CLEANING ACTIVITY

[Mr. M. GOVINDARAJAN]

Section 65 (24b) defines ‘cleaning activity’ as cleaning including specialized cleaning services such as disinfecting, exterminating or sterilizing of objects or premises, of —

• commercial or industrial buildings and premises thereof; or
• factory, plant or machinery, tank or reservoir of such commercial or industrial buildings and premises thereof,

but does not include such services in relation to agriculture, horticulture, animal husbandry or dairying.  This service was introduced vide Finance Act, 2005 with effect from 16.06.2005.

In ‘A.N. Kapoor Private Limited V. Commissioner of Central Excise, Lucknow’ – 2014 (5) TMI 423 - CESTAT NEW DELHI the Tribunal found that as per the cleaning activity as provided under Section 65 (24B) of the Finance Act, meanings cleaning including specialized cleaning services such as disinfecting, exterminating or sterilizing of objects or premises, of-

• Commercial or industrial buildings and premises thereof;
• Factory, plant or machinery, tank or reservoir or such commercial or industrial buildings and premises thereof;

but does not include such services in relation to agriculture, horticulture, animal husbandry or dairying.

In ‘Sulabh International Social Service Organization V. Commissioner of Central Excise, Hyderabad’ – 2009 (9) TMI 729 - CESTAT BANGALORE the appellant submitted that cleaning activity under Section 65(24b) of the Act is taxable only if such activity is undertaken in commercial or industrial buildings and premises thereof, or factory, plants or machinery, tanks or reservoir of such commercial or industrial premises.   In the instant case the premises in which the impugned activity was undertaken by the appellants are buildings maintained by the Tirumala Tirupathi Devasthanam for providing accommodation to pilgrims visiting the temples at Tirupati.   The Tribunal held that the impugned activity cannot be legally classified as taxable service specified under Section 65(24b) of the Act.

In ‘Purba Medinipur Zilla Parishad V. Commissioner of Central Excise, Haldia’ – 2010 (5) TMI 369 - CESTAT, KOLKATA the applicants are only removing fly ash from the ash pond to the other area, therefore it is not covering under the cleaning service.

Horticulture service

In ‘Commissioner of Central Excise, Jaipur-I V. ANS Constructions Limited’ – 2009 (6) TMI 465 - CESTAT, NEW DELHI the Tribunal held that the services in relation to agriculture, horticulture, animal husbandry or diary were excluded from the definition of ‘cleaning activity’ under Section 65(24b) of the Act.   So the horticulture activity is outside of ‘cleaning activity’.

Excavation work

In ‘Praveen Engineering Work V. Commissioner of Service Tax, Raigad’ – 2014 (5) TMI 424 - CESTAT MUMBAI the Tribunal held that the excavation work would not be classifiable as cleaning service.

Cleaning activity to Hospital

In ‘Mankeshwar Enterprises V. Commissioner of Central Excise, Pune’ – 2014 (1) TMI 91 - CESTAT MUMBAI the appellants are engaged in the cleaning services of D.Y. Patil Medical Hospital and Research Institute.   As per Section 65 (105) of the Act, 1994 the cleaning service is taxable, if provided to any Commercial or Industrial Institution.   The cleaning activity provided by the appellant to the D.Y. Patil Medical Hospital & Research Institute which is neither commercial nor an industrial institution.   Therefore the activity undertaken by the applicant is not tenable.

Cleaning activity to residential complex

In ‘Panch Sheel Udyog V. Union of India’ – 2013 (11) TMI 1008 - JHARKHAND HIGH COURT after going through the contents of the agreement and definition of cleaning activities as given in Section 65(24b) of Finance Act, 1994, the Tribunal held that there may be prima facie force in the contention that the cleaning activities may not include the activities undertaken by the petitioner when it is for the residential complex or colony.

In ‘Nirmal Construction Company V. Commissioner of Central Excise, Surat’ – 2014 (1) TMI 309 - CESTAT AHMEDABAD the appellant had entered into contract with ONGC for cutting and removal of all kind of unwarranted grass, brushes, trees, weeds and removal/uprooting the roots of wild vegetation, removal of debris and garbage from the roads, streets and open space of ONGC Township and residential areas of the ONGC.   The Adjudicating Authority as well as the Appellate Authority has held that this activity fall under the category of ‘cleaning activity service’.  The Tribunal found that the activities of the appellant prima facie may not fall under cleaning activities.

