1 cext119.11.sxw IN THE HIGH COURT OF JDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CENTRAL EXCISE APPEAL NO. 119 OF 2011 (OLD WRIT PETITION NO.1237 OF 2011) The Security Guards Board for Greater Mumbai and Thane District, a statutory authority framed under Section 6 of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981 having their office at Copper- Rollers Pvt. Ltd., Compound, 2nd floor, Lalbahadur Shastri Marg, Bhandup (West), Mumbai-400 078. ...Appellant. Vs. 1. Commissioner of Central Excise Thane-II, having his office at 4th floor, Navprabhat Chambers, Ranade Road, Dadar (W), Mumbai-400028. 2. Union of India, Notice served through the office of the Central Government Pleader, having his office at Maharshi Karve Road, Mumbai-400 001. ..Respondents Ms. Lata Desai with Dr. Pallavi Divekar for the Appellant. Mr. Pradeep S. Jetly i/by Ms. Suchitra Kamble for the Respondent. 2 cext119.11.sxw CORAM : DR. D.Y. CHANDRACHUD AND A.A. SAYED, JJ. DATE : 21 SEPTEMBER, 2011. ORAL JUDGMENT (PER DR. D.Y. CHANDRACHUD, J.) 1. On the request of Counsel appearing on behalf of the Petitioner, leave is granted to convert the Petition under Article 226 of the Constitution of India into an Appeal. Necessary formal amendment shall be carried out within a period of one week from today. The Registry shall accordingly, number the Petition as a Central Excise Appeal. 2. The appeal arises out of an order passed by the CESTAT on 6 May 2011 on an application for waiver of pre-deposit and for stay of recovery in respect of a demand for service tax in the amount of Rs. 12,90,54,553/-. 3. The Tribunal has directed the Appellant to deposit an amount representing 50% of Rs. 9,76,97,740/- under Section 35F of the Central Excise Act read with Section 83 of the Finance Act, 1994. 4. The appeal is admitted on the following substantial question of law: 3 cext119.11.sxw "Whether the Tribunal was justified in rejecting the application of the Appellant for a complete waiver of the requirement of pre- deposit having regard to the fact that a serious triable issue arises in the appeal and the Appellant seeks to establish that prima facie it does not carry on a business but is a statutory Board which does not fall within the purview of Section 65(94) of the Finance Act of 1994 as amended?" 5. The Appellant is the Security Guards Board for Greater Mumbai and Thane District, a statutory authority constituted under Section 6 of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981. The Act has been enacted by the State legislature for regulating the employment of private security guards employed in factories and establishments in the State of Maharashtra and for making better provisions for their terms and conditions of employment and welfare, through the establishment of a Board. The Board has been constituted under Section 6. Under Section 3, the State Government has been empowered to frame a scheme to ensure an adequate supply and full and proper utilization of Security Guards in factories and establishments, and generally for making better provisions for the terms and condition of employment of such workers. The Board under sub-section (1) of Section 8 is responsible for 4 cext119.11.sxw administering the scheme and is statutorily required to exercise such powers and to perform and discharge such duties and functions as may be conferred on it by the Scheme. In pursuance of the provisions of the Act, the State Government has made a scheme called the Maharashtra Private Security Guards ( Regulation of Employment and Welfare) Scheme, 2002. Under the scheme the wages and allowances payable to the security guards by the Principal employer have been prescribed. Both the Principal employers and the Security Guards are registered with the Board. The establishments are liable to remit to the Board the stipulated amounts every month for the payment of wages and allowances to the Security Guards besides which a levy is recovered to meet the expenses of administering the scheme. 6. Prior to 1 May, 2006 the expression Security Agency was defined by the Finance Act, 1994 as follows : "65(94) "Security Agency" means any commercial concern engaged in the business of rendering services, relating to the security of any property, movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any facts of activity, whether of personal nature of otherwise, including services of providing security personnel." The Finance Act of 2006 amended the definition of the expression Security Agency and the definition as amended reads as follows: 5 cext119.11.sxw "65(94) "Security Agency" means any person engaged in the business of rendering services, relating to the security of any property, movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any facts or activity, whether of personal nature or otherwise, including services of providing security personnel." 7. Prior to the amendment, the Respondents called upon the Board to pay service tax of Rs. 17,91,27,953/- for the period from 16 October 1998 to 31 March 2003. In an appeal filed by the Appellant, the Commissioner (Appeals) by his order dated 20 March 2006 held that the Board was not engaged in providing any security service and was not a commercial concern, and hence was not covered by the definition of Security Agency under Section 65 (94) of the Finance Act, 1994. A similar view was taken in an order of the Commissioner (ADJ) Central Excise, dated 28 February 2008 which related to period between December 2003 to June 2004. After the definition of the expression 'Security Agency' was amended, a notice to show cause-cum-demand notice was issued to the Appellant on 18 October 2007 for the recovery of service tax in the amount of Rs.12,90,54,553/- for the period from 1 May 2006 to 31 March 2007. The First Respondent by an order dated 9 September 2009 confirmed the demand holding that the activity of supplying security guards by the Appellant to factories and other 6 cext119.11.sxw establishments is a service which is covered by the definition under Section 65(94). The Appellant filed an appeal before the CESTAT, in which an application for waiver of pre-deposit was made. By its impugned order dated 6 May 2011, the Tribunal held that prima facie, the Appellant falls within the definition of the expression 'Security Agency' under Section 65(94) and directed the Appellant to deposit an amount of Rs.4,88,48,874/-. 