2016 (9) TMI 843 - AT - Service Tax

Demand of service tax on advances received - works contracts - it was contended that these are payments received towards obtaining necessary equipment and creating basic facilities before the commencement of rendering of service. - Held that - advances made cannot be subject to tax if such advances are adjusted against dues for rendering of service as that would amount to double taxation. - Decision in the case of Thermax Instrumentation Ltd v. Commissioner of Central Excise, Pune 2015 (12) TMI 1222 - CESTAT MUMBAI followed - Decided in favor of assessee. Outstandings from associate concerns - it was contended that tax liability was being discharged upon receipt of dues as prescribed in the statute upto May 2008 - Held that - Department was not in a position to convince us that these submissions were incorrect. Accordingly, we hold that the dues that were liable to be discharged by various payments made as claimed in the appeal and as recorded in the impugned orders on the respective heads. We are, therefore, left to examine in detail the submissions made in connection with the construction of railway sidings and the sinking of the mine shaft on which, admittedly, the appellant has not effected any payment of tax. Demand alongwith interest and penalties - work related to mines - Held that - in the light of a subsequent entry to tax mining service by section 65(105)(zzzy) of Finance Act, 1994 with effect from 1st June 2007 which was intended to cover all activities relating to mineral exploration and extraction under one head as a consolidation entry, the actual sinking of a shaft cannot be treated as site formation and clearance service but as related to excavation of mineral from the mine. Consequently, we are in agreement with the appellant that the demand for the disputed period is not valid. Demand alongwith interest and penalties - construction of railway sidings - Held that - it is noticed that the Railway Act, 1989 provides for railways with public investment and private investment and both function under the same statute. Such railways established in the private sector have a statutorily acknowledged Administrator. Consequently, we too hold that railway sidings built by the appellant fall within the exclusionary portion of section 65(25a) and are outside the ambit of taxation. Therefore, the liability to tax on the labour portion of work executed by the appellant and which has been duly discharged by them are confirmed. The demands under the other heads are set aside. Penalties are also set aside. - Appeals disposed of

Summary

Issues:
Appeal against two orders-in-original confirming tax demands under Finance Act, 1994 for various services provided by M/s SMS infrastructure.

Analysis:
1. Tax Demand Components:
The first demand includes services like erection, commissioning, and construction of civil structures with alleged non-payment of tax. The second demand involves construction of railway sidings, mobilization advance, and outstandings from associate concerns.

2. Appellant's Contentions:
The appellant argued that the tax liabilities were discharged correctly for certain services. They relied on judicial decisions and statutory provisions to support their claims, especially regarding mobilization advances and construction of railway sidings.

3. Construction of Railway Sidings:
The Tribunal examined the contracts related to the construction of railway sidings. The definition of 'Commercial or Industrial Construction' under the Finance Act was crucial in determining the tax liability. The exclusion of railway work from the definition was a key point of contention.

4. Mining Service vs. Site Formation:
Regarding the mining service, the appellant argued that the demand was invalid as the service was taxable only after 2007. The distinction between 'site formation and clearance service' and 'mining service' was debated based on statutory provisions and interpretations.

5. Decision and Rulings:
The Tribunal confirmed tax liability on the labor portion of work but set aside demands under other heads. Penalties were also waived. Rulings from previous cases were cited to support the decision, emphasizing the correct application of tax laws and exclusions under the Finance Act.

6. Conclusion:
The appeals were disposed of with a detailed analysis of each tax demand component, considering statutory definitions, judicial precedents, and contractual agreements. The judgment clarified the tax liabilities of the appellant for the services provided, ensuring a fair and legally sound decision.