Cleaning activity to Educational Institutions and trust hospitals

In ‘Maltanb Construction Engineers Private Limited V. Commissioner of Central Excise & Service Tax, Coimbatore’ – 2013 (2) TMI 105 - CESTAT CHENNAI the applicant is engaged in providing cleaning services to charitable hospitals and educational institutions.  A show cause notice was issued to the applicant.  The Adjudicating Authority dropped the demand on clearing services provided to educational institutions but confirmed the demand on cleaning services provided to charitable hospitals.   The Tribunal held that as per the Board’s Circular No. 80/10/2004-ST, dated 17.09.2004, wherein construction of civil structure, which are being used for religious, charitable, health sanitation and not for the purpose of profit are not taxable has been clarified.   As the applicants have provided the cleaning services to charitable hospital, prima facie, the applicants have made out a case for 100% waiver of pre-deposit.

In re. Update Services Private Limited – 2013 (3) TMI 335 - COMMISSIONER OF CENTRAL EXCISE (APPEALS), CHENNAI  it was held that it is clear from the definition that non commercial building and premises thereof will not come under the purview of service tax.   Therefore the appellant is right in not paying the service tax on the cleaning service imparted to child trust hospital, which is not a commercial building.

Fumigation of Cargo

The trade has raised the issue as to whether the activity of fumigation of export cargo including agricultural/horticultural produce, whether loaded into containers or otherwise is a taxable service falling under ‘cleaning services’ or not.  The Board considered this issue and vide its Circular No. 132/1/2011 – ST, dated 12-1-2011 held that fumigation of cargo is a cleaning service.   However, the definition under section 65(24b) of the Finance Act, 1994, as amended, taxes cleaning of ‘objects or premises’ of (i) commercial or industrial buildings and premises thereof; or (ii) factory, plant or machinery, tank or reservoir of such commercial or industrial building and premises thereof. Fumigation of export cargo including agricultural/horticultural produce, whether loaded into containers or otherwise, does not satisfy the statutory definition of ‘cleaning activity’ under Section 65(24b) of the Finance Act, 1994.  It is further clarified that as a matter of abundant precaution, Government had also issued Notification No. 41/2007-ST dated 6.10.2007, as amended by Notification No. 42/2007-ST dated 29.11.2007 to exempt specialized cleaning services of containers used for export goods. This was in line with the international practice of making the export consignments free from taxation in the country of its origin. However, the wordings of this circular cannot be used to interpret the scope of service defined under section 65(105) (zzzd) of the Finance Act, 1994.

In ‘Ramdev Food Products Private Limited V. Commissioner of Central Excise, Ahamedabad’ – 2011 (3) TMI 1256 - CESTAT, AHMEDABAD the disinfecting and fumigation service was rendered for disinfecting the container and fumigating the export goods.   The refund in respect of this service was denied on the ground that the written agreement has not been provided by the appellant.  The Tribunal found that in the Notification No. 41/2007 as amended provided that the refund of service tax on specialized cleaning services, namely, disinfecting, experimenting, sterilizing or fumigating of containers used for the export of the goods provided to an exporter are admissible subject to the two conditions namely, a copy of written agreement is provided and the exporter shows that the service provider is accredited by the statutory authority to provide such service.   The Tribunal found in the absence of written agreement it would not be possible to know whether there was any condition.   The Tribunal remanded the matter for fresh consideration in terms of Notification as well as other agreements with the appellants may produce during the de novo adjudication.

Eligibility of CENVAT Credit

In ‘Paper Products Limited V. Commissioner of Central Excise, Mumbai – III’ – 2014 (5) TMI 425 - CESTAT MUMBAI the Tribunal held that the cleaning service has been undertaken in the factory premises of the appellant.   It is nobody’s case that cleaning services are not required in a factory and has nothing to do with the manufacturing activities. The manufacturing activities require not only inputs and capital goods but also on the hygienic atmosphere prevailing in the factory premises.   Therefore, it is a pre-requisite for the manufacturing activity and is integrally connected with the manufacturing activities.   Hence it is an eligible input service’ as defined under Rule 2(l) of CENVAT Credit Rules, 2004.

In ‘Suzuki Power train India Limited V. Commissioner of Central Excise, Delhi – III, Gurgaon’ – 2014 (5) TMI 420 - CESTAT NEW DELHI  it was held that Section 11 of the Factories Act cast a legal duty on the factory owner to maintain cleanliness in the factory.   Therefore the expenses incurred on cleanliness of the factory is incidental to manufacture of cylinder head/block casting etc.,  The appellant is entitled to take CENVAT credit of service tax paid.

After the introduction of negative list regime there is no specific provision relating to this service.   This can be inferred that this service is taxable.