2026-VIL-113-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax – Sections 65(105)(zzg), 73(1), 77 and 78 of Finance Act, 1994 – Special Economic Zones Act, 2005 – Section 26 – Providing of garden related services – Tax liability – Appellant is engaged in providing garden related services – Department opined that activities undertaken by Appellant constituted maintenance of gardens, which is taxable under Section 65(105)(zzg) of the Act – Department issued show cause notice proposing demand of service tax by invoking extended period of limitation – Commissioner confirmed demand proposed in show cause notice – Whether landscaping and garden maintenance activities undertaken by Appellant are classifiable as taxable services – HELD – Contracts and invoices on record unmistakably show that Appellant was entrusted with upkeep, preservation and periodic maintenance of existing gardens and parks and not with one time development or creation of new horticultural assets. Services rendered by Appellant clearly satisfy the definition of management, maintenance or repair service. Activities are correctly classifiable as taxable “management, maintenance or repair service” – The appeal is partly allowedrnrnIssue 2: Service Tax – Rendering of services to municipal corporation – Demand of tax – Whether services rendered by Appellant to Coimbatore City Municipal Corporation constitute sovereign functions under Article 243W of the Constitution – HELD – There is no dispute that maintenance of parks and gardens is a municipal function and such functions may be outsourced to private agencies. Article 243W of the Constitution only identifies municipal responsibilities and it does not grant tax immunity to private entities executing outsourced work. Appellant does not step into shoes of State or municipality merely because the work relates to a municipal function. Service tax law exempts services rendered by Government and not services rendered to them by private contractors. Services rendered by Appellant to Coimbatore Municipal Corporation cannot be treated as sovereign functions and are not immune from levy of service tax. Appellant is liable to tax on this score.rnrnIssue 3: Service Tax – Sale of plants – Tax liability – Whether sale of plants, manure, soil, milk etc. attracts service tax – HELD – It is well settled that pure sale of goods involving transfer of property in goods is outside scope of service tax in view of Article 366(29A) of the Constitution. Value of goods and value of services are required to be segregated and service tax cannot be levied on value of goods. 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 taxable value. Since necessary factual details and supporting documents are not readily available on record, it is unable to quantify exact extent of exclusion at this stage. Demand to extent it includes value of pure sale of goods not relatable to landscaping and maintenance contracts is unsustainable. For purpose of limited verification and re-computation, issue is remanded to Adjudicating Authority, who shall examine the documentary evidence produced by Appellant, verify either sales are independent of service contracts and allow appropriate relief and re-compute demand in accordance with law. rnrnIssue 4: Service Tax – Rendering of services to special economic zone – Denial of exemption – Whether services rendered by Appellant to SEZ units are exempt from payment of Service Tax – HELD – Merely because recipient happens to be an SEZ unit does not render all services rendered to it exempt. Appellant had failed to establish that landscaping and garden maintenance services rendered to SEZ units were approved as authorised operations under SEZ Act. Appellant had not demonstrated compliance with mandatory procedural requirements prescribed under SEZ Act and relevant service tax exemption notifications. In absence of such compliance, exemption under Section 26 of SEZ Act cannot be extended. Services rendered by Appellant to SEZ units are not exempt from payment of Service Tax.rnrnIssue 5: Service Tax – Invoking of extended period of limitation – Imposition of penalty – Whether invocation of extended period and imposition of interest & penalties are sustainable – HELD – Proviso to Section 73(1) of the Act permits invocation of extended period, where non-payment of tax is by reason of fraud, collusion, wilful misstatement, suppression of facts or contravention of statutory provisions with intent to evade tax. Although Appellant was registered under one taxable category, they did not declare impugned activities and did not discharge tax under appropriate category of Management, Maintenance or Repair Service. Appellant did not file ST-3 returns reflecting consideration received under contracts. Mere availability of information in books of accounts, contracts or invoices would not amount to disclosure unless same is specifically declared in statutory returns. Extended period has been correctly invoked. Once tax liability is upheld, interest follows automatically. There is no infirmity in imposition of penalties, as Appellant had failed to comply with statutory obligations. Penalties imposed under Sections 77 and 78 of the Act are sustainable, subject to re-computation of tax liability after excluding value of sale of goods, as held above in this order.
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