2026 (2) TMI 125 - AT - Service Tax

Management, maintenance or repair services and fly ash brick processing taxed; remand ordered for verification, extended limitation sustained.

Management, maintenance or repair services for lawn and garden upkeep were treated as taxable 'Management, Maintenance or Repair' services; exemption ... Management, Maintenance or Repair Service - cleaning activity exclusion - Business Auxiliary Service - exemption for production/processing on behalf of client under Notification No. 8/2005-ST - negative list exclusion of processes amounting to manufacture - reconciliation of accounts and payment-receipt versus accrual basis for service tax - extended period of limitation invoked after statutory audit - penalty under Rule 15(3) of the CENVAT Credit Rules, 2004 - HELD THAT:- We find that the appellant have provided the services of maintenance of lawns and gardens comprised of growing of grass, plants, trees, regular mowing of lawns, pruning and trimming of shrubs and cleaning of garden. In our view, such activities would fall within the ambit of ‘Management, Maintenance or Repair service’. Further, we also take note of the fact that the appellant has been paying Service Tax for the said service for the period after 01.07.2012, during the Negative List regime. Thus, we do not find any merit in the claim of the appellant that the said services are exempted from payment of Service Tax. In this regard, we observe that the appellant could not submit copy of any agreement towards rendering of such service. Therefore, we are of the opinion that for the purpose of verifying the correctness of the claim of rendering the said services and quantifying the correct Service Tax payable, the issue needs to be remanded back to the adjudicating authority. As regards the activity processing of fly ash bricks provided by the appellant, we find that the demand of service tax on the said service has been confirmed under the category of Management, Maintenance and Repair service. The Appellant has submitted that the said services provided by them were exempt vide Notification No. 8/2005–ST dated 01.03.2005 as amended vide Notification No. 19/2005–ST dated 25.04.2006 till 30.06.2012 and thereafter vide entry S. No. 30 (c) of Notification No. 25/2012-ST dated 20.06.2012. The demand of Service Tax confirmed in respect of the issue (E) of the Table has been claimed by the appellant as double demand. If it is established by the appellant as double demand, then the said demand confirmed in respect of the issue (E) (supra) would not survive. Regarding the demand of Rs.10,00,000/- [pertaining to issue (F) supra], the appellant has claimed that it was due to clerical error. This claim of the appellant needs to be verified. If the same is due to a clerical error, as claimed by the appellant, then the said demand would not survive. Thus, we are of the view that these issues [i.e., issues (C), (D), (E) and (F) supra] need to be remanded back to the adjudicating authority for the purpose of verification of the correctness of the claims made by the appellant. Limitation. - HELD THAT:- In this regard, we observe that audit of the appellant’s unit had been conducted during 07.07.2014 to 10.07.2014 and the impugned Show Cause Notice has been issued to them on 16.10.2014, which is within a one-year period from the date of audit. We observe that the Department had no occasion to scrutinize the records of the appellant before the audit and therefore, we find that issuance of the instant Show Cause Notice, within the one-year period from the date of audit, by invoking the extended period of limitation is legally sustainable. Accordingly, we do not agree with the above submission made by the appellant as to the extended period of limitation being not invocable to demand Service Tax in the present case. Consequently, we hold that the extended period has been rightly invoked to demand Service Tax in this case. Regarding the appellant’s prayer for setting aside the penalty in respect of the demand for recovery of CENVAT Credit, as imposed vide the impugned order, we take note of the fact that the said credit had been paid back by the appellant along with interest, vide e-Receipt bearing CIN No. 0005347 19122015 01363. We observe that the above payment made by the appellant stands appropriated in the impugned order. Therefore, taking a lenient view, we set aside the penalty imposed on the appellant under Rule 15(3) of the CENVAT Credit Rules, 2004. We set aside the demands of Service Tax confirmed in the impugned order. Issues: (i) Whether services of horticulture and processing of fly ash bricks rendered by the appellant are exempt from service tax or liable under 'Management, Maintenance