TaxTMI 
TaxTMI 
2026 (1) TMI 791
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....ax for Interior Decorator Service but did not obtain registration or discharge service tax under "Management, Maintenance or Repair Service". 2.3 Based on intelligence gathered by the Preventive Unit, it was alleged that the activities undertaken by the appellant namely watering, trimming, pruning, mowing, weeding, pest control, replacement of plants and maintenance of lawns and parks constituted maintenance of gardens, taxable under Section 65(64) read with Section 65(105)(zzg) of the Finance Act, 1994 for the period April 2008 to June 2012, and taxable as "service" under Section 65B(44) read with Section 66B thereafter. 2.4 Accordingly, Show Cause Notice No. 12/2013 (COMMR) dated 10.10.2013 was issued proposing demand of service tax of Rs.80,16,538/- for the period April 2008 to March 2013, recovery of interest under Section 75 and imposition of penalties under Sections 76, 77 and 78 by invoking the extended period under the proviso to Section 73(1). The notice was adjudicated by the Commissioner, who confirmed the demand with interest and penalties as proposed. Being aggrieved by the impugned order, the appellant has filed the present appeal. 3. The Ld. Advocate Mr. Rag....
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.... services rendered to Coimbatore City Municipal Corporation constitute sovereign/Public functions under Article 243W of the Constitution? iii. Whether the appellant is eligible for service tax exemption: - a. prior to 01.07.2012, and b. post 01.07.2012 under the Negative List or Mega Exemption. iv. Whether sale of plants, manure, soil, milk etc. attracts service tax? v. Whether services rendered to SEZ units are exempt? vi. Whether invocation of extended period and imposition of interest and penalties are sustainable? We take up the questions framed by us in seriatim: Whether landscaping and garden maintenance activities undertaken by the appellant are classifiable as taxable services 8.1 The appellant submitted that the activities undertaken by them are essentially horticulture and cultivation of gardens, involving soil preparation, planting of saplings, nurturing of plants, irrigation and related agricultural operations. It is contended that such activities result in creation and development of gardens, rather than mere maintenance. Reliance was placed on Kasturi (Dead) v. Gaon Sabha (1989) 4 SCC 55 to submit that hor....
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..... 2 Whether services rendered to Coimbatore City Municipal Corporation constitute sovereign functions under Article 243W 9.1 The appellant submits that maintenance of parks and gardens is a function entrusted to municipalities under Article 243W read with the Twelfth Schedule. It is argued that by performing such activities for Coimbatore City Municipal Corporation (CCMC), the appellant has effectively stepped into the shoes of the municipal authority and is discharging a sovereign/municipal function, which is not taxable. 9.2 The Department controverted that while the function may be municipal in nature, the appellant is a private contractor rendering services for consideration. Service tax law distinguishes between services rendered by a local authority and services rendered to a local authority. Outsourcing does not confer Public Authority/ sovereign character on the contractor. 9.3 We have heard both the sides on this issue and find that Article 243W of the Constitution empowers municipalities to perform functions listed in the Twelfth Schedule, including: i. Urban forestry, environmental protection (Entry 8), and ii. Urban amenities such as parks and....
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....functions does not confer sovereign character upon the contractor or its activities. Accordingly, services rendered by the appellant to the Coimbatore Municipal Corporation cannot be treated as sovereign functions and are not immune from levy of service tax. 9.10 As such, we conclude that the Appellant is liable to Tax on this score. ISSUE No. 3 Whether the appellant is eligible for service tax exemption (a) prior to 01.07.2012, and (b) post 01.07.2012 under the Negative List or Mega Exemption 10.1 The appellant submitted that prior to 01.07.2012, horticulture was not a specified taxable service. Post 01.07.2012, it is contended that the activities fall under Section 66D(d) (Negative List - agriculture). Reliance is also placed on Notification No. 25/2012-ST (Mega Exemption). 10.2 The Department on the other hand has adverted to that no general exemption existed prior to 01.07.2012 for landscaping or garden maintenance services rendered by private contractors. Post 01.07.2012, maintenance of urban gardens does not qualify as "agriculture", as it is not related to production of agricultural produce. 10.3 Pre-01.07.2012: We find that Service tax wa....
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....nts, manure etc. Sold (Rs) 2008-09 32,38,654/- 2009-10 25,35,8 13 2010-11 74,39,072 2011-12 1,28,93,933 2012-13 1,25,46,909 TOTAL 3,54,15,727 Further, in paragraph H8 of the grounds of appeal, the appellant has claimed that an amount of Rs. 52,00,305/-, representing sale proceeds of milk, manure and other dairy products from their dairy farm, is also not liable to service tax. 11.5 We observe that these claims require detailed factual verification, particularly to ascertain: - i. whether the sale of goods was independent and standalone, and ii. whether such goods were not integrally connected with or incidental to the execution of landscaping or garden maintenance contracts. Only those sales which are established as pure sales of goods, supported by documentary evidence such as invoices, stock records and separate accounting, would be eligible for exclusion from the taxable value. 11.6 Since the necessary factual details and supporting documents are not readily available on record before us, we are unable to quantify the exact extent of exclusion at this stage. Accordingly, we hold that the demand to the extent it....
