2018 (10) TMI 552 - AT - Service Tax

Site formation and clearance services - appellant is a mines contractor and is into drilling and blasting work in mines; was awarded winning of iron ore by drilling and blasting in mines; the said activity was conducted for a consideration during the period 16.06.2005 to 31.12.2008 - demand of service tax with Interest and penalty - tax prior to 01.06.2007, when the service tax were levied - Held that - On perusal of the said work order it transpires that activity undertaken by the appellant is regarding drilling and blasting of sufficient quantity as and when required of iron ore in the mines; the said work order also specifies about the drilling pattern and explosive for such drilling will be given by the mine owners; the bills which have been raised by the appellant for payment also indicates that consideration is towards the gross quantity which has been blasted in the mines or winning of the iron ore - From the mere reading of the said activity and the activity undertaken by the appellant, it can be seen that the appellant is engaged only in drilling and blasting in the mines and the definition of site formation and clearance services will not get attracted to the activity undertaken by the appellant. A similar issue came up before the Bench in the case of Shipping Corporation of India Ltd 2016 (8) TMI 852 - CESTAT MUMBAI , the Bench held that the service tax liability on the entries which have been inserted from a specific date cannot be taxed under any other entry prior to such date. The activity undertaken by the appellant i.e., drilling and blasting in the mines cannot be taxed under site formation and clearance services prior to 01.06.2007. Liability of tax post 01.06.2007 - Held that - Appellant is not contesting the tax liability of such services - Since law is settled on this point there being no findings recorded by the adjudicating authority on this point, while upholding the taxability of the services of drilling and blasting post 01.06.2007, under mining services, matter remanded back to the adjudicating authority to recompute the tax amount by considering the amounts received by appellant as cum tax value and the interest liability thereof. Appeal disposed off.

Summary

Issues:
Demand of service tax on amount received for drilling and blasting in mines; Taxability of drilling and blasting services under site formation and clearance services; Correct demand calculation post-01.06.2007; Applicability of penalty.

Analysis:
1. The appeal challenged a service tax demand on consideration received for drilling and blasting in mines. Revenue authorities deemed the activity taxable under "Site formation and clearance services." Appellant argued the activity fell under mining services post-01.06.2007, citing legal precedents like the judgment of the Hon'ble High Court of Bombay and Tribunal decisions. The appellant contended that activities could not be taxed under any other category before specific entries were introduced in the tax net.

2. The department asserted that drilling and blasting constituted site formation and clearance services, supported by statutory definitions and tribunal decisions. The Tribunal analyzed work orders, technical reports, and definitions of drilling and blasting in mining activities. It concluded that the appellant's work solely involved drilling and blasting, not falling under site formation and clearance services. Citing the Bombay High Court's judgment, the Tribunal held that activities could not be taxed under previous categories before specific entries were introduced.

3. The Tribunal found the demand for tax on drilling and blasting pre-01.06.2007 as unsustainable and set it aside, along with associated interest and penalties. For post-01.06.2007 services, the appellant did not contest tax liability but sought a correct demand calculation based on cum tax value. The Tribunal remanded the matter to the adjudicating authority for recalculating the tax amount and interest. No penalty was imposed due to the interpretational nature of the issue.

4. The Tribunal disposed of the appeal, emphasizing the correct tax treatment of drilling and blasting activities in mines, distinguishing between site formation and clearance services and mining services. The decision highlighted the importance of legal precedents in determining tax liability and penalty imposition based on the nature of the issue.