2013 (10) TMI 436 - AT - Service Tax

Business Support Servcie - Infrastructural support service - Removal of fly ash - Whether removal of Fly ash as per rate of the order of Government of Tamil Nadu would constitute infrastructural support service under the definition of Support Service of Business or Commerce - Held that - Services rendered by a person must have a direct or a proximate relation to the subject matter of the taxing entry and the context in which the words in relation to are used has to be borne in mind to judge the extent of the scope of an entry which may be of wide amplitude - orders issued by the appellant to the cement and asbestos sheet companies do not disclose that the appellant provided any service to the companies. The appellants as per order of Government of Tamil Nadu removed the Fly ash from the site and collected rate as prescribed therein from the said companies. At the best, the amount collected by supply Fly ash utilized for water, lighting, road maintenance etc. in their site as referred in letter dated 10.5.2007 appears to be in conformity with the utilization of Fly ash as mentioned in Draft Notification dated 6.11.2008 issued by the Central Government, wherein the Thermal Power Stations are permitted to sell Fly ash. There is no mention in the contract between the appellant and cement and asbestos sheet companies that the appellant is providing any service to them. Activity of collection and removal of Fly ash as per rate of the order of Government of Tamil Nadu would not constitute infrastructural support service under the definition of Support Service of Business or Commerce . We have noticed that Government of India, Ministry of Environment and Forests issued Notification dated 14.9.1999 to the effect that Fly ash should be supplied free of cost. Subsequently, by notification dated 6.11.2008, issued by Ministry of Environment and Forest, Thermal Power Stations are permitted to sell Fly ash to the user agencies. It makes it clear that the consideration received by the appellant from the cement and asbestos sheet companies for supply of Fly ash seems to be for sale of fly ash. In our opinion, it is not for any service provided to the persons taking delivery of Fly ash, notwithstanding the name under which, it is collected. Hence, the demand of service tax along with interest is not sustainable - Following decision of Indian National Shipowners Association Vs. Union of India & Others 2009 (3) TMI 29 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues Involved:
1. Classification of the activity of supplying Fly Ash as a 'Business Support Service'.
2. Applicability of service tax on the supply of Fly Ash.
3. Invocation of the extended period for demand.
4. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Classification of the Activity of Supplying Fly Ash as a 'Business Support Service':
The primary issue was whether the supply of Fly Ash by the appellant to cement and asbestos sheet companies constitutes a 'Business Support Service' under Section 65(104c) of the Finance Act, 1994. The appellant argued that they were merely disposing of Fly Ash as per government orders and not rendering any service. The Tribunal noted that the appellant did not provide any service related to business or commerce, such as secretarial assistance or infrastructural support, to the cement and asbestos sheet companies. The companies collected Fly Ash directly from the site, and the appellant did not facilitate the collection beyond providing access to the Fly Ash. Thus, the activity did not fall under the definition of 'Business Support Service'.

2. Applicability of Service Tax on the Supply of Fly Ash:
The Tribunal examined various notifications and government orders, including the Ministry of Environment & Forests' Notification dated 14.9.1999, which mandated that Fly Ash be supplied free of cost for ten years. The subsequent Draft Notification dated 6.11.2008 allowed the sale of Fly Ash. The Tamil Nadu Government's orders directed the collection of rates for Fly Ash supply to cement and asbestos sheet companies. The Tribunal concluded that the amounts collected were for the sale of Fly Ash rather than for providing any service. Therefore, the demand for service tax was not sustainable.

3. Invocation of the Extended Period for Demand:
The appellant contended that there was no suppression of facts with intent to evade payment of service tax. The Tribunal observed that the adjudicating authority had already granted relief from penalties under Sections 76 and 78 of the Finance Act, 1994, by invoking Section 80, indicating that the extended period for demand was not justified. As the demand for service tax itself was not maintainable, the issue of limitation was not discussed in detail.

4. Imposition of Penalties under Sections 76 and 78 of the Finance Act, 1994:
Given that the demand for service tax was not upheld, the Tribunal found no basis for imposing penalties under Sections 76 and 78. The relief from penalties granted by the adjudicating authority under Section 80 was noted, further supporting the conclusion that penalties were not warranted.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal filed by the appellant with consequential relief. The activity of supplying Fly Ash was not classified as a 'Business Support Service', and the demand for service tax along with interest was deemed unsustainable. The invocation of the extended period for demand and the imposition of penalties were also not upheld.