2023 (6) TMI 310 - AT - Service Tax

Levy of Service Tax - Mining Services - service tax registration till 01.06.2007 not taken - Cargo Handing Service - Business Auxiliary Service - Site Formation and Clearance, excavation and Earth Moving and Demolition services - applicability of Board CBEC Circular F. No. 232/2/2006-Cx.4 dated 12.11.2007 - extended period of limitation - penalty - HELD THAT - The Appellant has got a composite contract for undertaking mining activities . From the work orders, it is evident that the activities were to be performed entirely within the mining area, for a lump sum price. The Department has artificially bifurcated the services under the categories of Cargo Handling Services, Site Formation services and Business Auxiliary Services and demanded service tax. In fact there is no separate charges payable to such services as per the work orders. In the Notice, the taxable value under each category of service has been arrived at artificially without any basis. CBEC has issued Circular F. No. 232/2/2006Cx.4 dated 12.11.2007, which categorically states that no service tax leviable on mining activities prior to 01.06.2007. However, the adjudicating authority failed to appreciate the clarification and went ahead to confirm the demand made in the Notice. In the case of CCE Vs. Larsen Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT , the Hon ble Supreme Court has held that when a particular levy was introduced for certain activities with effect from a particular date, it is to be construed that such activities were not liable to service tax prior to that date. In the present case mining services were brought under service tax only with effect from 01/06/2017. Hence, for the period prior to 01/06/2007, there was no liability of service tax on mining services . The Board has issued a Circular in F. No. 232/2/2006 Cx.4 dated 12.11.2007 clarifying the issue. The Circular cited above categorically clarifies that mining services were not leviable to service tax prior to 01/06/2007. Accordingly the artificial bifurcation of the services rendered by the Appellant into Cargo Handling Service, Site Formation Service and Business Auxiliary Service and demanding service tax in the impugned order is not sustainable and hence it is liable to be set aside. Time Limitation - HELD THAT - There is no evidence brought on record to establish that the Appellant has intentionally evaded service tax. Since mining services were liable for service tax only with effect from 01/06/2017, demand of service tax by invoking extended period is not sustainable. Accordingly, the demands confirmed in the impugned orders are liable to be set aside on the ground of limitation also. Penalty - HELD THAT - The demands confirmed in the impugned are are not sustainable. When the demand itself is not sustainable on merit as well as on limitation, the question of imposing penalty does not arise. The impugned order set aside - appeal allowed.

Summary

Issues Involved:
1. Taxability of mining services prior to 01.06.2007.
2. Limitation period for issuing a show cause notice.
3. Imposition of penalty.

Summary:

1. Taxability of Mining Services Prior to 01.06.2007:
The appellant provided 'Mining Services' from 16.08.2002 to 31.10.2006 but did not pay service tax or register for it until 01.06.2007. The appellant received a Show Cause Notice demanding service tax under various heads including Cargo Handling Service, Business Auxiliary Service, and Site Formation and Clearance services. The appellant argued that mining services were only taxable from 01.06.2007, and activities prior to this date cannot be bifurcated under different heads for service tax purposes. They cited multiple decisions, including the Hon'ble Supreme Court's ruling in CCE Vs. Larsen & Toubro Ltd., which stated that activities not taxable before a particular date cannot be retrospectively taxed. The Tribunal agreed, noting that the CBEC Circular dated 12.11.2007 clarified that no service tax was leviable on mining activities before 01.06.2007. Hence, the artificial bifurcation and demand for service tax were not sustainable.

2. Limitation Period for Issuing a Show Cause Notice:
The appellant contended that the extended period for issuing a show cause notice could not be invoked as they were under a bona fide belief that mining services were not taxable before 01.06.2007. They cited several decisions, including Atwood Oceanics Pacific Ltd. Vs. Commissioner of Service Tax, Ahmedabad, which held that if two views are possible, extended period cannot be invoked. The Tribunal found no evidence of intentional evasion of service tax by the appellant and held that the demand for service tax by invoking the extended period was not sustainable.

3. Imposition of Penalty:
The appellant argued that penalties were not applicable as their actions were based on a bona fide belief. The Tribunal observed that since the demand itself was not sustainable on merit and limitation grounds, the imposition of penalties did not arise.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal filed by the appellant, concluding that the demand for service tax and penalties were unsustainable.