State was not liable to pay service tax on amount received for providing securities to various banks being the duty of the state.

Case Details:

Issue- In the above case, petitioners filed a writ petition wherein prayer has been made for quashing show cause notice dated 17-10-2014 and order dated 11-9-2015, raising demand of tax on account of sum received for providing security to various banks for the period from September, 2009 to September, 2012. Petitioner contented that as per Article 289 of the Constitution of India, the property of the State is exempted from Union taxation. The kind of service provided by it cannot be said to be trade or business being carried on by the State.

Held- It was held that perusal of Article 289 of the Constitution of India shows that the property and income of a State is exempted from Union taxation. However, the Union is not debarred from imposing or authorising or imposition of any tax by law to be framed by the Parliament in respect of a trade or business of any kind carried on by or on behalf of the State or any property used for the purpose. In the case in hand, providing security cannot be said to be a business carried on by the State, as it is otherwise the duty of the State. Security service has not been provided to any private individual. Apparently for the reason of requirement of security more than the normal being provided by the State, certain amounts have been recovered from the public sector banks and All India Radio, on which service tax is sought to be charged by the department, which cannot be permitted, because of constitutional bar. For the reasons mentioned above, the writ petitions were allowed and the impugned orders directing recovery of service tax from the amount received by the State on account of service provided to the banks, etc. were set aside. If any amount is already paid, the same shall be refunded to the State.