2023 (9) TMI 568 - AT - Service Tax

Classification of services - site formation and clearance, excavation and earth moving and demolition service or not - Hiring of HEMM, Tippers, Drills, Dozers for removal of all types of over burden materials in all kinds of strata - levy of penalty - HELD THAT - The service of site formation and clearance, excavation and earth moving and demolition was brought under the service tax net by the Finance Act, 2005 with effect from June 16, 2005 by inserting section 65(97a) and section 65(105)(zzza) in the Act. Subsection (97a)(i) of section 65 of the Act defines site formation and clearance, excavation and earthmoving and demolition to include drilling, boring and core extraction services for construction, geophysical, geological or similar purposes. The works undertaken by the Appellant as mentioned in Para 2 supra, clearly covered under the activities as defined in the above said definition of 'Site Formation' service - The works undertaken by the Appellant as per the work order mentioned in Para 2 supra, has been rightly classified as 'Site formation Service' as defined under Section 65(97a) of the Finance Act, 1994 and liable to service tax w.e.f.16.06.2005. Accordingly, the demand of service tax along with interest as confirmed in the impugned order is upheld. Levy of penalty - HELD THAT - It is now well settled that penalty cannot be imposed simultaneously under section 76 and section 78 of the Finance Act, 1996. Accordingly, the penalty imposed under Section 76 of the Finance Act, 1994 is set aside. Regarding the penalty imposed under Section 78 of the Finance Act, 1994, the Appellant stated that the issue is one of law. They were legally advised that the services rendered by them did not fall under the category site formation and clearance, excavation and earthmoving and demolition service and had proceeded on that basis. There was no intent or motive to evade payment of service tax - The issue involved is of interpretation in nature. No evidence has been brought on record to substantiate the allegation of intention to evade the tax. Considering the facts and circumstances of the instant case, the penalty under Section 78 cannot be imposed in this case. The demand of service tax along with interest under 'Site Formation Service' as confirmed in the impugned order is upheld. The penalties imposed under Sections 76 and 78 are set aside - appeal allowed in part.

Summary

Issues Involved:
1. Classification of services rendered by the appellant.
2. Applicability of service tax prior to 01.06.2007.
3. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.

Summary:

Issue 1: Classification of Services Rendered by the Appellant
The appellant, M/s Faridabad Gurgaon Minerals, had entered into an agreement with M/s Mahanadi Coal Fields Ltd. for the removal of overburden materials to expose coal seams. The appellant contended that their work fell under 'Mining Service,' which was taxable only from 01.06.2007, as per Section 65(105)(zzzy). However, the department classified the services as 'Site Preparation Services' under Section 65(97a), taxable from 16.06.2005. The Tribunal observed that the appellant's activities were preparatory to mining, involving drilling, excavation, and earthmoving, and thus fell under 'Site Formation Service' as defined in Section 65(97a).

Issue 2: Applicability of Service Tax Prior to 01.06.2007
The appellant argued that their activities were related to mining and hence not taxable before 01.06.2007. They cited various circulars and definitions to support their claim that exposure of coal seams should be classified under 'Mining Service.' However, the Tribunal noted that the appellant's contract was for overburden removal and site preparation, not for actual mineral extraction. The Tribunal referred to Board Circulars and previous Tribunal decisions to conclude that the appellant's services were taxable as 'Site Formation Service' from 16.06.2005.

Issue 3: Imposition of Penalties Under Sections 76 and 78 of the Finance Act, 1994
The appellant contended that penalties under both Sections 76 and 78 could not be simultaneously imposed and argued for the waiver of penalties due to the interpretative nature of the issue. The Tribunal agreed, noting that no intent to evade tax was demonstrated. Consequently, the penalty under Section 76 was set aside, and the penalty under Section 78 was waived by invoking Section 80 of the Finance Act, 1994.

Conclusion:
The Tribunal upheld the demand for service tax along with interest under 'Site Formation Service' as confirmed in the impugned order. However, it set aside the penalties imposed under Sections 76 and 78, modifying the impugned order accordingly. The appeal was disposed of on these terms.