2009 (10) TMI 481 - AT - Service Tax

Site Formation and Clearance, Excavation, Earth Moving and Demolition Services - appellant submits that the services involved were works contract . They had discharged VAT for the subject activity, which was deducted at source by the recipient of the service tax M/s Power Grid Corporation (I) Ltd. Works contract was brought under the Act as a taxable service only from 01.06.2007. Since the material period in the impugned case if prior to 01.06.2007, activity involved could not be subjected to tax under a different category of service such as Site Formation for a period prior to 01.06.2007. Alternatively it is submitted that they had purchased red earth for carrying out Site Formation work and they were entitled to exemption in terms of Notification No.12/2003-ST dated 20.06.2003. Held that - Subject to such compliance being reported, there will be waiver of pre-deposit and stay of recovery of the balance dues pending decision in the appeal.

Summary

Issues:
1. Whether the activity of "Site Formation" falls under the definition of "Works Contract" for the purpose of service tax liability.
2. Whether the appellant is entitled to exemption under Notification No.12/2003-ST dated 20.06.2003 for the sale of red mud.

Analysis:
1. The appellant sought waiver of pre-deposit of service tax and penalties totaling Rs.57,87,451 for services provided during May 2006 to September 2007. The appellant argued that the services rendered were under a 'works contract' and prior to the inclusion of 'works contract' as a taxable service. The appellant claimed they had discharged VAT for the activity and were entitled to exemption under Notification No.12/2003-ST. The JCDR contended that "Site Formation" did not fall under the definition of "Works Contract" as per the Act. After considering the submissions, the Tribunal found that the appellant did not establish a prima facie case for complete waiver of the dues. While acknowledging that the activity was not a "Works Contract," the Tribunal directed the appellant to make a pre-deposit of Rs.5,00,000 for the sale of red mud within six weeks. Upon compliance, the Tribunal granted a waiver of pre-deposit and stayed the recovery of the remaining dues pending the appeal decision.

2. The issue of entitlement to exemption under Notification No.12/2003-ST dated 20.06.2003 arose concerning the sale of red mud by the appellant. The Tribunal recognized the appellant's right to exemption for the sale of red mud under the said notification. Consequently, the Tribunal directed the appellant to make a pre-deposit of Rs.5,00,000 within a specified period, subject to which the waiver of pre-deposit and stay of recovery of the balance dues were granted pending the appeal decision.

This judgment clarifies the distinction between "Site Formation" and "Works Contract" for service tax liability purposes and highlights the importance of compliance with relevant notifications to claim exemptions. The Tribunal's decision emphasizes the need for a prima facie case to warrant a complete waiver of dues and the significance of following procedural directives for pre-deposit requirements in tax disputes.