2023 (9) TMI 919 - AT - Service Tax

Classification of services - Site Formation Services or mining service - works executed for ECL for excavation of coal - Construction of Complex Services or Works contract service - works contract of construction of house project in West Bengal - Demand alongwith interest and penalty u/s 76 and 78 of FA. Site Formation Services or mining service - HELD THAT - The nature of work executed by the assessee is a comprehensive contract for mining of coal consisting of excavation, loading and transportation of overburden/overburden/top soil (within the mines area), dewatering of mines, excavation of benches for extraction of coal , drilling, blasting with explosives (including cost of explosives), extraction of coal, backfilling of excavated area, loading of raw coal at face and transporting to surface, unloading an stacking at surface. The said activity is in relation to mining of coal and not site formation. The similar issue has been dealt by this Tribunal in the case of M RAMAKRISHNA REDDY VERSUS COMMR. OF C. EX. CUS., TIRUPATHI 2008 (10) TMI 115 - CESTAT, BANGALORE wherein the activity as executed by the assessee is having merit classification under Mining Service - thus the service the merits classification is Mining Service and no service tax has been demanded from the appellant under Mining Service. Construction of Residential Complex Services - HELD THAT - The said service has been provided by the appellant along with the materials , the merits classification on the said services is Works Contract Service as held by the decision of the Hon ble Apex Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT wherein the Hon ble Apex Court has held that he finding that Section 67 of the Finance Act, which speaks of gross amount charged , only speaks of the gross amount charged for service provided and not the gross amount of the works contract as a whole from which various deductions have to be made to arrive at the service element in the said contract. We find therefore that this judgment is wholly incorrect in its conclusion that the Finance Act, 1994 contains both the charge and machinery for levy and assessment of service tax on indivisible works contracts - thus, the merits classification for the said service is Works Contract Service , no demand has been made from the assessee under Works Contract Service - the demand confirmed under the category of Construction of Residential Complex Services is also not sustainable. Penalty - HELD THAT - As no service tax is payable, therefore, the question of imposition of penalty on the assessee does not arise. Appeal allowed.

Summary

Issues involved: Appeal against the order demanding service tax under "Site Formation Services" and "Construction of Industrial & Commercial Services" by invoking extended period of limitation.

Site Formation Services Issue:
The appellant, a Public Sector Undertaking, executed a comprehensive contract for mining coal with Eastern Coalfields Limited. The Tribunal held that the activity is in relation to mining of coal and not site formation, citing precedents where similar activities were classified under "Mining Service." Consequently, the demand for service tax under "Site Formation Services" was set aside.

Construction of Residential Complex Services Issue:
The appellant also executed works contracts for construction projects, supplying materials along with services. The Tribunal classified this service as "Works Contract Service" based on legal precedents, where it was clarified that the Finance Act taxes service contracts simpliciter and not composite works contracts. As no demand was made under "Works Contract Service," the demand for service tax under "Construction of Residential Complex Services" was deemed unsustainable.

Conclusion:
The Tribunal allowed the appeal filed by the appellant, setting aside the demands for both "Site Formation Services" and "Construction of Residential Complex Services." As no service tax was payable, the question of imposing penalties did not arise, leading to the dismissal of the Revenue's appeal as well.