OIO No. 59/STC-AHD/ADC (MKR)/11-12 Page 41 of 41

BRIEF FACTS OF THE CASE:-

Intelligence gathered by the H.Q. Preventive Section of Service Tax
Commissionerate, Ahmedabad indicated that M/s. Patel Utility Services (herein after referred to as “the said service provider”), situated at 818, 2nd floor, Banker Niwas, Hirparu, Navovas, Danapith, Ahmedabad-380001 (presently situated at 802, Pratiksha Complex, Mahalaxmi Panch Rasta, Paldi, Ahmedabad : 380 007) was engaged in the business of providing cleaning services to various clients as defined under Section 65 (24b) of the Finance Act, 1994, but not paying the Service Tax properly. Therefore, the premises of the said service provider as well as residence of the proprietor were visited as per the permission obtained from Additional Commissioner of Service Tax, Ahmedabad. During the course of the said visit, it was found that the said service provider was engaged in the business of providing cleaning services to various clients without payment of Service Tax properly. It was further noticed that the said service provider was recovering Service Tax from their clients but they were not depositing the same with the Government account.

2. A statement of Shri Pradip Jagdishbhai Patel, Proprietor of M/s. Patel Utility Services, Ahmedabad residing at 11/A, 1st Floor, Chunibhai Colony, Opp. Jolly Park, Near Old Dairy, Kankaria, Ahmedabad, was recorded on 26.02.2008 under Section 14 of the Central Excise Act, 1944 read with Section 83 of Finance Act, 1994, wherein he, inter-alia, deposed that he is the proprietor of M/s. Patel Utility Services, Ahmedabad and looking after all the affairs of the said firm. On being asked. regarding number of companies functioning, he stated that, (i) M/s Patel Associates (ii) M/s Patel Utility Services, (iii) M/s Patel Housekeeping Services. On being further asked, he stated that M/s Patel Utility Services is a Proprietary firm and he is the Proprietor of the said firm; that the said company M/s Patel Utility was started in the month of January 2006; that in the said company they
are providing cleaning services to various customers / clients for which he
provided a list of the major clients / customers, for which they have been
registered with the Service Tax Department bearing STC No. AECPP2069JST001 issued on 21.03.2006, under the category of “Cleaning
Services”. He produced copies of some of the invoices issued by the said
service provider. On being specifically asked regarding Service Tax payment
particulars and filing of ST-3 returns, he stated that he had paid Rs.2,50,000/- (approximately) up to June 2007; that for the remaining period i.e. July 2007 to December 2007, (which was due at the relevant point of time), their Service Tax liabilities was to the extent of Rs.5,00,000/-(Approx.) which they had not paid till date and assured to pay the same; that they had not filed any ST-3 Returns during the said period.

3. Further statement of Shri Pradip Jagdishbhai Patel, Proprietor of M/s. Patel Utility Services was recorded on 02.05.2008 under Section 14 of the Central Excise Act, 1944 read with Section 83 of Finance Act, 1994, wherein he stated that he is a Proprietor of M/s Patel Utility Services Ahmedabad and looking after all affairs of the said firm.

3.1. On being asked regarding the materials supplied to various clients, to whom service was provided by them, he stated that the raw materials are sold by them as per clients / customers requirements; that in the invoices also value of such materials / goods were shown separately; that he has not charged / recovered any Service Tax on the material / goods supplied; that they have supplied material/ goods without any profit i.e. cost to cost basis.

3.2. On being asked regarding payment of Service Tax on the value of the materials, he stated that he had not paid any Service Tax on the said value of the materials; they had neither paid any Service Tax on the said value / cost of the materials realized; nor had charged Service Tax from their clients / customers on the value of the materials; that they had also neither charged VAT/ Sales Tax from the clients / customers; nor had taken / utilized any CENVAT Credit / abatement.

