2015 (6) TMI 916 - AT - Service Tax

Site formation and clearance, excavation & earthmoving & demolition - Whether the respondent, while executing a work order awarded to them by Goa State urban Development Agency (GSUDA) for a project name Construction of Market-Cum Community Hall and Park, Phase-I Land Development had provided the taxable service of Site formation and clearance, excavation and earth moving and demolition under Section 65(97a) of the Chapter V of the Finance Act, 1994 - Held that - Site formation basically refers to earth work or activities related to earthwork or, at the most, drilling for the passage of cables or drain pipes. Whereas the activities undertaken by the respondent indicate a comprehensive works contract which includes appreciable RCC work for foundations, columns and walls apart from construction of walls, laying of pipes. The definition includes creation of passages for pipes. It does not include laying of pipes itself. There is merit in the finding of the Commissioner (Appeals) that if such works are held to be taxable under the site formation service, then every such project would involve the activity of site formation. Revenue could at most tax only that part of the contract which involves site formation and related earthwork and not the entire works. But that has not been done by Revenue. Be that as it may, the total activities undertaken cannot be categorized under the Site Formation service. The nature of work is more akin to a comprehensive works contract. - Therefore, we hold that the work undertaken by the respondent cannot be termed as an activity of Site formation and clearance, excavation & earthmoving & demolition . - Decided against Revenue.

Summary

Issues:
Whether the respondent provided taxable services of "Site formation and clearance, excavation and earth moving and demolition" under Section 65(97a) of the Finance Act, 1994 while executing a work order for a project awarded by Goa State Urban Development Agency (GSUDA) for the construction of Market-Cum Community Hall and Park, Phase-I Land Development.

Analysis:
The Revenue filed an appeal against the Order-in-appeal passed by the Commissioner (Appeals) regarding the taxability of services provided by the respondent under a work order from GSUDA. The core issue revolved around determining whether the activities undertaken by the respondent fell within the definition of "Site formation and clearance, excavation and earth moving and demolition" as per Section 65(97a) of the Finance Act, 1994. The Revenue argued that the entire contract primarily involved pre-construction activities related to land development, while the respondent contended that they were awarded a works contract for the construction of Market-Cum Community Hall Phase-I. The respondent emphasized that the nature of the work was focused on the construction of the market-cum community hall and not solely land development activities.

Upon hearing both sides and examining the Agreement between the respondent and GSUDA, it was observed that the work order was specifically for the "Construction of market-cum community hall and park, Phase-I Land development." The activities listed in the show cause notice and the schedule of quantities submitted by the respondent included various construction elements such as earthwork, stonework, concrete work, formwork, steel, and more. The definition of "site formation and clearance, excavation and earthmoving and demolition" was scrutinized, revealing that it primarily encompassed earthwork-related activities. The Tribunal noted that the activities undertaken by the respondent were more in line with a comprehensive works contract involving substantial RCC work, foundations, columns, walls, and other construction aspects, which went beyond the scope of mere site formation services.

The Tribunal concurred with the Commissioner (Appeals)'s finding that categorizing the entire project as taxable under site formation services would be inappropriate. It was highlighted that if Revenue intended to tax the project, it should have isolated and taxed only the portion related to site formation and earthwork, which was not done. The Tribunal concluded that the nature of the work undertaken did not align with the definition of "Site formation and clearance, excavation and earth moving and demolition," and therefore, the respondent's activities could not be classified under this service. Consequently, the appeal of the Revenue was dismissed, affirming that the work executed did not fall under the taxable category specified in the Finance Act, 1994.

(Judges: M V Ravindran, Member (J) and P S Pruthi, Member (Technical))