Leviability of service tax on management and maintenance of parks

PJ/CASE LAW/2016-17/3132

Case:- SURESH JAISWAL VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR

Citation:- 2016 (42) S.T.R. 97 (Tri. - Del.)

Brief Facts:-Appeal has been filed against order-in-original No. 14/2012(S.T.)-COMM, dated 17-2-2012/21-2-2012 in terms of which service tax demand of Rs. 51,00,710/- was confirmed along with interest and penalties on the ground that the appellant provided management, maintenance or repair service but had not paid service tax. The facts, briefly stated, are as under:
The appellant, a contractor, entered into contracts with Jaipur Development Authority (JDA) and Jaipur Nagar Nigam (JNN) for management and maintenance of parks and road side plantation and maintenance. The scope of work was mainly as under:
(a)        Supply and growing of plants;
(b)        Supply and providing fertilizers and pesticides to the plants at regular interval;
(c)        Watering of lawns, plants;
(d)        Lawn cutting and pruning and trimming of hedges;
(e)        De-weeding of lawns and flower beds;
(f)         Preparation of flower beds and planting of shrubs, etc;
(g)        Removing of stone pieces from other than lawn area in a park;
(h)        Brooming the lawn and collecting the dirt at destined places;
(i)         Operating the water pump;
(j)         Putting on the lights and shutting them off;
(k)        Operating the fountains;
(l)         Providing round the clock security of the parks;
(m)      Coloring the ports; potting and re-potting;
(n)        Filling up new pots and planting plants therein;
(o)        Replacement of dead plants.
The adjudicating authority held that in view of the CESTAT judgment in the case of CCEv. ANS Constructions Ltd. - 2010 (17)S.T.R.549 (Tri.-Del.) the demand for the period up to 30-4-2006 was not sustainable but demand for period with effect from 1-5-2006 onwards was upheld on the ground that the service rendered fell under the scope of management, maintenance or repair service [Section 65(64)/65(105)(zzg) of the Finance Act, 1994].

Appellant’s Contention-The appellant has contended that:
(1)The service rendered by the appellant could not be covered under the ambit of maintenance and repair of immovable property as has been held by CESTAT in the case of ANS Constructions Ltd.(supra).
(2)There was no suppression or wilful misstatement and therefore the extended period is not invocable.
(3)Maintenance of parks is a statutory duty of JDA/JNN and therefore the said activity is not liable to service tax.

Respondent’s Contention-The ld. DR on the other hand, contended that merely because maintenance of parks, etc., was statutory duty of JNN/JDA, it in no way meant that the service covered under management, maintenance or repair service would not be liable to service tax. The appellant did not co-operate during investigation, did not respond to summons, did not submit any details (in spite of being asked) which had to be obtained from JDA/JNN and did not file ST-3 returns showing rendition of the impugned service and therefore the extended period is clearly invocable.

Reasoning Of Judgement-The tribunal have considered the contentions of both sides. They find that up to 30-4-2006 the definition of what was then called “maintenance or repair” as given in Section 65(64) was as under:
16-6-2005 to 30-4-2006:
“Maintenance or repair” means any service provided by -
(i)         Any person under a contract or an agreement; or
(ii)        A manufacturer or any person authorised by him;
In relation to -
(a) maintenance or repair including reconditioning or restoration, or servicing of any goods or equipment, excluding motor vehicle; or
(b) maintenance or management of immovable property.
From 1-5-2006 service became “management, maintenance or repair” service and the definition of “management, maintenance or repair” given in the said Section 65(64) is reproduced below:
From 1.5.2006:
“Management, maintenance or repair” means any service provided by -
(a)        any person under a contract or an agreement; or
(b)        maintenance or repair of properties, whether immovable or not;
(c)        maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle.”
They find that in the case of ANS Construction (supra), the CESTAT held that “respondents were engaged for activities of growing grass, plants, trees or fruits, vegetable, regular mowing of lawns, pruning and trimming of shrubs end cleaning of garden, would not come within the ambit of “maintenance of immovable property”. While they find it hard to discern any ratio in the said judgment, the adjudicating authority has dropped the demand pertaining to the period up to 30-4-2006 on the ground that during that period maintenance or repair of only immovable property was liable to service tax. The Commissioner (Appeals) clearly noted that with effect from 1-5-2006 the change in definition of “management, maintenance or repair” brought “maintenance or repair of properties whether immovable or not” within the scope of ‘management, maintenance or repair service’ and accordingly confirmed the impugned demand for the period with effect from 1-5-2006. While there can hardly be any doubt that “roads, airports, railway, building, parks, electrical installation and the like” are clearly immovable properties and therefore management, maintenance or repair of such properties is clearly liable to service tax, even if it is contended, as indeed has been done by the appellant, that maintenance of trees, grass, etc. cannot be called in the category of maintenance of immovable property, the impugned demand would be sustainable even in the wake of such contention as maintenance or repair of even non-immovable properties was brought under the scope of management, maintenance or repair service with effect from 1-5-2006. Thus the said judgment in the case of ANS Construction does not come in the way of charging service tax on the impugned service w.e.f. 1-5-2006 as has rightly been held by the adjudicating authority.
It is seen that the appellant did not take Service Tax registration and did not file ST-3 returns pertaining to the impugned service. It also did not submit the details in spite of being asked and did not even respond to summons. The required details had to be gathered from JNN/JDA. Thus, the appellant is clearly guilty of suppression of facts.
In the light of the above analysis, we hold that the impugned service is liable to service tax under management, maintenance or repair service and the appellant is guilty of suppression of facts.
However, they have perused the typical work orders which apart from requiring maintenance or repair, involve supply of goods too, like supply of different trees, for which specific rates have been mentioned. On this being pointed out, Revenue conceded that service tax would not be chargeable on supply/sale of such goods and that the benefit of Notification No. 12/2003-S.T. would be available to the appellant if the conditions thereof were satisfied.
Tribunal therefore remand the case to the Commissioner (Appeals) with the direction that the impugned service tax liability may be recomputed after extending the benefit of Notification No. 12/2003-S.T. in respect of supply of goods (like trees/shrubs/climbers etc.) provided the conditions of the said Notification No. 12/2003-S.T. are satisfied. The appellant may be granted an opportunity of being heard to enable it to establish its eligibility for the benefit of Notification No. 12/2003-S.T. Needless to say that the penalties would also have to be recomputed in the light of the recomputed demand. The Commissioner (Appeals) shall issue appropriate orders after such re-computation of impugned demand and penalties. The appeal stands disposed of in the above terms.

Decision:-Case remanded.

Comment:- The analogy of the case is thatRoads, airports, railway, building, parks, electrical installation are clearly immovable properties and since the Maintenance or repair of even non-immovable properties brought under scope of Management, Maintenance or Repair service w.e.f. 1-5-2006 therefore the Judgment in ANS Construction not to come in way of charging Service Tax on Maintenance or repair w.e.f. 1-5-2006. But the management and maintenance of parks and road side plantation work involve supply of goods too, so the service Tax is not chargeable on supply/sale of such goods. This means that benefit of Notification No. 12/2003-S.T. to be available if conditions thereof satisfied. Hence, the case was remanded to Commissioner (Appeals) with direction that impugned Service Tax liability may be recomputed after extending benefit of such notification.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2016-17/3132

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