By TIOL News Service

MUMBAI, MAY 08, 2017: THIS is a Revenue appeal.

The respondent is engaged in undertaking the work of cleaning of nullah, roadside garbage, soil etc. at designated places in Nagpur and has received payment for such activities from Nagpur Municipal Corporation (NMC) and from Kanak Resource Management Ltd.

The jurisdictional authorities were of the view that the respondent is liable to pay service tax under the category of "Business Auxiliary Service".

The adjudicating authority came to a conclusion that the services rendered by the respondent will not be taxable under BAS as the cleaning activity undertaken by the respondent is a statutory responsibility of NMC. The Commissioner(A) dismissed the Revenue appeal and, therefore, the department is before the CESTAT.

Relying on the CBEC Circular No. 89/7/2006-ST dated 18.12.2006, the AR submitted that in the case in hand the respondents are not a sovereign/public authority constituted under any law, but they are a Proprietorship concern and are working as a Commercial organization performing their functions/activities with a profit motive;that the fees collected by the respondents are not in the nature of compulsory levy and are not deposited in the Government treasury; that under the category of 'BAS', the provision of service on behalf of the client does not require that the service should be in relation to any business but merely has to be a service, whether taxable service or not, provided to a client. Inasmuch as it is prayed that the demand needs to be upheld.

The respondent filed a cross objection and submitted that the judgment in Ankit Consultancy Ltd. = 2006-TIOL-1793-CESTAT-DEL was correctly followed by the first appellate authority holding that statutory activity cannot be termed as 'business activity'; that in the case in hand NMC is supposed to provide statutory activity of cleaning of nullahs, roadside garbage and waste soil and it was not a commercial activity of NMC.

The Bench observed -

+ It cannot be disputed that cleaning of nullahs and removal of roadside garbage and waste soil is statutory function of NMC which they have outsourced to the respondent herein.

+ Respondent is not providing any services to NMC as the activity of cleaning of nullahs and removal of roadside garbage and waste soil is not an activity of business to NMC, and these services do not qualify as services on behalf of the client.

+ The findings of the lower authorities are not disputed by Revenue in the 'grounds of appeal' i.e. cleaning of nullahs and removal of garbage and soil by the respondent in a designated area on being contracted by NMC.

Concluding that the Commissioner(A) had correctly relied on the decision in Ankit Consultancy (supra) to hold in favour of respondent, the Revenue appeal was rejected.

(See 2017-TIOL-1537-CESTAT-MUM)