RELIANCE SECURITY AGENCY Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioners seek to declare S.67 of Chapter V of the Finance Act, 1994 (Act 32 of 1994), as amended from time to time , and other provisions and rules made and notifications issued under the Act, in so far as it includes the expenses and salary paid to the Security Guards and the statutory payments like contributions to ESI and EPF, in the 'Gross amount' charged for valuation of 'taxable service' in computing the 'service tax' payable, as ultra vires to the Constitution of India.

(2.) WP (C) No. 34643 of 2004 has been preferred by an Association representing various Security Agencies, who are alleged to be the members of the said Association. In fact, the said Association is stated as registered under the provisions of the Travancore - Cochin (Literary, Scientific and Charitable Societies) Registration Act. The grievance is mainly with regard to the steps taken by the respondents to mulct the liability towards service tax upon the members of the Association under various heads; by way of Tax, Interest, Penalty etc., reckoning the 'Gross income' of the members, i.e. without realizing or taking into account the actual 'service aspect' rendered. Almost similar pleadings and prayers have been raised by the other petitioners as well, who are the concerned security service providers and are not the members of the Association. The petitioners contend that their undertakings actually do not have any clients at all and that the tax liability is to be fixed only with respect to the actual charges / commission realised by them in providing the security personnel to the service receivers. It is contended that, in most of the cases, the agencies who provide the security personnel to the service receivers, are getting only a meagre amount as 'Commission' and bulk of the amounts received is spent towards the salary and other statutory payments payable in respect of the security personnel engaged. It is also contended that in several cases, salary is being paid directly by the service receivers.

(3.) With regard to the challenge as to the constitutional validity of the provisions, it is stated that there is absolutely no rhyme or reason in including the said items in the 'Gross amount', as S.67 only provides for valuation of the 'taxable service' and that it is violative of Art.14 and Art.19(1)(g) of the Constitution of India. It is stated that an element of hostile discrimination is shown towards the 'Security Agencies', unlike several other cases, where a specific provision for exemption is provided. The gist of the contention is that the salary and other statutory payments have to be segregated from the 'Gross amount' and only the balance amount is liable to be reckoned for the purpose of taxation.