Tribunal upholds Service Tax demand on Serial Nos. 2, 3, 4, reduces penalty under Section 78, upholds penalty under Section 77.

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 Rs. 2,25,803/-, and the penalty under Section 77 was upheld. The appeal was partly allowed in these terms.

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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 Rs. 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., Rs. 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 Rs. 2,25,803/-, and the penalty under Section 77 was upheld. The appeal was partly allowed in these terms.

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