No Service Tax Applicable on “Cleaning Service” Provided to Railway Prior to 01.07.2012: CESTAT sets aside Demand [Read Order]
Since the tax entry must be strictly construed, cleaning services provided to the Railways could not be brought under the levy prior to the negative list regime introduced from 01.07.2012, said the bench.
The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Kolkata has held that cleaning and sanitation services provided to the Indian Railways prior to 1st July 2012 do not fall within the ambit of taxable “cleaning services” under the Finance Act, 1994.
The appellant, M/s Khagaul Labour Co-operative Society Ltd had undertaken mechanised and manual cleaning, sanitation, and upkeep of railway stations in the Samastipur Division under contracts with the Eastern Railways.
The Revenue alleged that such services fell under the definition of “cleaning activity” as per Section 65(24b) of the Finance Act, 1994, and issued a show cause notice demanding tax. Both the adjudicating authority and Commissioner (Appeals) upheld the demand, leading the appellant to challenge the order before the Tribunal.
The appellant argued that Indian Railways, being a government organisation engaged in passenger transportation for public welfare, could not be equated with a “commercial or industrial concern.”
It was further contended that the definition of “cleaning activity” prior to 1st July 2012 covered only cleaning of commercial or industrial buildings, factories, plants, machinery, tanks or reservoirs, and not services relating to public infrastructure like railways.
The counsel also depended on the recent decision of the Tribunal in Bindhya Bashini Traders v. Commissioner of CGST & Central Excise, where it was held that similar services provided to railways did not attract service tax before 2012.
The Tribunal, comprising Mr. R. Muralidhar (Judicial Member) and Mr. K. Anpazhakan (Technical Member), after examining the statutory definition and precedents including R.K. Refreshments & Enterprises Pvt. Ltd. v. CCE, Raipur and P. Siva Prasad v. CCE, Hyderabad-III, held that railway stations, coaches, and platforms cannot be regarded as “commercial or industrial buildings.”
In the case of P. Siva Prasad v. CCE, Hyderabad-III, the tribunal held that “Service Tax confirmed in the impugned order for the period up to 30.06.2012 under the category of “cleaning service” is not sustainable and hence we set aside the same.”
Since the tax entry must be strictly construed, cleaning services provided to the Railways could not be brought under the levy prior to the negative list regime introduced from 01.07.2012. Accordingly, the Tribunal set aside the impugned order demanding a service tax of Rs. 28 lakhs and allowed the appeal with consequential relief.
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