2022 (3) TMI 403 - AT - Service Tax

Levy of service tax - Cleaning services such as up-keeping/environmental services - HELD THAT - It can be seen that the appellants were engaged in all kind of activities relating to up keep of the residential colony. It involved cleaning of not only open spaces but also various facilities located within the residential colony - It is seen that the terms premises in the definition of cleaning activity does not cover the premises of service recipients but it covers only the premises of commercial or industrial building or factory, plant or machinery, tank or reservoir of such commercial or industrial building only. It is not as if all the premises on the service recipient would be covered in the definition. The definition of input services is very vast and uses words like in or in relation to and also has inclusive parts which covers services received at places other than the main office. Moreover the CBEC Circular No. B1/6/2005-TRU, dated 27-7-2005 at www.cbec.gov.in has also clarified that such cleaning services in respect of non-commercial buildings and premises thereof would not be covered within the purview of Service Tax under this category. The residential Colony would therefore not be covered under the description premises appearing in Section 65 (24b). Cleaning services or horticulture - Cutting of trees, grass shrubs etc. and maintain it over a period of time in the Gas collection Centre of the service recipient namely ONGC - HELD THAT - The activity of the appellant cannot be treated as horticulture. It is apparent that the activity undertaken by the appellant is in the nature of cleaning activity and therefore covered under the definition of this service as defined in Section 65 (24b) of the Finance Act, 1994, the demand of this ground is therefore upheld. Clearing services as such Grass, Bush, Jungle cutting at Area-III of ONGC Ank. And regular maintenance as tender documents - HELD THAT - There is absolutely no doubt that the said activity amounted to provision of the cleaning services as defined in Section 65 (24b) of Finance Act, 1994 and there could not have been any bonafide doubt to in that regard - there are no merit in the argument that the appellant, harboured a bonafide view. Penalty - HELD THAT - Penalty under Section 78 has been imposed amounting to double of the total duty confirm. The said penalty is excessive needs to be revised to equivalent to the duty confirm and thus the penalty is revised to ₹ 2,25,803/- only under Section 78. The penalty under section 77 is upheld as the appellant had not taken registration or filed ST-3 return. Appeal allowed in part.

Summary

Issues Involved:
1. Demand of Service Tax on four different contracts.
2. Limitation period for demand of Service Tax.
3. Definition and applicability of "cleaning services" under Section 65(24b) of the Finance Act, 1994.
4. Imposition of penalty under Section 78 and Section 77 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Demand of Service Tax on Four Different Contracts:
The appellant, M/s Nirmal Construction Company, faced a demand for Service Tax, interest, and penalties under four contracts. The contracts involved various cleaning and maintenance services, with the total amount in question being ?45,37,892/-. The appellant did not contest the demand on two contracts (Serial Nos. 3 & 4) on merits but challenged the demand on the grounds of limitation. For Serial Nos. 1 & 2, the appellant argued that the services did not fall under the definition of "cleaning services" as per Section 65(24b) of the Finance Act, 1994.

2. Limitation Period for Demand of Service Tax:
The appellant contended that the demand for Service Tax on Serial Nos. 3 & 4 was time-barred. However, the tribunal noted that the appellant had not registered for Service Tax or filed returns, which negated the claim of a bonafide belief. Consequently, the tribunal upheld the demand for these contracts.

3. Definition and Applicability of "Cleaning Services":
- Serial No. 1: The contract involved activities in a residential colony. The tribunal referred to the definition of "cleaning activity" under Section 65(24b) and CBEC Circular No. B1/6/2005-TRU, dated 27-7-2005, which clarified that cleaning services for non-commercial buildings are not taxable. The tribunal ruled that residential colonies do not fall under the definition of "premises" in Section 65(24b) and set aside the demand for Serial No. 1.
- Serial No. 2: The contract involved cutting grass, trees, and bushes in ONGC's commercial premises. The tribunal agreed with the Commissioner (Appeals) that these activities are not horticulture but cleaning services, thus falling under the taxable category. The demand for Serial No. 2 was upheld.

4. Imposition of Penalty:
- Section 78: The penalty imposed was double the duty confirmed. The tribunal found this excessive and revised it to an amount equivalent to the duty confirmed, i.e., ?2,25,803/-.
- Section 77: The penalty was upheld as the appellant had failed to register for Service Tax and file returns.

Conclusion:
The tribunal upheld the demand for Service Tax on Serial Nos. 2, 3, and 4, while setting aside the demand for Serial No. 1. The penalty under Section 78 was reduced to ?2,25,803/-, and the penalty under Section 77 was upheld. The appeal was partly allowed in these terms.