4. Further statement of Shri Pradip Jagdishbhai Patel, Proprietor of M/s Patel Utility Service was recorded on 10.02.2009 under Section 14 of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 wherein he admitted that the same were true and correct however, he would like to clarify that certain facts & figure / data, provided by him with respect to House keeping charges / labour charges and material charges, so claimed, were not comprehensively shown / disclosed by their accountant since the same were not finalized at the relevant point of time, therefore, re-submitted the same under Annexure -I & II to his statement after duly certifying the same. Further on being specifically asked, he categorically stated that he failed to pay up the remaining amount of Rs.2,50,328/- which was liable to be paid as per the Annexure-I & II, due to recession in the market and financial crisis.

4.1. Whereas Shri Pradip J Patel in his statement recorded on 26.02.2009 has, inter-alia, stated that they had entered into an agreement with M/s Medisurge Associates Pvt. Ltd., Ahmedabad from 01.04.2007 to 31.03.2008, wherein certain terms and condition were specified; that other than the said agreement they never had entered into any kind of written agreement with any of the clients; that the cleaning services so provided to various clients also includes supply of cleaning materials which is shown and charged separately in the invoices; that they never provide any cleaning service without supply of cleaning material; that the charges for the same are collected from the clients but the same are not actually sold to them but utilized in cleaning process and no Sales Tax / VAT is paid on the same.

5. Whereas a further statement of Shri Pradip Jagdishbhai Patel was finally recorded on 15.09.2009 wherein he, inter-alia, stated and confirmed that they had not filed any ST3 Returns, since from the inception of the subject enquiry i.e. from 26.02.2008 to till date, however they had made a payment towards Service Tax amounting to Rs.16,44,542/- for the period from December 2005 to March 2008 and Rs.2,57,470/- ( Rs.66,422/-, Rs.77,537/- and Rs.48,673/- on 22.06.2009 quarter wise respectively), for the period from April 2008 to March 2009, from time to time. On being specifically asked, he provided the relevant documents / information pertaining to the said period i.e. April, 2008 to March, 2009. He further clarified that they had not been considering the value in terms of cost of material supplied to the various customers, as per their requirements, while computing the taxable value and that they had also not considered the value of services provided to various Hospitals, in the computation of taxable value, as they are of belief that the same is not applicable / taxable but at the same time they had furnished the relevant details of the total amount of such billing to the said Hospitals during the period from 2008 to 2009, on the basis of Trial Balance Sheet.

6. Whereas it appeared that as per the Annexure-I & II, of the statement of Shri Pradip J. Patel recorded on 10.02.2009, in respect of M/s. Patel Utility Services, Ahmedabad which rendered Cleaning Service to various customers, wherein the total taxable value collected / realized has been worked out to be Rs.1,55,14,749/- and Service Tax actual payable worked out to be the tune of Rs.18,94,870/- during the period from 16.06.2005 to 31.03.2008 and in light of the further statement of said Shri Pradip J. Patel, recorded on 15.09.2009 the taxable value i.e. amount of value realized in respect of House Keeping / Labour charges + Cost of Materials supplied, has been worked out to be Rs.1,23,09,398/- during the period 2008-09 (Details as per Annexure III of the statement date 15.09.2009). Detailed worksheet as per Annexure “A”, prepared on the basis of aforesaid Annexure I to III of the statements of Shri Patel, was attached to the SCN.

7. According to the provisions contained under clause 24(b) of the Section 65 of the Finance Act, 1994, as amended, “Cleaning Activity” means ;

‘Cleaning, including specialized cleaning services such as disinfecting,
exterminating or sterilizing of objects or premises, of-

(i)  commercial or industrial buildings and premises thereof; or

(ii)  factory, plant or machinery, tank or reservoir of such commercial
or industrial buildings and premises thereof,

but does not include such services in relation to agriculture,
horticulture, animal husbandry or dairying;’

The definition provides that cleaning activity means cleaning. Thus the term
cleaning has to be understood in its general sense. As per American Heritage
Dictionary, 4th Edition, the term ‘cleaning' means- to get rid of dirt, rubbish, or impurities; to remove the contents from; to undergo or perform an act of cleaning. Some examples of general cleaning services are - Dusting, Mopping, Vacuuming, Rubbish disposal, Toilets, Kitchens, Dishwashing, Glass cleaning, Car Park scrubbing, Factory floor cleaning etc.

