2020 (1) TMI 639 - AT - Service Tax

Classification of services - contract for supply of mud and spreading and dumping of earth on agricultural land - classifiable under site formation and clearance service, excavation, earth moving and demolition service or not - period 01 October, 2007 to 31 March, 2008 - time limitation - HELD THAT - The services of providing mud and spreading the same was undertaken by the appellant during the period 01 October, 2007 to 31 March, 2008. As per the contract entered by the appellants with M/s Arrow Infra Limited the land in question upon which the mud was to be spread was admittedly agricultural land. Revenue has also not disputed the said fact. As per the definition of site formation and clearance etc, any activity done in relation to agriculture is excluded - Inasmuch as the services in the present case were provided in relation to agriculture, the same has to be held as exempted. Subsequent action by the owner of the land has got no relation to the activities done by the appellant prior to the said conversion. The findings of the Adjudicating Authority that since the agricultural land was subsequently converted into commercial land, the activity undertaken by the appellant prior to the said conversion would become taxable subsequent to conversion of the land, cannot be agreed upon - demand set aside. Time Limitation - HELD THAT - The demand raised on 22 April, 2013 is barred by limitation. At the time when the appellant provided services, the same were exempted and as such the appellant s plea that no service tax is required to be paid cannot be doubted. There is no evidence on record to establish that the appellant at the time of providing the services knew that the said land is going to be converted - In such a scenario, the invocation of longer period cannot be upheld. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Dispute regarding service tax liability for services provided on agricultural land.
2. Interpretation of site formation and clearance services in relation to agriculture.
3. Validity of show cause notice and invocation of longer period for tax assessment.

Analysis:
1. The appellant, engaged in construction services, provided services on agricultural land to a client. The Revenue contended that post-conversion of land to construction use, services fall under taxable categories. A show cause notice was issued for service tax demand of approximately ?2.47 crores.

2. The appellant argued that services were provided when the land was agricultural, hence exempt. The Revenue claimed mala fide intention in land conversion. The Tribunal found services exempt as they were related to agriculture, irrespective of subsequent land use change. The taxability is determined at the time of service provision.

3. The appellant challenged the notice's validity and limitation period. The Tribunal agreed that the demand was time-barred as services were initially exempt. Lack of evidence of appellant's knowledge about land conversion negated the need for invoking a longer period. The impugned order was set aside, granting relief to the appellant.