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Service Tax - maintenance of green belt - not 'maintenance of immovable property': CESTAT

By TIOL News Service

NEW DELHI, SEPT 14, 2009: REVENUE filed this appeal against Order of the Commissioner
(Appeals) whereby adjudication order was set aside and it has been held that the activities pertaining
to maintenance of green belt and maintenance of grass, plants, fruits, trees & shrubs, etc. are not
subject to service tax under Finance Act, 1994. According to Revenue, the activities of maintenance of
garden carried out by the Respondents would fall within the scope of maintenance of immovable
property such as the parks and the like and service tax would be levied w.e.f. 16.6.2005 under Section
65(64) of Finance Act, 1994.

The respondents entered into a contract with M/s. Chambal Fertilizers & Chemicals Ltd. (in short CFCL)
for annual maintenance contract of green belt maintenance in CFCL garden. The scope of contract is
Horticulture and Landscaping. A show cause dated 8.5.2006 was issued proposing demand of tax of Rs.
21,72,670/- for the period 16.6.2005 to 28.2.2006 under the category of Maintenance or Repair
service. It was also proposed to impose penalty along with interest. Original authority confirmed the
demand of tax and imposed penalties along with interest. The Commissioner (Appeals) set aside the
adjudication order.

Hence, Revenue filed this appeal.

The dispute relates to as to whether the activities undertaken by the respondents for maintenance of
green belt would come within the purview of maintenance of immovable property under Section 65(64)
of the Act. It is noted that with effect from 1.5.2006, the above definition was amended to the extent
management, maintenance or repair of all properties (whether immovable or not) is included. It
appears from CFCL Project Report that carefully designed green belts that have been developed in and
around the fertilizer aesthetic look of the area, Chambal has taken up extensive tree plantation to
develop complex. Over 0.2 million trees and shrubs cover an area of 438 acres, with species of birds
including migratory one that can be spotted within the Complex.

The respondents are cultivating as well as landscaping the CFCL garden and the works of repair and
maintenance of civil, mechanical and electrical are incidental thereto. It is contended by the Advocate
that respondent paid tax in such incidental works. The main contention of the respondents is that the
activity of horticulture which deals with growing of grass, flowering and plant are not act of
maintenance of immovable property. The original authority observed that maintenance of plant, grass,
walkways and other fixtures is only maintenance of park and garden, would come under the
maintenance of immovable property. The Commissioner (Appeals) observed that the respondents have
not done any civil/electrical or mechanical work in relation to maintenance of park or green belt.
Board's Circular dated 27.7.2005 refers to maintenance of civil/electrical and construction work of park
and green belt and not maintenance of grass, plants, trees or shrubs. There is no dispute that the
respondents paid the tax on construction work in park. It is seen that services in relation to agriculture,
horticulture, animal husbandry or diary were excluded from the definition of cleaning activity under
Section 65 (24b) of the Act. So, the horticulture activity is outside of cleaning activity a separate
activity. As per Section 3 of Transfer of Property Act, 1982 immovable property does not include the
standing timber, growing crops or grass. It is noticed that by amendment of Section 65(64) with effect
from 1.5.2006, service tax is leviable on maintenance of all properties (whether immovable or not).
The respondents were engaged for activities of growing of grass, plants, trees or fruits, vegetable,
regular mowing of lawns, pruning & trimming of shrubs and cleaning of garden, would not come within
the ambit of maintenance of immovable property.

In view of the above discussion, Tribunal found that there is no reason to interfere with the order of the
Commissioner (Appeals). Accordingly, appeal filed by the Revenue is rejected.

(See 2009-TIOL-1459-CESTAT-DEL in 'Service Tax')

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