or Repair service'; (ii) Whether demands based on entries in NTPC's cost-wise break-up ledger and reconciliation with appellant's books (issues A & B) are sustainable; (iii) Whether differential tax demand due to rate change for receipts of past-billed services (issue C) is sustainable; (iv) Whether demand relating to opening balances and receipt/payment reconciliation (issue D) is sustainable given payment-receipt accounting prior to 01.04.2011; (v) Whether the confirmed demand alleged as double is in fact double (issue E); (vi) Whether the asserted short payment due to a clerical error in ST-3 (issue F) can be rectified; (vii) Whether penalty under proviso to Rule 15(3) of the CENVAT Credit Rules is maintainable in respect of excess CENVAT credit recovered.Issue (i): Whether horticulture and processing of fly ash bricks services are not liable to service tax.Analysis: Cleaning activity definition under Clause (24b) of Section 65 excludes services in relation to horticulture; exemption notifications and the Negative List entries and Notification No. 8/2005-ST and related notifications govern processing/job-work where goods produced using client-supplied materials and appropriate excise duty is paid. Evidence required to establish applicability of exclusion/exemption includes agreements, bills, work orders and proof of excise duty payment by recipient.Conclusion: Horticulture and processing of fly ash bricks claims not finally upheld; both issues require factual/documents verification and are remanded to the adjudicating authority for quantification and verification. Conclusion in favour of Appellant on entitlement not finally made; remand ordered.Issue (ii): Whether demands founded on NTPC ledger entries and reconciliation (other services) are sustainable.Analysis: Ledger entries are treated as memorandum and reconciliation with audited trial balances, ST-3 returns, and evidence of ST payments and unbilled services (Rule 6(1) proviso) must be verified by reference to audited books and documentary proof.Conclusion: The claims of correct declaration require verification; issue remanded to adjudicating authority to examine documentary evidence and determine actual liability. Conclusion provisionally in favour of Appellant subject to verification.Issue (iii): Whether differential tax demand due to rate change on receipts for past-billed services is sustainable.Analysis: Determination depends on whether receipts correspond to services for which tax at earlier lower rate was correctly reported and paid at the time of taxable event; relevant judicial precedents and month-wise particulars supplied require verification against invoices and returns.Conclusion: Differential demand is remanded for verification; if appellant's claim is established, the differential tax will not survive.Issue (iv): Whether demand attributable to opening balances/unrealized entries is sustainable given payment-receipt accounting prior to 01.04.2011.Analysis: Service tax liability prior to 01.04.2011 arises on receipt basis; evidence of invoice issuance prior to 01.04.2011 and subsequent receipt must be produced and verified.Conclusion: Issue remanded for verification; if proof of invoice date and receipt is furnished, the demand will not survive.Issue (v): Whether the confirmed demand alleged as double is indeed double.Analysis: Documentary entries shown by appellant indicate amounts already paid/credited; verification against records is necessary to confirm duplication.Conclusion: Issue remanded; if established as double, the demand will be set aside.Issue (vi): Whether the demand of Rs.10,00,000/- is attributable to a clerical error in ST-3 and can be rectified.Analysis: Evidence of document-wise CENVAT credit availment, journal vouchers and books of account must be verified; rectification is permissible where clerical error causes no revenue loss as per judicial guidance.Conclusion: Issue remanded for verification; if found to be clerical error with no revenue loss, the demand will not survive.Issue (vii): Whether penalty under proviso to Rule 15(3) of CENVAT Credit Rules is maintainable for excess CENVAT credit of Rs.7,940/- which has been repaid with interest.Analysis: Repayment of excess credit with interest and appropriation in the adjudicating order are relevant; discretion on penalty to be exercised considering recovery and interest paid.Conclusion: Penalty of Rs.7,940/- set aside. Conclusion in favour of Appellant on penalty.Final Conclusion: The appeal is partly allowed by setting aside specific confirmed demands and penalty and remanding multiple factual/accounting issues to the adjudicating authority for documentary verification and quantification of actual service tax liability, if any.