CISF Not Liable to Pay Service Tax on Security Services Provided to Delhi Airport: CESTAT

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has held that the Central Industrial Security Force (CISF) was not liable to pay service tax on security services provided to Delhi International Airport Limited (DIAL) and that the entire tax liability rested on the service recipient under the reverse charge mechanism. The bench of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) set aside a service tax demand of over Rs. 5.93 crore along with penalty, bringing major relief to the CISF. The appellant/assessee, CISF, a department under the Ministry of Home Affairs, provides security services at the Indira Gandhi International Airport, operated by DIAL. CISF was registered with the Service Tax department and had been raising monthly bills on DIAL for the cost of deployment of staff, arms and ammunition, clothing, supervision charges and related expenses. Service tax was paid on these amounts. In addition, DIAL provided several facilities and reimbursements to CISF such as transportation, medical facilities, office expenses, telephone charges, rent-free accommodation and dog squad handling expenses. The Department issued three show cause notices covering the period from 2009–10 to 2015–16, proposing to levy service tax on these reimbursements under Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, along with interest and penalties. The Commissioner dropped the demands for the period prior to 14 May 2015, relying on the Supreme Court judgment in Intercontinental Consultants and Technocrats Ltd., which held that Rule 5(1) was ultra vires Section 67 of the Finance Act, 1994. However, for the period May 2015 to March 2016, after the amendment to Section 67, the Commissioner confirmed a reduced demand of ₹5,93,05,515 (after correcting alleged double counting) and imposed a 10% penaltyunder Section 76. Both CISF and the Revenue challenged this order before CESTAT. The Tribunal examined two central issues. Firstly, whether service tax could be levied on reimbursable expenses and free facilities provided by DIAL to CISF? Secondly, whether CISF was at all liable to pay service tax after the issuance of Notification No. 30/2012-ST dated 20 June 2012, which shifted the liability to the service recipient under Section 68(2) of the Finance Act? The Tribunal upheld the Commissioner’s decision to drop demands for the period prior to 14 May 2015, reiterating that the Supreme Court in Intercontinental Consultants had clearly held that reimbursable expenses cannot be added to the value of taxable services prior to the statutory amendment. The Bench observed that the issue was no longer res integra and fully covered by the apex court ruling. For the period after 14 May 2015, the Tribunal went a step further and held that CISF was not liable to pay service tax at all, even on the main service charges, because of Notification No. 30/2012-ST. The notification, issued under Section 68(2) of the Finance Act, 1994, clearly provides that in the case of support services provided by Government or local authority to a business entity, 100% of the service tax is payable by the service recipient and nil by the service provider. The Tribunal noted that CISF is undeniably part of the Government under the Ministry of Home Affairs. DIAL is a commercial entity operating the airport. Security services are not excluded from the scope of the notification. Accordingly, the Bench held that the entire service tax liability rested on DIAL and not on CISF. The Commissioner had observed that the notification merely facilitated ease of doing business and did not shift the substantive liability. The Tribunal strongly rejected this reasoning. Relying on the Supreme Court judgment in Govind Saran Ganga Saran v. CST, the Bench emphasised that identification of the person liable to pay tax is a fundamental component of a valid levy. If the law makes “A” liable, the tax cannot be recovered from “B”. The Tribunal observed, “If ‘A’ is liable to pay, it cannot be charged from ‘B’. The fountain head of charge of any tax is the charging section of the Act and not any action of any individual.” It further clarified that the fact that CISF had been paying service tax earlier does not create a legal liability where none exists. The Tribunal concluded that CISF was not liable to pay any service tax at all on services provided to DIAL after Notification No. 30/2012 came into force. Consequently, the demand of ₹5.93 crore, interest and penalty were unsustainable. The Revenue’s appeal was dismissed, and CISF’s appeal was allowed in full. The order was set aside in entirety, and CISF was held entitled to consequential relief. Case Details Case Title: M/s Senior Commandant Versus Principal Commissioner of CGST Case No.: SERVICE TAX APPEAL NO. 50756 OF 2021 Date: 06.01.2026 Counsel For Appellant: Jaya Kumari, Authorized Representative Counsel For Respondent: Ram Avtar Sharma and Shri Bhupesh Aggarwal, Advocates Click Here To Read Order Read More: Job Work Amounting to Manufacture Can’t Be Taxed as Service: CESTAT

CISF Not Liable to Pay Service Tax on Security Services Provided to Delhi Airport: CESTAT

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