2017 (12) TMI 964 - AT - Service Tax

Classification of services - Site Formation and Clearance, Excavation and Earth Moving and Demolition services or mining services? - Held that - The activities carried out by the appellant, though in relation to mining, cannot be considered as mining activity. The work undertaken by the appellant makes the site fit and ready for coal mining, but the mining of coal is not the work alloted to be appellant. Further, it is seen that the activity undertaken is also not a part of composite activity of mining - the activity will be liable for Service Tax under the category of Site Formation and Clearance. Penalty - Held that - there were many contractors who were undertaking similar kind of work for various coal fields and there were doubts on Service Tax liability on the activity carried out by them - this is a fit case to exercise discretion under Section 80 of the Finance Act, 1994, for waiver of penalty. But, such waiver can be granted only if the appellant has already paid the entire Service Tax liability along with interest for the disputed period. Impugned order is upheld regarding demand of Service Tax and interest - Matter remanded only for deciding penalty.

Issues:
- Appeal against Order-in-Appeal No.181/2011 dated 12/09/2011 for the period from 16/05/2005 to 31/03/2007.
- Service Tax liability on services of Site Formation, Excavation, Earth Moving, and removal of Over Burden.
- Justification of penalties levied under various Sections of the Finance Act, 1994.
- Clarification on the applicability of Service Tax on mining activities prior to 01/06/2007.
- Verification of payment of interest under Section 75 for delayed Service Tax payment.
- Exercise of discretion under Section 80 of the Finance Act, 1994 for waiver of penalty.

Analysis:

1. The appeal challenges the Order-in-Appeal concerning Service Tax liability on services provided to M/s Western Coal Fields Ltd. The Department contended that the activities fell under the category of Site Formation, Excavation, and Earth Moving, demanding Service Tax of ?42,78,922 along with interest and imposing penalties under the Finance Act, 1994.

2. During the hearing, the appellant argued that the services were related to coal mining, and as Service Tax on mining services was applicable only from 01/06/2007, the demand for the period before that was unjustified. Additionally, it was requested to set aside the penalties since the Service Tax had been paid.

3. Upon reviewing the records, it was observed that the services involved removal of overburden using heavy machinery to prepare the site for mining, not for mining itself. The Tribunal concluded that the activities did not constitute mining but fell under the category of Site Formation and Clearance, justifying the Service Tax demand.

4. While the appellant claimed full payment of Service Tax liability, clarity was sought on the payment of interest for delayed tax payment. Considering the uncertainties surrounding Service Tax liability for similar activities at mines and a CBEC circular clarifying the applicability of Service Tax before 01/06/2007, the Tribunal decided to remand the issue of penalty to verify the payment of entire Service Tax dues with interest.

5. The Tribunal upheld the Order regarding the demand for Service Tax and interest, remanding the penalty issue for further consideration by the Adjudicating Authority. The appellant's request for waiver of penalty under Section 80 of the Finance Act, 1994 was contingent upon the verification of complete payment of Service Tax liability with interest.

6. In conclusion, the Tribunal maintained the Service Tax demand and interest but deferred the decision on penalties, emphasizing the need for verification of full payment before considering any waiver under Section 80 of the Finance Act, 1994.

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