The Ahmedabad bench of the Customs, Excise And Service Tax Appellate Tribunal ( CESTAT ) held that No Service Tax on any Services provided to the Government in Relation to Water Supply and Public Health.
M/s M.J. Solanki (Partnership Firm) is engaged in providing taxable services such as Cleaning Services and Manpower Recruitment or Supply Agency Services etc. Information received by the DGGI indicated that respondents have provided the taxable services but had not paid the appropriate amount of Service tax on taxable services provided by them.
An inquiry was initiated against the respondent. A search was carried out at their registered office and documents/ records relevant to the inquiry available at the said premises were withdrawn under Panchnama. Statement of Shri Anil J Solanki, partner was recorded. Investigation of such documents withdrawn and subsequently details provided by the assessee viz, agreement/contracts/works orders/ invoices/ ledger and statement of Shri Anil Solanki, partner revealed that the Respondent are engaged in providing the services of Manpower Supply, cleaning and Housekeeping, Security, Rent-a-cab etc, to their various clients which includes hospitals, medical colleges, educational institutes, local authorities viz. Collector office, municipal corporations, public health centers, block health centers etc; banks, public sector undertakings, educational institutions, research institutions, western railways, districts courts; etc.
It was noticed by the investigating agency that though the assessee had discharged service tax liability under some of the services provided by them, they had claimed a major chunk of services provided by them as exempted from Service tax. However department is of the view that services provided by the respondent are taxable and they are liable to pay Service tax on the income earned from providing said services.
It was submitted that the assessee had provided manpower on an outsourcing basis to Hospitals, Community Health Centers etc. and claimed exemption from payment of Service tax under Sr. No. 25(a) of the Notification No. 25/2012-ST dated 20.06.2012 as amended. As per the agreement with these service recipients i.e. Hospitals, Community/ Public Health Centres etc., the respondent has supplied Paramedics and other Class 4 category manpower to these Hospitals, health centres etc.
The adjudicating authority has allowed the exemption from service tax claimed by the assessee for providing Cleaning & Housekeeping services to various organizations under Sr. No. 25(a) of Notification No. 25/2012-ST dated 20.06.2012 as amended.
The non-payment of service tax on the amounts so collected by the assessee which appeared to be consideration for providing taxable services viz. Supply of Manpower or cleaning services to various Community Health Centres etc. came to the knowledge of the DGGI only due to a specific investigation carried out. Therefore, the extended period of limitation as envisaged under proviso to Section 73(1) of the erstwhile Finance Act 1994 is rightly invocable in respect of the demand for Service tax for the period April 2012 to March 2016. The findings of the adjudicating authority that an extended period of limitation is not invocable in this case are not proper and legal.
The respondents had a bona fide that they were eligible for the exemption since the services provided by them were with public health and sanitation conservancy. The belief of Respondent has been duly upheld by the Adjudicating authority. An extended period of limitation is also not invocable where the issue involves interpretation, there is a bona fide belief of the assessee regarding exemption to the services provided by him and all the transactions are duly recorded in the books of accounts.
The Respondent by inter alia citing Sr. No. 25(a) of Notification No. 25/2012-ST dated 20.06.2012 as amended by Notification No. 6/2014-ST dated 11.07.2014 claimed the service tax exemption on the ground that they have provided services to hospitals, health centres etc. run by government.
A two-member bench comprising Mr Ramesh Nair, Member (Judicial) and Mr Raju, Member (Technical) held that exemption is available to services that are provided to the Government, a local authority or a government authority by way of carrying out any activity about any function ordinarily entrusted to a Municipality about water supply, public health, sanitation conservancy, solid waste management upto 10.07.2014 and w.e.f. 11.07.2014 services by way of water supply, public health, sanitation conservancy, solid waste management of slum improvement and upgradation.
The Tribunal viewed that services provided to the Government, Local Authority or a Government authority by way of carrying out any activity about public health, sanitation conservancy, solid waste management etc. are exempted from service tax. The assessee is providing health services under the supervision of authorized medical officers of government-run municipal hospitals and government health centres and hence eligible for exemption under Sr. No. 25(a) of Notification No. 25/2012-ST up to 11.07.2014.
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