Board shall be such as may be prescribed.
(8) There shall be paid to every member (not being a member representing the State Government) from the fund of the Board, travelling and daily allowances for attending meetings, of the Board at such rates as may be prescribed.
(9) The meetings of the Board and procedure to be followed for the purpose and all matters supplementary or ancillary thereto shall, subject to the approval of the State Government, be regulated by the Board.”
It can be seen 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 :-
“31. 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.
4.2 Penalties have been imposed under Sections 76, 77 and 78 of the Finance Act, 1994. We find that the board has been created for welfare of the working class. One of the purposes of the board is to ensure that working people are treated well and not exploited. In these circumstances, invoking Section 80 of the Finance Act, 1994, we set aside penalties under Sections 76 and 78 of the Finance Act, 1994.
5. Accordingly, appeal is allowed partially on above terms.
(Pronounced in Court on 14-12-2016)