2023 (12) TMI 908 - AT - Service Tax

Classification of service - cleaning activity or not - services relating to fumigation of export containers - HELD THAT - A bare perusal of the definition of cleaning activity under section 65(24b) of the Finance act would indicate that it means 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 or buildings, but would not include such services in relation to agriculture, horticulture, animal husbandry or dairying - In the instant case, the activity of fumigation of containers was not of commercial or industrial building or premises thereof. It would, therefore, not be covered by the definition of cleaning activity under section 65(24b) of the Finance Act. Circular dated 12.01.2011 was amended by Circular dated 20.01.2011 by deleting the word Circular at paragraph 2(b) and replacing it by Notification - A perusal of the aforesaid Circular shows that fumigation of export cargo would not satisfy the statutory definition of cleaning activity under section 65(24b) of the Finance Act and it is only as a matter of abundant caution that the government had issued the Notification dated 06.10.2007 which was subsequently amended on 29.11.2007 and that the wordings of the Notification cannot be used to interpret the scope of the service taxable under section 65(105) (zzzd) of the Finance Act. The Commissioner (Appeals) completely fell in error in holding that because the Notification dated 06.10.2007 exempts the cleaning activity services, it should be held that they were taxable and for claiming exemption the conditions have to be satisfied. The Commissioner (Appeals) also fell in error in misreading the Circular dated 12.01.2001 - Once it is clear that fumigation of export containers would not fall within the definition of cleaning activity defined under section 65 (24b) of the Finance Act, service tax could have been levied. The impugned order dated 04.05.2018 passed by the Commissioner (Appeals) is set aside - Appeal allowed.

Issues Involved:
The issues in this case involve the classification of services provided by the appellant relating to fumigation of export containers as a taxable service under the category of 'cleaning activity' defined under the Finance Act, 1994. The dispute centers around whether the activity of fumigation of export containers falls within the definition of cleaning activity and is therefore leviable to service tax.

Summary of Judgment:

Issue 1: Interpretation of Taxable Service under 'Cleaning Activity'
The Assistant Commissioner confirmed the demand of service tax against the appellant for fumigation services based on the Notification dated 06.10.2007 and Circular dated 12.01.2011, which clarified the taxable nature of fumigation services under section 65(105)(zzzd) of the Finance Act. The Commissioner (Appeals) upheld this decision, emphasizing that the exemption from service tax is available only by way of refund after payment. However, the appellant argued that fumigation of export containers does not fall under the taxable category of 'cleaning activity' as defined under the Finance Act. The Circular dated 12.01.2011 supported this argument by stating that fumigation of export cargo does not satisfy the statutory definition of cleaning activity under section 65(24b) of the Finance Act.

Issue 2: Application of Exemption Notification
The Commissioner (Appeals) erroneously relied on the exemption Notification dated 06.10.2007 to justify the taxable nature of fumigation services. However, the Circular clarified that the exemption was issued as a precaution and should not be used to interpret the scope of services taxable under section 65(105)(zzzd) of the Finance Act. The Circular emphasized that fumigation of export cargo does not meet the criteria of 'cleaning activity' under the Finance Act, thereby indicating that service tax should not be levied on such services.

Issue 3: Error in Commissioner's Decision
The Commissioner (Appeals) misinterpreted the Circular and the Notification, leading to an incorrect conclusion regarding the taxability of fumigation services. The appellant's argument that fumigation of export containers does not fall under the definition of 'cleaning activity' was supported by legal provisions and clarifications provided by the Department of Revenue. As a result, the impugned order passed by the Commissioner (Appeals) was set aside, and the appeal of the appellant was allowed.

In conclusion, the judgment clarified that the activity of fumigation of export containers does not constitute a taxable service under the category of 'cleaning activity' as defined under the Finance Act, thereby overturning the decisions of the Assistant Commissioner and the Commissioner (Appeals).

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