2020 (1) TMI 7 - HC - Service Tax

Classification of services - Business Auxiliary Services or not - cleaning and sweeping of public roads and streets in the city of Chennai as well as collection and transportation of municipal solid wastes at designated places in the city - HELD THAT - The activity of 'cleaning' has been defined and understood to apply qua commercial and industrial as well as related buildings and premises only. The activity of cleaning in relation to all other premises excepting those specifically defined, such as public roads and streets in this city, stand outside the ambit of the definition - thus, the receipts from cleaning activities carried out by the petitioner on public roads and streets stand excluded from the ambit of tax, even at the threshold. The impugned SCN which seeks to bring to tax receipts from cleaning activities carried out by the petitioner in public roads/public streets, was based on an objection by the audit that has itself not found favour with the Departmental assessing officer, and has subsequently not been pursued - Petition allowed - decided in favor of petitioner.

Summary

Issues:
Classification of services under 'cleaning services' or 'business auxiliary services' for tax purposes.

Analysis:
The petitioner, a company engaged in cleaning and sweeping public roads and streets, registered under 'cleaning services' with the Service Tax Department. An audit inspection suggested classifying their activity under 'business auxiliary services', despite accepted returns and remittances for cleaning commercial and industrial buildings. The audit's classification was based on a misunderstanding of the Finance Act's definition of 'cleaning activity'. The Act defines 'cleaning activity' to include cleaning of commercial/industrial buildings and related premises only, excluding public roads and streets. The respondent's admission in the counter filing further supported the petitioner's position that tax on receipts from cleaning public roads and streets was not applicable. The show cause notice, based on the audit's objection, was set aside as it was not accepted by the Departmental assessing officer and was not pursued further.

This judgment clarifies the scope of 'cleaning activity' for tax purposes, emphasizing that the definition under the Finance Act limits it to specific types of premises. It highlights the importance of correctly interpreting statutory definitions to determine tax liabilities. The court's decision to set aside the show cause notice provides relief to the petitioner, affirming that their cleaning activities on public roads and streets are not subject to tax under the 'business auxiliary services' category.