2024 (12) TMI 1454 - AT - Service Tax

Cleaning services to railways and PSUs attract service tax but extended limitation period invalid without willful suppression

CESTAT Bangalore held that appellant's cleaning services to Indian Railway and public sector undertakings are subject to service tax liability. The demand ... Liability of appellant to pay service tax - Cleaning activity services provided to Indian Railway and other public sector undertaking - service tax is payable on the gross amount which includes the wages, etc., paid to the employees or not - secondary packaging activity is falling under the category of manufacturing or not - transportation of documents and goods and other liaison works - Manpower Recruitment or Supply agency service or not - eligibility for benefit of N/N. 30/2012-ST dated 20.06.2012 - Suppression of facts or not - Extended period of limitation. Extended period of limitation - HELD THAT:- There is no allegation that the appellant is involved in suppression of facts in any manner with an intention to evade payment of service tax. Moreover, for the very same service, demand was made for different periods by issuing different show-cause notices by invoking extended period of limitation. Similar demand was made for the period from 2012-13 to 2015-16 and after considering the submissions, adjudication authority vide Order-in-Original No. 38/2021 dated 30.07.2021 dropped the demand. As held by Hon’ble Supreme Court in the matter of Pushpam Pharmaceuticals Company Vs. CCE, Bombay [1995 (3) TMI 100 - SUPREME COURT], wilful suppression does not mean any omission and that the act must be deliberate - thus, demand by invoking the extended period of limitation is unsustainable. Whether the Appellant is liable to pay service tax on 'Cleaning activity' services provided to Indian Railway and other public sector undertaking? - HELD THAT:- The issue is no more res integra. As per the decision of the Hon’ble Madras High Court in the matter of M/s. Premier Garment Process Vs. CCE&ST, Chennai [2022 (10) TMI 881 - MADRAS HIGH COURT], the issue is settled and the activities of the Appellant are subject to service tax. Similar view was taken in the matter of HAKAMICHAND D & SONS VERSUS C.S.T. -SERVICE TAX - AHMEDABAD [2022 (5) TMI 481 - CESTAT AHMEDABAD]. Thus, even if the appellant failed to collect service tax, service tax liability for providing such services is well settled and the impugned order is sustainable. Hence, demand for the normal period against the show-cause notices issued to the appellant is confirmed - Since the appellant has not collected the same from the service recipient, Appellant is entitled for cum-tax benefit as held by adjudication authority as per Section 67(2) of the Finance Act, 1994. Whether service tax is payable on the gross amount which includes the wages, etc., paid to the employees? - HELD THAT:- Though the Hon’ble High Court of Kerala in the matter of M/s. Security Agencies Association [2013 (2) TMI 356 - KERALA HIGH COURT] held that salary and statutory payment of security personal can be included as consideration, only by following the ratio of the judgment of the Hon’ble Supreme Court in the matter of Intercontinental consultants and Technocrats Pvt., Ltd., [2018 (3) TMI 357 - SUPREME COURT] and considering the nature of contract to find out whether appellant had received the consideration as pure agent, service tax can be quantified. Whether providing secondary packaging activity is falling under the category of manufacturing? - HELD THAT:- Considering the definition of ‘Packaging Activity’ under Section 65(7B) and Clause (f) of Section 2 of the Central Excise Act, 1944, and considering the Circular dated 01.07.2002, such activity can be considered as manufacture, and it is beyond the scope of service tax. Hence, entire demand under the category of ‘Manpower Recruitment and Supply Agency' Services or under 'Packaging activity' services on the consideration received from M/s. HLL Life Care is set aside. Whether transportation of documents and goods and other liaison works amounts to service under the category of 'Manpower Recruitment or Supply agency' services? - HELD THAT:- As regarding demand of service tax for providing transportation of document, the activity cannot be considered as 'Manpower, recruitment or Supply' services, since the consideration was determined on the basis of distance for carrying the document belonging to M/s. HLL Lifecare and it is falling under the category of ‘Transportation of Goods’. As per the relevant provisions of law, the service tax is payable by the service recipient under reverse charge. Whether the appellant is eligible for the benefit of Notification No. 30/2012-ST dated 20.06.2012? - HELD THAT:- The appellant is eligible for the benefit of N/N. 30/2012-ST dated 20.06.2012 and cum-tax benefit as held by adjudication authority as per Section 67(2) of the Finance Act, 1994. Adjudication Authority is directed to complete the De-novo Adjudication within 3(three) months after the receipt of this order by extending a reasonable opportunity