Police Bundobast Services Are Sovereign Functions, Not Taxable Under Service Tax Law: Madras High Court

The Madras High Court has held that security and bundobast services rendered by the Greater Chennai Police Commissionerate in the discharge of its statutory duties cannot be subjected to service tax under the Finance Act, 1994, for the period prior to 1 June 2012. It was clarified that police bundobast duties retain sovereign character irrespective of whether services are rendered to government or private entities. The bench of Dr.Justice Anita Sumanth and Justice Mummineni Sudheer Kumar has quashed a service tax demand raised against the Police Commissionerate, reaffirming that such activities form part of the State’s sovereign functions and are outside the scope of taxable “security agency services”. The Greater Chennai Police Commissionerate had approached the High Court by filing a batch of writ petitions challenging the levy of service tax on amounts collected for providing police personnel for security, escort, and bundobast duties. These services were rendered under statutory obligations flowing from the Tamil Nadu District Police Act, 1859, the Chennai City Police Act, 1888, and various Government Orders issued by the State of Tamil Nadu. The tax demand arose from an Order-in-Original dated 14 October 2015, by which the Service Tax Department treated the police department as a “security agency” and sought to levy service tax on the charges collected from government bodies, public sector entities, and private organisations for police deployment. Apart from seeking quashing of the tax demand, the Police Commissionerate also sought a declaration that such statutory services fall outside the ambit of Chapter V and VA of the Finance Act, 1994, and a direction restraining authorities from proposing or levying service tax on similar activities. The principal question before the High Court was whether the Greater Chennai Police Commissionerate could be treated as a “person” engaged in the business of providing security services and thus made liable to service tax for bundobast and escort duties performed as part of its statutory mandate. A related issue was whether the amounts collected under Government Orders constituted consideration for taxable services or were merely reimbursements of costs incurred by the State in deploying police personnel. The Police Commissionerate argued that maintaining law and order and providing security are sovereign functions entrusted to the police under statute. The collection of charges, it was submitted, was only to reimburse expenses such as salary components, allowances, pension contributions, and administrative costs of deputed personnel, as permitted by Government Orders, including G.O. No. 949 dated 6 November 2009. It was further contended that during the relevant period (May 2006 to December 2011), the definition of “person” under the service tax law did not include the Government, and therefore no tax liability could be fastened on a governmental authority performing sovereign duties. Reliance was placed on the Supreme Court’s dismissal of the Revenue’s appeal in the Dy. Commissioner of Police, Jodhpur case, where similar service tax demands had been rejected. The tax department argued that the services were not purely statutory in nature, as police personnel were deployed for specific events and entities, including private organisations. According to the Department, the charges collected were fixed tariffs and not mere reimbursements, and therefore had an element of consideration, bringing them within the scope of taxable security services. The court held that the nature of the services rendered by the police does not change merely because the beneficiaries include private or non-government entities. The Court observed that bundobast and escort duties are integral to the police’s public duty of maintaining peace and order and thus retain the character of sovereign functions. The Court noted that during the period in question, the Finance Act, 1994 did not include the Government within the definition of “person” liable to service tax. The inclusion of “Government” as a taxable person came only with effect from 1 June 2012. On this short but decisive ground, the assumption of jurisdiction by the Service Tax Department for the earlier period was held to be unsustainable. Allowing all three writ petitions, the Madras High Court quashed the Order-in-Original dated 14 October 2015 and set aside the service tax demand raised against the Greater Chennai Police Commissionerate. The Court clarified that its decision was confined to the period prior to 1 June 2012 and left the question of taxability for the post-2012 period open. Case Details Case Title: The Greater Chennai Police Commissionerate Versus UOI Case No.: W.P.Nos. 6280, 6281 & 6282 of 2016 Date: 12.12.2025 Counsel For Petitioner: R.Anishkumar Counsel For Respondent: K.Mohana Murali Click Here To Read Order Read More: Supreme Court Shields District Judges from Disciplinary Action Over Erroneous Orders, Reinstates MP Judicial Officer

Police Bundobast Services Are Sovereign Functions, Not Taxable Under Service Tax Law: Madras High Court

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