2026 (2) TMI 785 - AT - Service Tax

Negative list exemption for horticulture confirmed; remaining manpower-supply tax payable with interest but penalties set aside.

Horticulture and garden maintenance services-including watering, weeding, manuring, pruning and plant protection-are treated as agricultural activity and ... Exemption from payment of Service Tax - horticulture services such as upkeep of gardens by watering, sweeping, fertilization, spraying of insecticides, etc. - differences between Form 26AS and ST-3 returns - Exemption from Service Tax for agricultural/horticulture services - Extended period/limitation for recovery where issue is one of interpretation - Taxability of manpower supply services (partial taxable value) - Penalty not warranted in absence of deliberate suppression or wilful misstatement - HELD THAT:- On perusal of the invoices, it is evident that the appellant was engaged in horticulture activities such as garden maintenance, watering, and allied services. I find that the issue is no longer res integra. The ratio of Tribunal in the case of CCE & ST Ahmedabad-III v. Murlidhar Horticulture Pvt. Ltd.[2019 (3) TMI 1435 - CESTAT AHMEDABAD] is squarely applicable to the facts of the present case. Thus, hold that no Service Tax is payable on the turnover of Rs. 40,16,924/-. The appellant succeeds both on merits as well as on account of time bar to this extent. Turnover relating to manpower supply services - HELD THAT:- Appellant has partly discharged the tax liability during the relevant period. However, there remains a short payment of Rs. 12,870/-. I hold that the plea of limitation is not acceptable in respect of this amount, since this emanates from improper calculation of the tax by the appellant and they have been paying the Service Tax in the normal course for rendering this service. At the same time, I do not find any evidence on record establishing deliberate suppression or wilful misstatement with intent to evade payment of tax. Therefore, while the appellant is liable to pay Service Tax of Rs. 12,870/- along with applicable interest, imposition of penalty is not warranted. Hence, I set aside the penalty on this amount of Service Tax. The appellant shall be entitled to consequential relief of pre-deposit, after adjustment of payable Service Tax of Rs.12,870/- along with applicable interest. Issues: (i) Whether services described as horticulture/garden maintenance are exempt under the negative list (Section 66D(d)) and whether demands on such turnover are time-barred; (ii) Whether the balance turnover on manpower supply is taxable (taking into account partial valuation) and whether penalty and extended period invocation are sustainable for the shortfall.Issue (i): Whether horticulture/garden maintenance services are exempt from service tax under the negative list and whether demand on that turnover is time-barred.Analysis: The exemption scope under Section 66D(d) of the Finance Act, 1994 and the definition of 'agriculture' in Section 65B(3) of the Finance Act, 1994 were applied to activities such as watering, weeding, manuring, pruning and plant protection. Prior Tribunal authority interpreting horticulture as falling within agricultural activity and within the negative list was followed. The question of extended period was considered in the light of absence of evidence of deliberate intention to evade tax and prior guidance indicating non-liability.Conclusion: The demand on turnover of Rs.40,16,924 relating to horticulture services is not sustainable and is set aside on merits and on account of time bar; decision is in favour of the assessee on this issue.Issue (ii): Whether the shortfall in service tax on manpower supply services (taxable on 25% of gross) is chargeable and whether penalty/extended period invocation is maintainable.Analysis: The applicable partial valuation for manpower supply was applied to the stated turnover to compute taxable value and tax liability. Records show partial payment of tax and a remaining short payment of Rs.12,870. There is no evidence of deliberate suppression or wilful intent to evade tax supporting invocation of extended period for penalty. Therefore liability for the shortfall and interest arises, but penalty and extended-period consequences require proof of wilful suppression.Conclusion: The appellant is liable to pay the outstanding service tax of Rs.12,870 along with applicable interest; imposition of penalty is set aside. This conclusion is against the assessee on the limited issue of the unpaid tax but in favour of the assessee on penalty.Final Conclusion: The appeal is partly allowed - tax demand on horticulture turnover is quashed and time-barred, while a limited balance tax with interest is sustained for manpower supply; all penalties are set aside.Ratio Decidendi: Services properly characterized as horticulture/garden maintenance fall within the negative list under Section 66D(d) read with Section 65B(3) of the Finance Act, 1994 and demands thereon are unsustainable where no evidence of deliberate evasion exists; liabilities arising from incorrect calculation of tax on manpower supply remain chargeable but penalties requiring wilful suppression cannot be imposed without supporting evidence.