8. Further, according to the provisions contained under sub-clause (zzzd) of Clause 105 of Section 65 of the Finance Act, 1994, as amended, taxable service is a service provided or to be provided to any person, by any other person, in relation to cleaning activity.

9. The government has from the very beginning placed full trust on the service provider so far service tax is concerned and accordingly measures like Self-assessments etc., based on mutual trust and confidence are in place. Further, a taxable service provider is not required to maintain any statutory or separate records under the provisions of Service Tax Rules as considerable amount of trust is placed on the service provider and private records maintained by him for normal business purposes are accepted, practically for all the purpose of Service tax. All these operate on the basis of honesty of the service provider; therefore, the governing statutory provisions create an absolute liability when any provision is contravened or there is a breach of trust placed on the service provider, no matter how innocently. From the evidence, it appeared that the said assessee had not taken into account all the incomes received by them for rendering taxable services for the purpose of payment of service tax and thereby minimize their tax liabilities. The deliberate efforts to mis-declare the value of taxable service in ST 3 returns and not paying the correct amount of service tax in utter disregard to the requirements of law and breach of trust deposed on them such outright act in defiance of law appeared to had rendered them liable for stringent penal action as per the provisions of Section 78 of Finance Act 1994 for suppression or concealment or furnishing inaccurate value of taxable service with intent to evade payment of service tax.

10. From the above, it appeared that the above said firm, is engaged in the business of providing the taxable service i.e. Cleaning Services, collecting the taxable consideration for the service rendered and is therefore liable to pay the Service Tax on the total taxable amount of consideration / value charged and received by them. Further, it appeared that the said firm was charging and collecting Service Tax from M/s. Medisurge Associates from 01.04.2007 to 31.03.2008 as per the terms and conditions specified under the agreement held between said M/s. Medisurge Associates and the said service provider. During the course of investigation the said service provider was asked to provide copies of invoices and in response he provided some of the sample invoices for the relevant period which were subjected to scrutiny and it was noticed that they had not charged any service tax during the period in question from any customer / client except in some of the invoices issued in favour of M/s. Medisurge Associates Pvt. Ltd., Ahmedabad. However, it was not possible to quantify the amount of service tax so claimed /charges from said M/s. Medisurge Associate Pvt. Ltd., since they did not furnish all the copies of invoices. In this regard it therefore appeared that they had charged and claimed the service tax from M/s. Medisurge Associates Pvt. Ltd., but had failed to deposit the same with the Government account.

11. All the above acts of contravention on the part of the said service provider appeared to have been committed by way of suppression of facts with an intention to evade payment of Service Tax and therefore, the said Service Tax not paid was required to be demanded and recovered from them under the proviso to Section 73(1) of the Finance Act, 1994 by invoking extended period of five years. All these acts of contravention of the provisions of Section 66, 68, 70, 73A and 83 of the Finance Act, 1994 read with Rules 4, 5, 6 and 7 of the Service Tax Rules, 1994 appeared to be punishable under the provisions of Section 76, 77 and 78 of the Finance Act, 1994.

12. Moreover, in addition to the contravention, omission and commissions on the part of the said service provider as stated in the forgoing paras, it appeared that, they had willfully suppressed the facts, nature and value of service provided by them with an intent to evade the payment of Service Tax, rendering themselves liable for penalty under Section 78 of the Finance Act, 1994.

Thus, it appeared that the said M/s. Patel Utility Services had

contravened the provisions of:

a.  Section 68 of the Finance Act, 1994 read with Rule 4,5 & 6 of the
Service Tax Rules, 1994, in as much as that they had failed to make
payment of Service Tax total amounting to Rs.18,94,870/- as
mentioned in the foregoing paras for the period from 16.06.2005 to
31.03.2008 within the statutory time limit prescribed; They had already paid RS.16,,44,,542/-.Hence, remaining service tax payable was
Rs.2,50,328/-.