Cleaning and sanitation services to government hospitals confirmed exempt under Notification No.25/2012-ST; no tax or penalties imposed.

Clarifies that cleaning and sanitation services supplied to a government hospital qualify for exemption under the relevant notification, construing the superintendent's agreement-making power on behalf of the hospital. The question is interpretative; therefore invocation of the extended period of limitation is inappropriate and no duty demand arises on merits. In absence of any fraud, collusion, wilful default or suppression of facts, penalty cannot be sustained and orders imposing tax and penalties are to be set aside.

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Issues: Whether cleaning and sanitation services provided by the appellant to Government hospitals are exempt from service tax under Notification No. 25/2012-ST dated 20.06.2012 and whether the extended period of limitation and penalties can be invoked where exemption is interpretational.

Analysis: The factual matrix shows contracts for cleaning, sanitation and waste disposal entered into with a Government-run medical hospital. Section 65B(51) defines taxable services and Section 66B prescribes levy; Notification No. 25/2012-ST (as substituted by Notification No. 6/2014-ST) exempts services provided to Government, a local authority or a governmental authority by way of activities relating to water supply, public health, sanitation conservancy, solid waste management or slum improvement and up-gradation. The Court examined the scope of the agreement (cleaning of premises, toilets, drainage, disposal of normal and bio-waste) and compared it with the functions described in the exemption entry, concluding these services fall within sanitation conservancy and related activities covered by the notification. The Tribunal relied on co-ordinate bench decisions (held up by the Supreme Court) that applied the same notification to cleaning and housekeeping services provided to Government hospitals, and on authority that where the question is one of interpretation of an exemption notification, invocation of the extended period for raising demand is not appropriate in absence of fraud, suppression or wilful misstatement. Given no evidence of fraud or suppression and that the Superintendent legitimately entered the contract on behalf of the Government hospital, the extended period and penalties under the Finance Act could not be sustained. The absence of meritorious tax liability negates the imposition of penalties.

Conclusion: The cleaning and sanitation services provided by the appellant to Government hospitals are exempt under Notification No. 25/2012-ST as substituted by Notification No. 6/2014-ST; extended period of limitation is not invocable for this interpretational issue and penalties cannot be sustained. Appeals allowed in favour of the assessee.

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