2018 (11) TMI 756 - AT - Service Tax

Site Formation and Clearance, Excavation, Earthmoving and Demolition Services - construction of Tailing Dam for M/s Essar Steel - desilting of a tailing dam for M/s NMDC - Held that - The first work involved both supply of material as well as provision of service. The services on this account are clearly not liable to Service Tax before 01.06.2007 in view of the Hon ble Apex Court judgment in the case of Larsen & Toubro 2015 (8) TMI 749 - SUPREME COURT - demand set aside. Services related to construction of Tailing Dam post 01.06.2008 - Held that - The demands are not made under the head Works Contract Service but are under the head of Site Formation and Clearance, Excavation and Earth Moving and Demolition Service and hence they need to be set aside as well. Desilting the tailing dam of NMDC and transporting the silt to their dump which involved excavation of the material and moving it - Held that - Excavation and earth moving work related to renovating or restoring of water bodies are specifically excluded by the definition of site formation services. Since these services are rendered with respect to the dam in question which is a water body, they get excluded and no service tax is payable on these services - the service tax under the head of site formation services cannot be levied even on this ground. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Taxability of services under the head of "Site Formation Services"
2. Exclusion of services related to repairing, renovating, and restoring water bodies from the definition of "Site Formation Services"
3. Applicability of Board Circular on site formation and clearance services
4. Imposition of penalty under section 77 of Finance Act

Analysis:
1. Taxability of services under the head of "Site Formation Services": The appellant contested the taxability of services related to the construction of Tailing Dams under the head of "Site Formation Services". The argument was based on the nature of the contract, which involved both providing services and transferring materials, constituting a composite works contract service. The Tribunal referred to the judgment in Larsen & Toubro case, holding that works contract service was not chargeable to excise duty before 01.06.2007. Therefore, demands for the period prior to this date were set aside. For the period post-01.06.2007, the demands under "Site Formation and Clearance, Excavation, Earth Moving and Demolition Services" were also set aside, as the services were not classified as works contract services.

2. Exclusion of services related to water bodies from "Site Formation Services": The appellant argued that services related to desilting of Tailing Dams should not be taxed under "Site Formation Services" as they involved repairing, renovating, and restoring water bodies, which were excluded from the definition. The Tribunal agreed, stating that the services related to renovating or restoring water bodies were specifically excluded from the definition of site formation services. As the dam in question was considered a water body, the services of desilting were deemed non-taxable.

3. Applicability of Board Circular on site formation and clearance services: The appellant relied on Board Circular No. 123/5/2010-TRU, which stated that site formation and clearance services are taxable only if provided independently and not as part of a complete work. The Tribunal acknowledged this argument, noting that even though the appellant's work involved site clearance and preparation for dam construction, it could not be charged to service tax as per the circular.

4. Imposition of penalty under section 77 of Finance Act: The Department argued for the imposition of a penalty under section 77 of the Finance Act, contending that the services provided were exigible to service tax. However, the Tribunal found no merit in this argument and set aside the demands in favor of the appellant, leading to the rejection of the Department's appeal.

In conclusion, the Tribunal allowed the appeals filed by the assessee, setting aside the demands and penalties imposed. The Department's appeal was rejected, and the impugned orders were also set aside.