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....uthorised Operations The appellant has not produced any document to show that landscaping or garden maintenance services were approved as authorised operations by the SEZ Approval Committee. b) Nature of Service Rendered Landscaping and garden maintenance are ancillary amenities and not inherently linked to core SEZ operations such as manufacture or export of services. Unless specifically approved, such services do not automatically qualify as authorised operations. c) Exemption Cannot Be Claimed Merely on the basis of Recipient Status. Merely because the recipient happens to be an SEZ unit does not render all services rendered to it exempt. The onus lies squarely on the service provider to establish eligibility. 12.7 We finally find that the appellant has failed to establish that the landscaping and garden maintenance services rendered to SEZ units were approved as authorised operations under the SEZ Act, 2005. Further, the appellant has not demonstrated compliance with the mandatory procedural requirements prescribed under the SEZ Rules and the relevant service tax exemption notifications. In the absence of such compliance, exemption under Section 26 of th....
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.... that the presence of Service Tax clauses in contracts and purchase orders, coupled with the appellant's existing Service Tax registration, assumes significance for the following reasons: - i. It demonstrates that the appellant was aware of the taxability of the services rendered, or at the very least, the issue was known and foreseeable. ii. It negates the plea of bonafide belief that the activity was wholly outside the service tax net. iii. It establishes that the non-payment of tax was not on account of ignorance, but despite contractual recognition of tax liability. 13.5 The argument of the appellant that the activity was understood by them as "horticulture" and hence non-taxable cannot be accepted in isolation, when commercial contracts contemporaneously treated the activity as taxable, and when the appellant had never sought clarification or reclassification from the Department, despite such clauses. 13.6 In view of the above factual and legal position, we hold that: - The presence of Service Tax clauses in contracts and purchase orders, the requirement to submit Service Tax Registration Certificate, and the appellant's pre-existing r....
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.... the present case. iii. Murlidhar Horticulture Pvt. Ltd. - 2019 (3) TMI 1435 (CESTAT Ahmedabad) In Murlidhar Horticulture Pvt. Ltd., the Tribunal was dealing with activities relating to development and creation of horticultural assets, involving plantation and initial landscaping. In contrast, the present case involves routine, periodic and continuous maintenance of existing gardens and landscaped areas under contractual arrangements for fixed consideration. The scope of work in the present case predominantly consists of watering, pruning, mowing, pest control, cleaning and replacement of plants, which are characteristic of maintenance services. The factual matrix being materially different, the said decision is distinguishable. iv. Evergreen Horticulture - 2019 (25) GSTL 556 (Tri.-All.) The decision in Evergreen Horticulture also turned on its own facts, wherein the Tribunal was concerned with initial landscaping and horticultural development, and not with recurring maintenance contracts. In the present case, the documentary evidence clearly establishes that the appellant was engaged in maintenance of gardens on a recurring basis, rather than on....
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....o not assist the appellant in seeking relief in the present appeal. ISSUE No. vi) Whether invocation of extended period and imposition of interest and penalties are sustainable 15.1 The appellant contended that the invocation of the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 and the consequential imposition of interest and penalties are unsustainable as the i. the entire demand has been raised based on the books of accounts, contracts and invoices regularly maintained by the appellant; ii. the appellant was under a bona fide belief that the activities undertaken by them constituted horticulture/agriculture and were not taxable, which belief was supported by judicial precedents; iii. there was no deliberate suppression, misstatement or intent to evade tax; iv. the appellant was subjected to audit and correspondence by the Department as early as 2008, and therefore the Department was fully aware of the nature of activities; v. mere non-payment of tax on an interpretational issue cannot be equated with suppression. Reliance was placed on Padmini Products - 1989 (43) ELT 195 (SC), Praga....
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.... ii. Despite registration, the appellant did not declare landscaping/garden maintenance services in their ST-3 returns; iii. The appellant did not classify the service under any taxable category, nor did they seek any clarification from the Department when the contracts entered into expressly referred to service tax registration and payment of the tax. iv. The taxable nature of the activity has been upheld by us on merits. 15.9 It is settled law that statutory returns are the primary mode of disclosure under service tax law. Mere availability of information in books of accounts, contracts or invoices would not amount to disclosure unless the same is specifically declared in statutory returns. The Hon'ble Supreme Court in Pushpam Pharmaceuticals Co. v. CCE - 1995 (78) ELT 401 (SC) held that suppression includes failure to disclose information which the assessee was legally required to disclose. Similarly, in Nizam Sugar Factory v. CCE - 2006 (197) ELT 465 (SC), it was held that nondisclosure of correct information in returns justifies invocation of extended period. The appellant's contention that the Department was aware of their activities due to audit or cor....