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2013 (7) TMI 236 - AT - Service TaxService tax liability Dredging Service - Section 65(36)(a) - a show-cause notice was issued for demanding Service Tax on the activity undertaken under the category of Dredging Service the appellant s main contention is that the work done by them in respect of the the Mithi River is not a River but a Nalla Held that - From the documentary evidences ( Tender Notice and work awarded) it is clear that the work pertains to Widening and Deepening the depth of Mithi River - the contract is the work as to dredging of river and not as anything else earlier having agreed to and undertaken the work as widening and deepening of the river, the appellant cannot turn around now and say that what he has done is dredging of a nalla and not a river - the activity undertaken by the appellant squarely falls within the definition of taxable service u/s 65(36a) - the Service Tax demand confirmed in the order along with interest thereon is sustainable in law. Imposition of penalty - suppression of facts or mis-statement with intent to evade Service Tax is not attracted in the facts of the case - The activities undertaken by the appellant was in the public domain - The charge against the appellant can at best be described as mis-interpretation of law - mis-interpretation is not a mis-statement or suppression of facts - imposition of penalty under Section 78 is not warranted penalty set aside. CENVAT Credit - claim for CENVAT credit was never made before the adjudicating authority - the appellant is at liberty to substantiate their claim for eligibility to CENVAT Credit before the competent authority.
Issues:
1. Whether the appellant is liable to pay Service Tax for the activity undertaken. 2. Whether the Mithi River qualifies as a river for the purpose of taxation. 3. Validity of penalties imposed under Section 77 and Section 78 of the Finance Act, 1994. 4. Eligibility of the appellant for CENVAT Credit on various inputs/input services. --- Analysis: Issue 1: Liability for Service Tax The appellant, a contractor, was awarded a contract by MMRDA for work related to Mithi River and Vakola Nalla. The appellant contested the Service Tax demand on the grounds that Mithi River is not a natural river but a drain, and thus, the activity does not constitute dredging of a river. The Tribunal examined the nature of the work undertaken by the appellant, considering the definition of "dredging" under Section 65(36a) of the Finance Act, 1994. The Tribunal found that the work of widening, deepening, and desilting of Mithi River falls within the definition of taxable service, upholding the Service Tax demand along with interest. Issue 2: Classification of Mithi River The appellant argued that Mithi River should be classified as a nalla, not a river, to avoid Service Tax liability. However, based on documentary evidence, including the Tender Notice and the affidavit filed by the Government of Maharashtra, the Tribunal concluded that the work was indeed related to a river, as established by the Mithi River Development and Protection Authority. Therefore, the contention that Mithi River is not a river was dismissed. Issue 3: Penalties Imposed Regarding penalties, the Tribunal upheld the penalty of Rs. 5000 under Section 77 for non-compliance with Service Tax rules. However, the imposition of a penalty of Rs. 1 crore under Section 78 was set aside. The Tribunal found that the penalty under Section 78, equal to the Service Tax demand, was excessive and not justified, as there was no intent to evade payment but rather a misinterpretation of the law. Issue 4: CENVAT Credit Eligibility The appellant's claim for CENVAT Credit on various inputs/input services was not substantiated before the adjudicating authority. The Tribunal allowed the appellant to present evidence supporting their claim for CENVAT Credit to the competent authority for consideration in accordance with the law. In conclusion, the Tribunal upheld the Service Tax demand and the penalty under Section 77 but set aside the penalty under Section 78. The appellant was granted the opportunity to establish eligibility for CENVAT Credit before the competent authority. --- This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's findings on each aspect of the case.
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