2016 (11) TMI 492 - HC - Service Tax

Suppression of facts - extended period of limitation - Claim of exemption - Section 65 (97a) and 65 (105) (zzza) - Held that - The words drilling, digging, repairing, renovating, or restoring are all connected with the work water sources or water bodies, therefore, three items which are excluded are (1) agriculture; (2) irrigation; and (3) watershed development and work related to water sources or water bodies. There is an agreement of assessee with a company SICCL engaged in development of residential and other buildings, colonies and township. Levelling work of levelling soil including filling of gorges/nallah removing of shrubs, grass and rubbish etc. was for the purpose of development of his site Sahara City Homes, Amritsar. The total area of work was for 24 acres approximately. Levelling of soil in the context of work done at the instance of SICCL was not for agriculture or irrigation but it was connected with development of a township/residential scheme of Sahara City Homes, Amritsar. The condition of land at the time of work was carried, was also not relevant. When work agriculture/irrigation has been used in contradiction to the other works, which are included in taxable service, the message is very clear that here the agriculture means simple cultivation of soil and earth of animals which is primarily connected with simple agricultural work. When an agricultural land is taken and development work like soil levelling etc. is carried out for the purpose of development of township etc., then it cannot be said that work of levelling of soil etc. is connected with agriculture or can be said to be an agricultural work at all. Assessee is also not engaged in the work of agriculture simpliciter. An attempt was made that agricultural work should be read as agricultural land but we find no reason for such reading of relevant provision as quoted above. Section 65 (97a) is in respect of service and not to the nature of project, land or other things. Appellant-assessee is not exempted from service tax as claimed - assessee does not disclose the work at all and there was a clandestine suppression of facts on his part, therefore, extended period of limitation was available to the Revenue - Appeal dismissed - decided against appellant-assessee.

Summary

Issues:
1. Whether extended period of limitation is applicable for the Show Cause Notice demanding service tax on a bill dated 18.08.2006?
2. Whether activities of 'agriculture land leveling' undertaken by the Appellant are covered under specific clauses of the Finance Act, 1994?

Issue 1: Extended Period of Limitation for Service Tax Notice
The appellant, a construction company, received a work order from another company for levelling soil and related activities. The appellant did not pay service tax on this work and did not disclose it in their returns. The Revenue initiated an assessment process after obtaining information from various sources. The appellant claimed exemption under a specific section of the Finance Act, 1994. However, the Revenue found the appellant liable for service tax, interest, and penalties. The Tribunal upheld this decision. The High Court noted that the appellant suppressed facts regarding the work done, justifying the application of the extended period of limitation. Therefore, the first issue was decided against the appellant, upholding the Revenue's actions.

Issue 2: Applicability of Exemption for Agriculture Land Leveling
The appellant argued for exemption from service tax based on specific clauses of the Finance Act, 1994, related to site formation and clearance activities. The High Court analyzed the definitions provided in the Act and concluded that the work undertaken by the appellant, which involved levelling soil for a residential development project, did not fall under the excluded categories of agriculture or irrigation. The Court emphasized that the work was not related to simple agricultural activities but was part of a larger development project. Therefore, the Court held that the appellant was not exempt from service tax as claimed. Consequently, the second issue was decided against the appellant, affirming the Revenue's assessment. The appeal was dismissed based on these findings.

In conclusion, the High Court upheld the Revenue's assessment of service tax liability on the appellant for the work done, rejecting the appellant's claims for exemption and extended period of limitation.