2015 (12) TMI 155 - AT - Service Tax

Demand of service tax - Site Formation and Clearance, Excavation and Earthmoving and Demolition - Held that - site formation and clearance excavation and earthmoving and demolition is defined under Section 65(97a) of the Finance Act 1994 - The activity of the respondents is indisputably covered under Sr. No. (iii). It is seen that the said definition in no way and nowhere implies that only such horizontal drilling is covered there-under which is done using drilling machines. Thus we find that the reason and logic adopted by the Commissioner (Appeals) for setting aside the demand of service tax relating to horizontal drilling (for the passage of cables) where such drilling was not done using drilling machine is totally untenable and not supported by any legal reasoning - Decided in favour of Revenue.

Summary

Issues: Interpretation of service tax liability for horizontal drilling for passage of cables without the use of machines.

Analysis:
The case involved an appeal by the Revenue against an Order-in-Appeal that dropped the demand for service tax in relation to "Site Formation and Clearance, Excavation and Earthmoving and Demolition" service, specifically horizontal drilling for passage of cables without the use of machines. The respondents provided this service to various recipients, and while the adjudicating authority confirmed the demand, the Commissioner (Appeals) modified the order, stating that the service would only be taxable if drilling was done using machines. The Revenue contended that the nature of services provided was the same, with the only difference being the use of a drilling machine for some recipients and manual drilling for others. The central issue was whether the use of machines was a prerequisite for the service to be taxable.

Upon review, the Tribunal examined the definition of "Site formation and clearance, excavation and earthmoving and demolition" under Section 65(97a) of the Finance Act 1994. The definition explicitly included horizontal drilling for the passage of cables, without specifying the requirement of using machines for such drilling to be considered taxable. The Tribunal found that the activity of the respondents fell under this definition, irrespective of whether machines were used. The Commissioner (Appeals) was criticized for lacking legal reasoning in setting aside the demand for service tax on manually conducted horizontal drilling. Consequently, the Tribunal allowed the Revenue's appeal and overturned the Order-in-Appeal that dropped the demand, emphasizing that the use of machines was not a determining factor for tax liability in this context.