2008 (4) TMI 125 - AT - Service Tax

Site formation - service tax demanded in respect of construction of ash dyke and related activities - prima facie not able to accept the contention of assessee that ash dyke can be considered as a dam - definition clause for site formation is fairly extensive and prima facie, many of the activities under taken by the appellant may attract service tax as held by the Commissioner - applicant has not made out a prima facie strong case for total waiver of dues

Summary

Issues:
Service tax liability on construction of ash dyke for storing fly ash; Classification of activities under the contract; Applicability of Notification No. 17/2005 for exemption; Interpretation of site formation services; Prima facie acceptance of ash dyke as a dam; Pre-deposit amount for waiver of balance service tax and penalties.

Analysis:

The case involved a dispute regarding the service tax liability on the construction of an ash dyke for storing fly ash, with the Commissioner demanding payment for services related to site formation and cargo handling. The appellant argued that the contract was composite and indivisible, with payments received on a percentage basis, and should not be solely classified as site formation services. The appellant also contended that the ash dyke should be considered a dam, seeking exemption under Notification No. 17/2005 for services related to dam construction.

The appellant's representative argued that the construction of the ash dyke was a composite contract, with payments not linked to specific activities but based on a percentage basis. The Commissioner's classification of 85% of the contract value as site formation services was disputed. The appellant claimed that treating the ash dyke as a site formation service would mean they were providing a service to themselves for constructing the dyke. Alternatively, they argued that the ash dyke should be classified as a dam, citing definitions to support their claim.

The respondent, on the other hand, supported the Commissioner's findings, stating that the major activities under the contract were indeed related to site formation. They argued that the construction service was liable for service tax and that the ash dyke, being for a private party, did not qualify for the exemption under Notification No. 17/2005 for public utility constructions. They emphasized the strict construction principle for granting exemptions, citing legal precedent.

The Tribunal, after hearing both sides, found the case to involve contentious issues. They did not prima facie accept the argument that the ash dyke could be considered a dam. The definition of site formation was deemed extensive, with many activities undertaken by the appellant potentially attracting service tax. The Tribunal directed the appellant to deposit a sum of Rs. 30,00,000 within 12 weeks, with the balance of the service tax and penalties waived subject to this pre-deposit. The recoveries were stayed pending compliance with this direction.