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 fall within the negative list exemption under Section 66D(d) read with the definition in Section 65B(3); accordingly demands on such turnover were disallowed as unsustainable and time-barred in absence of evidence of deliberate evasion. Separately, manpower supply services were assessed under the applicable partial valuation method, producing a residual tax liability which the appellant must pay with interest; however, penalties and invocation of the extended period were set aside for lack of proof of wilful suppression.

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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.

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