Activities classified as taxable services under service tax law despite claims of horticulture and municipal function exemptions, with penalties upheld for non-disclosure.

Per Mr. VASA SESHAGIRI RAO

This appeal has been filed by M/s. Trishaa Rose Garden, Coimbatore (hereinafter referred to as the appellant) assailing Order-in-Original No. CBE/ST/5/2015 - Commr. dated 31.03.2015, passed by the Commissioner of Central Excise & Service Tax, Coimbatore (hereinafter referred to as the impugned order).

2.1 The appellant is engaged in operating a plant nursery and in providing garden-related services such as landscaping, planting, horticultural operations and maintenance of gardens, parks, lawns, avenues and green belts for municipal authorities and corporate entities.

2.2 The appellant was registered under Service Tax 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 (105)(zzg) of the Finance Act, 1994 for the period April 2008 to June 2012, and taxable as “service” under B(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 ₹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. Raghav Rajeev appeared on behalf of the Appellant and advanced detailed submissions in support of the Appeal and the Ld. Authorized Representative Mr. Sanjay Kakkar appeared for the Revenue and defended the Impugned Order.

4. The Ld. Advocate Mr. Raghav Rajeev made the following submissions which are summarized as below: - The appellant contended that: -

i. the activities undertaken are horticulture involving cultivation and development of gardens, not maintenance;

ii. Horticulture was not a taxable service prior to 01.07.2012 and is covered under agriculture in the Negative List thereafter;

iii. contracts are composite in nature and, if taxable, fall under works contract;

iv. services rendered to Coimbatore City Municipal Corporation are municipal/sovereign functions under Article 243W;

v. services rendered to SEZ units are exempt under the SEZ Act;

vi. sale of plants, manure, soil, milk and dairy products is pure sale of goods;

vii. extended period, interest and penalties are not invocable due to bona fide belief and departmental awareness.

5. Per Contra, the Ld. Authorized Representative Mr. Sanjay Kakkar for the Revenue supported the findings in the impugned order and further submitted that: -

i. contracts and invoices clearly show recurring maintenance of gardens for consideration;

ii. horticultural methods do not change the essential character of maintenance;

iii. Article 243W does not grant tax immunity to private contractors;

iv. urban garden maintenance is not “agriculture”;

v. SEZ exemption is conditional and procedural, not complied with;

vi. non-declaration in ST-3 returns justifies extended period, interest and penalties.

vii. The Ld. Authorized Representative accordingly prayed that the appeal be dismissed.

6. We have heard both sides, perused the appeal records, examined the relevant statutory provisions and the case laws cited by both sides. The main issue involved in this appeal is regarding the classification of serv