2024 (7) TMI 758 - HC - Service Tax

Consideration of services rendered by the respondent is Mining Service for the period 16.08.2002 to 31.10.2006 though the mining service came into effect on 01.06.2007 - services provided by the respondent prior to 01.06.2007 can be considered as Mining service or the said services would be considered as Business Auxiliary service Cargo Handling Service and Site formation and clearance excavation and earth moving and demolition services? - appreciation of contents of the Circular dated 12.11.2007. HELD THAT - It is found that except for the use of the words omission and failure suppression of material facts with an intent to evade payment of service tax the adjudicating authority has not brought out any facts to substantiate as to how there was an act of omission and failure on the part of the assessee to disclose the correct facts and that it was with an intent to evade payment of service tax. In the absence of these essential elements it is a settled legal position that the extended period of limitation cannot be invoked. Further the assessee on facts had further stated that on and from 1st June 2007 they have been paying service tax and earlier there was a doubt as regards the leviability of the service tax prior to 1st June 2007 that too by artificially bifurcating the composite services rendered by the assessee and therefore the extended period of limitation cannot be invoked. That apart the assessee had pointed out that they entered into contracts with reputed companies like TISCO Ltd. and ICML etc. and in the contracts which they have entered into with these listed companies there was no provision for service tax as there was no service tax on mining service during the material period. In UOI VERSUS INDIAN NATIONAL SHIPOWNERS ASS. ORS. 2010 (12) TMI 12 - SUPREME COURT the appeal was filed by the Union of India against a judgment of the High Court of Bombay quashing the notice issued by the appellant therein to the members of the Indian National Shipowners Association (respondents therein) by holding that the entry contained in Section 65 (105) (zzzy) of the Finance Act 1994 does not include service provided by the members of the association. The Union of India appellant therein contended that such service which were provided by the members of the association have by then subjected to the payment of service tax by virtue of the amendment brought in Section 65 (105) by way of amendment in Finance Act 1994 with effect from 16.05.2008 by inserting a fresh entry namely Section 65 (105) (zzzzj) - The Hon ble Supreme Court after considering the relevant provision and the nature of work that was carried out by the members of the respondent association therein in terms of the contract entered into by them with ONGC held that none of them could be strictly stated by the service rendered in relation to mining of minerals oil or gas and that the nature of work which has been placed before the Court cannot be said to be even remotely connected and included within the ambit of the provision as found in Section 65 (105) entry no. zzzy and accordingly the order passed by the High Court of Bombay was affirmed. This decision also lends support to the case of the respondent/assessee. The appellant was rightly granted relief by the learned Tribunal and the order does not call for any interference - Appeal of revenue dismissed.

Summary

Issues involved:
- Interpretation of service tax liability for mining activities prior to 1st June, 2007
- Validity of invoking extended period of limitation for service tax demand
- Consideration of circular dated 12.11.2007 in relation to mining activities

Analysis:
1. The primary issue in this case was whether the respondent/assessee was liable to pay service tax for mining activities conducted before 1st June, 2007. The appellant raised concerns regarding the classification of services as "Mining Service" prior to the official enactment date. The respondent argued that they were not required to register for service tax before the taxable period began and that the Department wrongly categorized their services as separate taxable entities.

2. The second issue revolved around the Department's invocation of the extended period of limitation for issuing the show-cause notice and demanding service tax. The respondent contended that they had not suppressed any material facts and had been paying service tax since the official taxability date. They argued against the artificial bifurcation of their composite services and cited contracts with reputed companies as evidence that service tax was not applicable during the relevant period.

3. The Court analyzed the factual background presented by the respondent, emphasizing the composite nature of the mining contracts and the absence of separate charges for specific services. The Tribunal's decision to grant relief regarding the extended period of limitation was supported by the circular dated 12.11.2007, which clarified that no service tax was leviable on mining activities before 1st June, 2007.

4. Referring to legal precedents, including the Supreme Court's decision in Commissioner of Central Excise & Customs vs. Larsen & Toubro Limited, the Court highlighted that the absence of a statutory provision to levy service tax on indivisible composite contracts precluded the Department from invoking the extended period of limitation. The judgment in Union of India vs. Indian National Shipowners Association further reinforced the respondent's position regarding the non-applicability of service tax to their specific services.

5. Ultimately, the Court dismissed the revenue's appeal and upheld the Tribunal's decision, concluding that the substantial questions of law were answered against the revenue. The application for stay was also dismissed, affirming the relief granted to the respondent/assessee in the case.