HC Upholds RCM On Security Services – No Violation Of Articles 14 Or 19

Case Details: Eagle Security & Personnel Services vs. Union of India - [2025] 177 taxmann.com 549 (Bombay) 

Judiciary and Counsel Details

• M. S. Sonak & Jitendra Jain, JJ.
• Shreyas Shrivastava & Saurabh R. Mashelkar, Advs. for the Petitioner.

Facts of the Case

The petitioner, a proprietorship entity rendering security services, challenged the constitutional validity of the classification of suppliers under the Reverse Charge Mechanism (RCM) introduced with effect from 01-01-2019. Prior to that date, GST on security services was levied under the forward charge mechanism, making the supplier liable to pay tax under the head “Investigation and Security Services.”

Notification No. 29/2018-Central Tax, dated 31-12-2018, amended Notification No.13/2017-Central Tax, dated 28-06-2017, to shift liability to the recipient under RCM if the supplier was any person other than a body corporate. The petitioner contended that such classification discriminated between proprietorship entities and body corporates, violated Articles 14 and 19 of the Constitution, and restricted the ability to claim Input Tax Credit (ITC), since services supplied under RCM were treated as exempt in the hands of the proprietorship entity, creating higher costs.

The petitioner sought to have sections 17(2) and 17(3) of the CGST Act read down to include proprietorship entities along with body corporates. The matter was accordingly placed before the Bombay High Court.

High Court Held

The Bombay High Court held that the classification of suppliers into body corporates and others was reasonable, based on an intelligible differentia having a rational nexus with the object of the legislation, and was therefore not violative of Articles 14 or 19. The Court observed that a person whose services are liable under RCM does not have output tax liability, and hence the input tax credit cannot be availed, while the recipient of services can claim ITC. Sections 17(2) and 17(3) could not be read down to include proprietorship entities alongside body corporates, as the legislative policy to cover certain classes under RCM is within the wisdom of the legislature and not easily subject to judicial interference.

List of Cases Reviewed

• Chief Commissioner of Central GST v. Safari Retreats (P.) Ltd. (2025) 2 SCC 523 (para 61)
• Delhi Transport Corporation v. D.T.C. Mazdoor Congress (1991) Supp (1) SCC 600 [para 64]

List of Cases Referred To

• R.K. Garg/R.K. Karanjia/Madhu Mehta/P.K. Soi/S.S. Bedi v. Union of India [1981] 7 Taxman 53/133 ITR 239 (SC) (para 22)
• Morey v. Doud 354 US 457 (1957) (para 24)
• State of West Bengal v. Kesoram Industries Limited (2004) 10 SCC 201 (para 25)
• Hoechst Pharmaceuticals Ltd. v. State of Bihar 1984 taxmann.com 835 (SC) (para 25)
• Uber India Systems (P.) Ltd. v. Union of India [2023] 149 taxmann.com 265/97 GST 920/73 GSTL 476 (Delhi) (para 36)
• Dharmendra M. Jani v. Union of India [2021] 127 taxmann.com 730/87 GST 522 (Bombay) (para 37)
• Amalgamated Tea Estate Co. Ltd. v. State of Kerala 1975 taxmann.com 41 (SC) (para 40)
•  All India Haj Umrah Tour Organizer Association, Mumbai v. Union of India [2022] 140 taxmann.com 562/93 GST 234/63 GSTL 129 (SC) (para 41)
• Amarendra Kumar Mohapatra v. State of Orissa (2014) 4 SCC 583 (para 42)
•  Shashikant Laxman Kale v. Union of India [1990] 52 Taxman 352 (SC) (para 43)
• S. Kodar v. State of Kerala AIR 1974 SC 2272 (para 48)
• State of Karnataka v. M.K. Agro Tech (P.) Ltd. [2017] 86 taxmann.com 123/64 GST 19 (SC) (para 49)
• Federation of Hotel & Restaurant Association of India v. Union of India [1989] 46 Taxman 47 (SC) (para 50)
•  Easland CCE, Coimbatore 2003 taxmann.com 2076 (SC) (para 51)
• Pace Setters Business Solutions (P.) Ltd. v. Union of India (2024) 127 GSTR 392 (Delhi) (para 59)
• Chief Commissioner of Central GST v. Safari Retreats (P.) Ltd. (2025) 2 SCC 523 (para 61)
•  Delhi Transport Corporation v. D.T.C. Mazdoor Congress (1991) Supp (1) SCC 600 (para 63)