for personal hearing to the appellant. Conclusion - The matter remanded to the Adjudication Authority to quantify the service tax liability against 'cleaning activity' services, ‘Manpower Recruitment or Supply Agency' Services for the normal period considering the date of issue of each show cause notice - As regards gross amount as consideration, the adjudication authority shall consider the contract against each service to ascertain whether the contract entered between Appellant and recipient of service are falling under the category of pure agent and if falling under the category of pure agent, said consideration should be excluded from the consideration - the appellant is eligible for the benefit of N/N. 30/2012-ST dated 20.06.2012 and cum-tax benefit as held by adjudication authority as per Section 67(2) of the Finance Act, 1994. Appeal allowed in part. Issues Involved:1. Liability to pay service tax on 'Cleaning activity' services provided to Indian Railways and other public sector undertakings.2. Payment of service tax on the gross amount including wages paid to employees.3. Classification of secondary packaging activity as manufacturing.4. Classification of transportation of documents and goods under 'Manpower Recruitment or Supply agency' services.5. Eligibility for the benefit of Notification No. 30/2012-ST dated 20.06.2012.Detailed Analysis:1. Liability to Pay Service Tax on 'Cleaning Activity' Services:The tribunal addressed whether the appellant is liable to pay service tax for 'Cleaning activity' services provided to Indian Railways and other public sector undertakings. The appellant argued that cleaning services provided to the rolling stocks of Indian Railways do not fall under 'cleaning activity' services as per Section 65(24b) of the Finance Act, 1994, since rolling stocks are not immovable properties. However, the tribunal noted that the appellant was liable to pay service tax for these services, as the issue is settled by the Hon'ble Madras High Court and other precedents. The tribunal confirmed the demand for the normal period and granted cum-tax benefit as per Section 67(2) of the Finance Act, 1994.2. Service Tax on Gross Amount Including Wages:The appellant contended that the gross amount considered for service tax assessment, including wages, was unsustainable due to the employer-employee relationship. The tribunal referred to the judgment of the Hon'ble Supreme Court in Union of India Vs. Intercontinental Consultants and Technocrats Pvt., Ltd., which emphasized that the valuation of taxable service should be the gross amount charged for 'such service' and not include any other amounts. The tribunal directed the adjudicating authority to consider the nature of the contract to ascertain if the appellant acted as a pure agent, which could exclude such amounts from consideration.3. Classification of Secondary Packaging Activity:The tribunal examined whether the secondary packaging of condoms constituted manufacturing or was taxable under 'Packaging activity' services. The appellant argued that the activity was ancillary to manufacturing and should not be taxed as a service. The tribunal agreed, noting that the activity could be considered manufacturing under the Central Excise Act, 1944, and thus beyond the scope of service tax. Consequently, the demand under 'Packaging activity' or 'Manpower Recruitment or Supply Agency' services for this activity was set aside.4. Transportation of Documents and Goods:The tribunal assessed whether the transportation of documents and goods constituted 'Manpower Recruitment or Supply agency' services. The appellant argued that the service involved transportation based on distance, not manpower supply. The tribunal found that the activity fell under 'Transportation of Goods,' with service tax payable by the recipient under reverse charge. Therefore, the demand under 'Manpower Recruitment or Supply Agency' services was unsustainable and set aside.5. Eligibility for Notification No. 30/2012-ST:The tribunal evaluated the appellant's eligibility for the benefit of Notification No. 30/2012-ST, which provided for partial reverse charge. The tribunal acknowledged that the appellant was eligible for this benefit, allowing them to pay only 25% of the service tax due, with the recipient liable for the remainder. The tribunal remanded the matter to the adjudicating authority to reassess the appellant's service tax liability, considering the notification and the findings regarding the nature of services provided.Conclusion:The tribunal partially allowed the appeals, remanding certain issues to the adjudicating authority for reassessment, particularly regarding the service tax liability for 'Cleaning activity' services and the applicability of Notification No. 30/2012-ST. The tribunal set aside demands related to secondary packaging and transportation services, emphasizing the need for a detailed examination of contracts to determine the correct service tax liability. Penalties imposed by the adjudication authority were also set aside due to the absence of fraud or suppression of facts.