2017 (6) TMI 161 - AT - Service Tax

Categorization of activity of the appellant for service tax liability - Site formation and clearance, excavation and earth moving and demolition service - Held that - the appellants are not directly involved in activity of site clearance, excavation, earth moving etc. The first contract is basically for transportation, which also involved loading unloading. The second contract is for hiring out the various special equipments/ machineries to be used by the client in the mining activity - the observation of the Original Authority to the effect that in terms of agreement the appellants are to perform work of excavation is not supported by the documentary evidence as perused in various agreements submitted by the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of the appellant to pay service tax under site formation, excavation, and demolition services.
2. Interpretation of contracts with the client regarding the nature of work carried out by the appellant.
3. Categorization of appellant's activities for service tax liability.

Analysis:
1. The judgment deals with the liability of the appellant to pay service tax under the categories of site formation, excavation, and demolition services as per Sections 65(97a) and 65(105) zzzy of the Finance Act, 1994. The dispute arose from the Commissioner of Central Excise's order confirming a service tax liability of &8377; 65,95,000 against the appellant, along with penalties under Sections 77 and 78 of the Finance Act, 1994.

2. The appellant's counsel argued that the original authority erred in determining the tax liability based on the nature of work carried out under the contracts with the client. The appellant had two sets of contracts with the client, one involving loading and transportation of limestone and the other for providing equipment like excavators and bulldozers on hire basis. The appellant contended that the nature of work was limited to transportation and hiring of equipment, not site formation or excavation activities. The appellant cited a Tribunal decision in support of their argument.

3. The Assistant Commissioner, on the other hand, supported the original authority's findings, emphasizing that the contracts were not merely for the supply of machinery but for the proper functioning of equipment for overburden removal in mining areas. The rate schedule in the agreement was highlighted as indicative of the contract's scope being related to excavation activities rather than just equipment hiring.

4. Upon hearing both sides and examining the appeal records, the Tribunal noted that the dispute revolved around categorizing the appellant's activities for service tax liability. The Tribunal analyzed the terms of the agreements between the parties to determine the nature of work carried out by the appellant under each contract.

5. The Tribunal observed that the first contract primarily involved transportation of limestone, while the second contract was for hiring out special equipment for overburden removal by the client. The rates fixed for equipment hiring based on overburden removed did not conclusively establish the appellant's involvement in removal activities. The Tribunal found that the appellant's role was limited to providing equipment to enable the client to undertake overburden removal, as per the terms of the agreements submitted.

6. Based on the analysis of the agreements and the nature of work described therein, the Tribunal concluded that the appellant was not directly engaged in site clearance, excavation, or earth moving activities. Therefore, the Tribunal found no merit in the original authority's order and set it aside, allowing the appeal in favor of the appellant.