2012 (28) STR 3 (Ker.) Security Agencies Association vs. Union of India

Facts:
A writ petition was filed stating that, inclusion of the expenses and salary paid to the security guards and statutory payments such as ESI, EPF, etc. in the “gross amount charged” was ultra vires to the Constitution of India. The appellant contended that they received a petty amount as commission, while providing security personnel to any service receivers and bulk of the amount received was expended towards salary and statutory dues. Further, sometimes, the service receivers directly paid salaries to security personnel. Therefore, it was not logical to include salary and statutory dues in “gross amount charged” u/s. 67 of the Finance Act, 1994 dealing with valuation of taxable services and that it was violation of Article 14 and 19(1)(g) of the Constitution of India. The appellant stated that the gross amount without segregating the expense towards salary and statutory payment should not form part of taxable service and reliance was also placed on Advertising Club vs. CBEC, 2001 (131) ELT 35 (Mad). The appellant contended that service tax is not a charge on business but on services as held by the Hon’ble Supreme Court in case of All India Federation of Tax Practitioners and others vs. Union of India 2007 (7) STR 625 (SC). The learned counsel of the appellant submitted that the challenge is not in regards to the leviability of service tax on the applicant, but on the gross amount as determined u/s. 67.

The revenue, relying on various Supreme Court and High Court precedents, contended that the provisions were introduced through powers vested with the parliament vide relevant entry under List I of the 7th Schedule. Further, the Hon’ble Apex Court and Madras High Court had held that sustainability of the provision cannot be questioned or established with reference to the “measure of taxation”.

Held:
Following various Supreme Court and High Court precedents, the Honourable High Court observed that there was no case for the petitioner that the Parliament did not have legislative competence to enact the law and there was no violation of any fundamental rights with respect to the business. The measure of tax could not alter the nature of taxation. The legislation had the discretion to decide the class of taxpayers, events, quantum etc. There was no master and servant relationship between the security personnel and the service receivers and the appellants could raise invoices on service receivers for the salaries, expenses and service tax thereon and therefore, the appellants were not aggrieved by the said levy in any manner and therefore, the writ petition failed.