Rent-Free Accommodation to CISF Personnel Not Taxable as ‘Consideration’ for Security Services: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh Bench, has ruled that facilities such as rent-free accommodation, electricity, medical facilities, vehicles, and other amenities provided by service recipients to personnel of the Central Industrial Security Force (CISF) cannot be treated as “consideration” for security services and therefore cannot be included in the taxable value for service tax purposes. The Bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that reimbursements or facilities provided directly by service recipients do not qualify as consideration unless they are payments made to the service provider for the service rendered. The ruling came in an appeal filed by CISF against the Commissioner of Central Goods and Service Tax (CGST), Panchkula. The Tribunal set aside the earlier order that had confirmed service tax demands on the notional value of these facilities. The CISF unit stationed at Panipat was providing security services to National Fertilizers Limited (NFL), a public sector undertaking. During the course of the arrangement, NFL provided certain facilities to CISF personnel, including accommodation, electricity, medical support, vehicles, telephone services, and stationery. The tax department took the view that these facilities amounted to additional consideration under Section 67 of the Finance Act, 1994 and therefore should form part of the taxable value of the security agency services provided by CISF. On this basis, a show cause notice was issued proposing a service tax demand along with interest and penalties. The adjudicating authority confirmed the demand under Section 73(1) of the Finance Act, invoking the extended limitation period. Interest was imposed under Section 75, along with penalties under Sections 77 and 78. The order was later upheld by the Commissioner (Appeals), prompting CISF to approach the Tribunal. CISF argued that the demand was legally unsustainable because the facilities provided by NFL were not part of the contractual consideration for the security services. The Force maintained that it had already discharged service tax on the actual consideration received, which included deployment costs, salaries and allowances, clothing, arms, and ammunition expenses. The appellant further contended that the facilities provided by the service recipient were merely for operational convenience and did not involve any monetary payment or contractual enhancement of the service charges. Consequently, assigning a notional value to such facilities for taxation purposes was impermissible under Section 67 of the Finance Act. CISF also relied on several earlier decisions of the Tribunal in its own cases, where similar service tax demands had been set aside. The Tribunal relied on the Supreme Court’s ruling in Union of India v. Intercontinental Consultants & Technocrats Pvt. Ltd., which held that reimbursable expenses cannot be included in the taxable value unless they form part of the consideration for the service. According to the Bench, the facilities such as accommodation, medical services, vehicles, and telephone charges were provided directly by the service recipient and were not amounts payable to CISF. Therefore, they could not be added to the assessable value for the purpose of service tax. The Tribunal also noted that similar demands in earlier cases had failed on the ground of limitation. Since both the service provider and the service recipient were government or public sector entities, the possibility of intentional tax evasion was unlikely, and the department could not invoke the extended limitation period without evidence of suppression or misrepresentation. Holding that the issue was already settled by consistent judicial precedents, the Tribunal concluded that the impugned order confirming the service tax demand was unsustainable. It accordingly set aside the order and allowed the appeal filed by CISF with consequential relief. Case Details Case Title: M/s Central Industrial Security Force Versus Commissioner of Central Goods & Service Tax, CGST Panchkula Citation: JURISHOUR-280-CES-2026(CHAN) Case No.: Service Tax Appeal No. 60756 of 2017 Date: 09.03.2026 Counsel For Appellant: Sagar Verma, Advocate Counsel For Respondent: Varun Sharma, Authorized Representative Click Here To Read Order Read More: ISD Credit Distribution Not Mandatory Before 2016: CESTAT

Rent-Free Accommodation to CISF Personnel Not Taxable as ‘Consideration’ for Security Services: CESTAT

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