2017 (5) TMI 824 - AT - Service Tax

Business Auxiliary Service - respondent herein was engaged in undertaking the work of cleaning of nullah roadside garbage soil etc. at designated places in Nagpur and has received payment for such activities from Nagpur Municipal Corporation (NMC) and from Kanak Resource Management Ltd. - Held that - it cannot be disputed that cleaning of nullahs and removal of roadside garbage and waste soil is statutory function of NMC which they have outsourced to the respondent herein. Respondent is not providing any services to NMC as the activity of cleaning of nullahs and removal of roadside garbage and waste soil is not an activity of business to NMC and these services do not qualify as services on behalf of the client - appeal dismissed - decided against Revenue.

Summary

Issues:
Taxability of services provided by respondent for cleaning nullahs, garbage, and soil on behalf of Nagpur Municipal Corporation (NMC) under "Business Auxiliary Service."

Analysis:
The appeal filed by Revenue against the order-in-appeal dated 17.10.2012 was heard by the Appellate Tribunal CESTAT Mumbai. The respondent-assessee had received payments for cleaning activities from NMC and Kanak Resource Management Ltd. Revenue authorities contended that the amounts received for the period 2005-06 to 2009-10 were liable for service tax under "Business Auxiliary Service." A show-cause notice was issued to the respondent, who contested it on merits and limitation. The adjudicating authority concluded that the cleaning services provided were a statutory responsibility of NMC and not taxable under "Business Auxiliary Service." The first appellate authority upheld this decision, rejecting Revenue's appeal.

In the appeal, Revenue argued that the lower authorities did not consider CBEC Circular No.89/7/2006-ST, which states that activities performed by sovereign and public authorities under the law are statutory obligations not subject to service tax. Revenue claimed that the respondent, a commercial entity, was not a sovereign/public authority and operated with a profit motive, thus the fees collected were not compulsory levies. The respondent's Cross Objection referenced the Tribunal's decision in CCE v. Ankit Consultancy Ltd., supporting that statutory activities cannot be considered business activities. The respondent also cited a similar case, CCE v. C.S. Software Enterprises Ltd., where services rendered on behalf of the government were not taxed as "business auxiliary service."

The Tribunal found the issue to be the taxability of cleaning services provided to NMC and determined that they did not fall under "business auxiliary service." The cleaning activities were deemed a statutory function of NMC outsourced to the respondent, not qualifying as services on behalf of the client. The first appellate authority's findings were supported, referencing the Ankit Consultancy Ltd. case where activities for a state agency were not considered business activities. The Tribunal held in favor of the respondent, agreeing with the lower authorities' decision that the cleaning services were not taxable under "Business Auxiliary Service." Consequently, the appeal by Revenue was rejected, and the respondent's Cross Objection was disposed of.