8. Counsel appearing on behalf of the Appellant submits that (i) The expression of Security Agency in Section 65(94) requires that a person should be engaged in the business of rendering services relating to the security of any property and the definition includes the business of rendering services of providing security personnel; (ii) The Appellant which is a statutory Board does not engage in any business but discharges a statutory function; (iii) A circular has been issued by Central Board of Excise and Customs on 18 December 2006 which clarified that activities performed by the sovereign/public authorities under the provisions of law are in the nature of statutory obligations of a mandatory nature and do not attract the payment of service tax; (iv) The Appellant is a statutory Board and a prima facie case having been made out, a complete waiver ought to have been granted. 9. On the other hand, it has been urged on behalf of the Respondent that 7 cext119.11.sxw (i) All the submissions of the Appellant have been fully considered by the CESTAT which has directed a deposit of only 50% of the demand; (ii) The Appellant prima facie does fall within the definition of the expression 'Security Agency' under Section 65(94) as amended with effect from 1 May 2006. 10. We clarify at the out set that this appeal is directed only against the order of the CESTAT on the application for waiver of pre-deposit. Hence, the observations in this order are confined only to evaluating whether a prima facie case has been made out for grant of an absolute waiver as prayed. The merits of the appeal would be decided by the Tribunal independently. Prima facie at this stage, it appears that prior to 1 May 2006 the definition of Security Agency in section 65(94) was applicable to a commercial concern, engaged in the business of rendering services relating to the security of any property. The words "commercial concern" have now been deleted with effect from 1 May 2006 and have been substituted by the words "any person". Nonetheless the primary requirement in Section 65(94) is that a person must be engaged in the business of rendering services relating to security of any property and the definition includes the business of rendering services of providing security personnel. The contention of the Appellant is that it does not engage in any business. The Appellant is a 8 cext119.11.sxw statutory body constituted by an act of the State legislature and has been vested with the statutory duty of enforcing schemes to protect the welfare of Security Guards. According to the Appellant, the Principal employers who are registered with the Appellant are required to deposit the wages and other payments liable to be made to the Security Guards and, apart from that, the Appellant recovers an amount representing 5% which is a levy for administering the scheme. The Central Board of Excise and Customs has in its circular dated 18 December 2006, clarified a doubt which had arisen as to whether, activities which are rendered by a sovereign/public authority which is required to perform activities can be considered as a provision of service for the purpose of the levy of tax. The Board clarified that it is of the view that activities performed by sovereign/public authorities under the provisions of law are in the nature of statutory obligations which are to be fulfilled in accordance with law. The fee collected by them is for performing such activities and is deposited in the Government Treasury. Such activity is purely in public interest and it is undertaken as a mandatory and statutory function, and is not in the nature of a service provided to any particular individual for consideration. In view of these circumstances, the Tribunal was not justified in imposing a requirement of deposit of an amount of Rs. 4,88,48,874/-. The Appellant is a statutory body. But apart from that, the question as to whether the Appellant carries on the business of rendering 9 cext119.11.sxw services relating to the security of any property including the business of providing security personnel is a serious triable question. Consequently an order for pre-deposit was not warranted in the circumstances of the case. 11. In the circumstances, we allow the appeal by setting aside the order of the Tribunal in so far as it directs the Appellant to deposit an amount of Rs. 4,88,48,874/-. The Appellant shall be entitled to an absolute waiver from the requirement of pre-deposit subject to the Appellant filing an undertaking and bond before the Tribunal within a period of four weeks from today to abide by the final result of the proceedings and deposit the amount so determined, in the event it is held liable to do so, subject to the right of the Appellant to challenge an adverse determination. The question of law is answered accordingly. However, we clarify that the merits of the issue as to whether the Appellant is covered within the ambit of the definition of the expression 'Security Agency' in Section 65(94) of the Finance Act, 1994 as amended is kept open to be decided by the Tribunal. The observations contained in this judgment are confined only to the disposal of the application for waiver of the pre-deposit. The Appeal shall accordingly stand disposed of. There shall be no order as to costs. ( A.A. SAYED, J. ) (DR. D.Y.CHANDRACHUD, J.)