2023 (6) TMI 412 - AT - Service Tax

Classification of services - site formation and clearance, excavation and earth moving and demolition service or Commercial/Industrial Construction Services? - work of Site grading, Roads, Boundary wall, Drains and associated works of Crude Oil Terminal of M/s Bina Refinery Project at Vadinar in the state of Gujarat - extended period of limitation - HELD THAT - As per the facts of the case, the appellant have carried out the service in terms of bidding documents No. 1204/T-64/06-07/RAL/04 and No. 6743/T-174/05-06/SKK/01.As per the said documents we noticed that during the disputed period appellant have undertaken the work of site grading, Roads, Boundary Wall, Drain and associated works of Crude Oil Terminal of M/s Bina Refinery Project at Vadinar in the state of Gujarat - It would be seen from the main part of the definition that the said service includes drilling, boring and core extraction services for construction, geophysical, geological or similar purpose, Soil Stabilization, Horizontal drilling, Horizontal drilling for the passage of cables or drain pipes, Land reclamation work, Contaminated top soil stripping work and Demolition and wrecking of building, structure or road. Whereas from the documents submitted by the appellant, it is found the entire contract was for lum sum price for carrying out not only site grading but also construction of Roads, Boundary wall, Drains lines and associated works for crude oil terminal of Bina Refinery Project - it is found that without the site cleaning, road, boundary wall and drainage line cannot be constructed. The contract specifically provide site grading for the reason that road, boundary wall and drainage line should be constructed after completion of site grading works. Clearly, the main object of contract was for construction of road, boundary walls and drainage line. The appellant s activity is not covered by the definition of site formation and clearance, excavation and earth moving and demolition service. The majority of work relates to civil work in the nature for construction of road, boundary wall and drainage lines. The essential character of this composite work is reflected as that of construction service. Thus, instead of site formation and clearance, excavation and earth moving and demolition service, this service is appropriately classifiable under Commercial or Industrial Construction Services . The service tax demand from the appellant by treating their activity as taxable under section 65(97a) as site formation and clearance, excavation and earth moving and demolition service is not sustainable. Time Limitation - HELD THAT - It is undisputed that the appellant had been rendering the services and has been paying service tax on disputed service under the head construction services and also filing ST-3 returns regularly with the departmental authorities. If a tax is chargeable, in order to recover the service tax not paid or short paid a notice has to be issued under Section 73 of the Act. This is the only remedy available to the Revenue. The notice can be issued within the normal period of limitation only unless the elements of fraud or collusion or wilful statement or suppression of facts or contravention of any provisions of the Act or Rules with an intent to evade payment of service tax is established - The appellant had been classifying its services under Commercial or Industrial construction service, paid the service tax and filed returns. Once the returns are filed, if Revenue was of the opinion that in the self-assessment of service tax the classification was not correct, it could have scrutinized the returns and issued notices within time. The show cause notice was issued on 19.10.2012 for the period 2007-08, which is clearly beyond the normal period of limitation. Therefore, the demand is time barred and, therefore, cannot sustain. The impugned order cannot be sustained. Hence, the impugned order is set aside. The appeal is allowed.

Summary

Issues involved:
Classification of taxable services under "Site Formation and Clearance, Excavation and Earth Moving and Demolition Service" or "Industrial or Commercial Construction Services"; Imposition of service tax demand and penalties under Section 76, 77, and 78 of the Act; Invocation of a large period of limitation for the issuance of a show cause notice.

Classification of Taxable Services:
The appellant argued that the service in dispute should be classified under "Industrial or Commercial Construction Services" rather than "Site Formation and Clearance, Excavation and Earth Moving and Demolition Service." They contended that the service provided was primarily for construction purposes, including site grading, roads, boundary walls, and drainage lines for a crude oil terminal project. The appellant maintained that the revenue erred in classifying the service under the wrong category and demanding service tax and penalties. They cited Section 65A of the Act, which states that services should be classified based on the most specific description provided. The appellant highlighted that the contracts clearly outlined construction activities, and the service should be classified accordingly. Additionally, the appellant argued that the revenue misinterpreted the definition of "Commercial or Industrial Construction Service" under Section 65(35b) of the Act. They also referenced relevant case laws and circulars to support their classification of services.

Invocation of Large Period of Limitation:
The appellant contended that the revenue wrongly invoked a large period of limitation for issuing the show cause notice. They argued that they had provided all relevant information for discharging their service tax liability and had consistently classified their services correctly under construction services. The appellant maintained that there was no intent to evade payment of service tax, as they had filed returns and paid taxes regularly. They emphasized that the revenue should have scrutinized their returns and issued notices within the normal period of limitation if there were any discrepancies. The appellant asserted that the demand was time-barred and should not be sustained.

Judgment:
After considering the submissions and perusing the records, the Tribunal found that the service in question was more appropriately classified under "Industrial or Commercial Construction Services" rather than "Site Formation and Clearance, Excavation and Earth Moving and Demolition Service." The Tribunal noted that the main objective of the contract was for construction activities such as roads, boundary walls, and drainage lines, and not solely for site formation. Additionally, the Tribunal concluded that the demand was not sustainable on limitation grounds, as there was no evidence of intent to evade payment of service tax. The show cause notice issued beyond the normal period of limitation was deemed time-barred. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant with any consequential relief.