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Mumbai Police owes 85 crores in taxes
November, 16th 2011

No one, not even the police, can evade the long arm of the tax department. In an unexpected development, the Service Tax department of the Central Board of Excise and Customs has slapped a show-cause notice to the Mumbai police, for non-payment of Rs. 85 crore in the form of service tax arrears.
The department contended that the Mumbai police force collects large sums of revenue by providing police protection to eminent personalities and at public events -- but do not observe the practice of paying service taxes for any of their bills.
According to the existing norms, even the Mumbai police is expected to pay 10 per cent of the total charges billed to their customers as service tax, and the amount collected under the said heading is to be deposited with the Service Tax Department at regular intervals.
Sushil Solanki, commissioner, service tax, Mumbai, confirmed the development, saying, "We issued a show-cause notice to the Mumbai police under Section 73 of the Finance Act 1994 last week, and they have to respond to our notice within 30 days."
Solanki added, "The notice has been issued after numerous reminders and letters sent to the police department went unanswered. A copy was even forwarded to the State Home Department, but they too failed to respond."
When asked how the department had managed to default on payment for a sum as large as Rs. 85 crore, Solanki clarified that prior to the year 2006, the definition of a 'security agency' did not include public bodies like the Mumbai police. "However, an amendment was made by the Central Government in the year 2006, in which services rendered by the Central Industrial Security Force (CISF), the Central Reserve Police Force (CRPF) and the Police Force, which were earlier exempted, were made taxable. We have taken into account the revenues raked in by them for the entire period between 2006 and 2011, including penalties imposed for late payment, as per the existing rules under the Finance Act," Solanki added.
Till date, the Mumbai police have not even collected their mandatory service tax registration number, which they need if they must pay their yearly service tax returns, explained the service tax commissioner.

"The police should revert back to us within 30 days. If they fail to revert, we may even have to start the recovery procedure against the department, as per the norms," explained Solanki.

Additional Chief Secretary Umesh Chandra Sarangi said, "I have not come across any such letter, and until I go through its content, I won't make any comment."

Another senior Home Department official from Mantralaya admitted that the Mumbai police do not charge any service tax for services rendered by it.

Cops speak
Meanwhile, Joint Commissioner of Police (Administration) S P Yadav insisted that the police department does not levy any service tax on its bills. "We follow the norms laid down by the State Home Department, and levy charges according to the guidelines, which varies on the basis of the number of police manpower provided, and the duration for which they offer their services. Apart from renewing of licences and charging licence fees, the department also provides police security for BMC demolition, and personnel protection. The funds generated in this way are forwarded to the state treasury." 

Yadav further added, "Any deduction or payment towards service tax, if at all applicable, should be notified to us by the state government, and we will follow the orders issued."

Another senior police officer added, "On an average, the city police may be generating approximately Rs. 1.5 crore annually, by offering the said services. Over Rs. 75 lakh was collected for providing security during the IPL tournament. The entire sum collected is sent to the state exchequer."

Levels of Protection
The Mumbai police's Special Protection Unit (SPU) provides security to different categories of clients -- classified as Z+, Z, Y and X -- to clients like politicians and leaders. All such protection rendered to clients under these categories is offered free of cost.

When the Protection Unit  (PU-I) offers security to persons not under the mentioned categories -- such as builders and film stars -- charges are levied in accordance with rates approved by the Home Department.

A special review committee, comprising DCPs, the additional CP (protection), the joint commissioner of police (law and order), and the commissioner of police collectively assesses the threat faced by VIPs and common individuals who approach the police seeking protection. The police commissioner decides the extent of security cover to be offered to these individuals.

In the case of VVIPs, the police commissioner forwards the review committee report to the State Intelligence Department and the Home Department, and then decides the extent of police cover that is to be offered.

Did you know?
The Protection Unit has around 400 policemen, headed by a police inspector and a senior police inspector.

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