2024 (7) TMI 928 - AT - Service Tax

Classification of service - Site Formation and Clearance, Excavation and Earthmoving and Demolition Services or not - services rendered by the assessee with respect to transport, dumping, filling, dozing, compacting, reformation and shifting of waste (Municipal Solid Waste) in respect of eight contracts of CMC - HELD THAT - From the facts, it is clear that M/s. UPL, who have been awarded the contract by CMC, are pioneers in environmental engineering and waste management etc. The work undertaken by the various work orders (8-CMC 7-UPL) are nothing but part and parcel of Integrated Waste Management system. In all these work orders the word waste has been mentioned. It is to be noted that the activities done are not for site formation or clearance in connection with erection of a civil structure, building, factory or mining area. In the present case, the activities of excavation, earthmoving, dumping etc. are done for the purpose of managing the waste and protecting the water tables / water sheds. The Commissioner has discussed the legislative intent of site formation service as brought out from the clarification issued by the Board Circular dt. 27.7.2005. The Ld. counsel has adverted to the works carried out along with the photographs to explain the nature of the work carried out at the site. The photographs placed on pages 99 to 126 of the appeal paper book filed by the assessee show various works carried out. The definition of Site Formation and Clearance, Excavation, Earthmoving and Demolition Services , excludes the services provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovation or restoring of water resources or water bodies. In fact, the entire effort on the part of CMC by engaging M/s.UPL is to manage the waste and also to protect the watersheds / water bodies. The original authority in para 33.3.24 has discussed this aspect and held that the works carried out by the assessee as per the work orders of CMC as well as M/s.UPL would fall under the exclusion part of the definition. After perusal of the work orders and the nature of works undertaken by assessee, we agree that the arguments by the learned counsel are tenable and acceptable. When the assessee has been given work orders by M/s.UPL and the Corporation with intention to prevent contamination of water, it cannot be construed that part of the works are done independently at the site and not as part of the complete work - Merely because the word 'waste' is not used in the work orders, the Commissioner has been carried away to conclude that these works undertaken are in the nature of Site Formation Service. Without executing works as per these work orders, the activity of waste management cannot be completed. From the above discussions, the confirmation of service tax demand in respect of the two work orders requires to be set aside. The impugned order to the extent of confirming the service tax demand of Rs.19,50,571/- along with interest and penalties imposed is set aside - The assessee's appeal is allowed.

Issues Involved:
1. Classification of services rendered by the assessee.
2. Taxability of services under "Site Formation and Clearance, Excavation and Earthmoving and Demolition Services."
3. Applicability of exclusions under the definition of "Site Formation and Clearance, Excavation and Earthmoving and Demolition Services."
4. Invocation of extended period of limitation.
5. Imposition of penalties under the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Classification of Services Rendered by the Assessee:
The primary issue was whether the activities performed by the assessee fell under "Site Formation and Clearance, Excavation and Earthmoving and Demolition Services" as defined under Section 65(97a) of the Finance Act, 1994. The Department argued that the activities involved site formation and clearance, while the assessee contended that they were part of waste management services.

2. Taxability of Services under "Site Formation and Clearance, Excavation and Earthmoving and Demolition Services":
The original authority examined various work orders and concluded that most of the services rendered by the assessee were related to waste management and not site formation and clearance. Specifically, the activities included excavation of garbage mounds, dozing, levelling of excavated garbage, and transferring debris, which were part of an Integrated Waste Management system. The original authority dropped the demand for these work orders, except for two specific work orders involving jungle clearance and site clearance, for which the demand was confirmed.

3. Applicability of Exclusions under the Definition of "Site Formation and Clearance, Excavation and Earthmoving and Demolition Services":
The definition of "Site Formation and Clearance, Excavation and Earthmoving and Demolition Services" excludes services provided in relation to agriculture, irrigation, watershed development, and drilling or restoring water sources or water bodies. The original authority held that the activities carried out by the assessee were aimed at waste management and protecting water tables/water bodies, thereby falling under the exclusion clause. The Department's appeal against this finding was dismissed, and the original authority's decision to drop the demand for these work orders was upheld.

4. Invocation of Extended Period of Limitation:
The Department invoked a larger period of limitation, alleging suppression of facts by the assessee. The assessee contended that there was no intention to evade tax and that all figures were furnished when called upon by the Department. The Tribunal found merit in the assessee's argument, noting that the issue involved was one of interpretation and that the assessee was under a bona fide belief that the work undertaken was not taxable.

5. Imposition of Penalties under the Finance Act, 1994:
The original authority imposed penalties under Section 78 and Section 77 of the Finance Act, 1994, for the confirmed demand. However, the Tribunal set aside the confirmation of the demand for the two work orders involving jungle clearance and site clearance, thereby also setting aside the penalties imposed.

Conclusion:
The Tribunal upheld the original authority's decision to drop the demand for most of the work orders, finding that the activities were part of waste management and not site formation and clearance. The Department's appeal was dismissed. The Tribunal also set aside the confirmation of demand and penalties for the two specific work orders involving jungle clearance and site clearance, allowing the assessee's appeal with consequential relief.

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