2024 (7) TMI 1313 - AT - Service Tax

Classification of service - mining services or site formation and clearance, excavation and earth moving and demolition services? - works for drilling operations of wells in oil fields in the state of Assam and Arunachal Pradesh - non-imposition of penalty - HELD THAT - The respondent has entered into agreements with M/s. OIL and M/s. ONGC to carry out works for drilling operations of wells in oil fields in the state of Assam and Arunachal Pradesh. A perusal of the Work Orders executed by the Respondent reveals that all the activities undertaken by them are in relation to mining service, which was brought into the net of taxable services with effect from 01.06.2007 - the ld. adjudicating authority has examined the work orders and given his findings at paragraph 2.2 and 2.3 of the impugned order wherein it has been categorically recorded that the activities undertaken by the respondent under the 12 work orders were not liable for Service Tax under the category of site formation and clearance, excavation and earth moving and demolition services . The ld. adjudicating authority has given a well-reasoned finding to arrive at the conclusion that the Respondent is not liable for payment of service tax under the category of site formation and clearance, excavation and earth moving and demolition services , for the period prior to 01.06.2007. Accordingly, there are no infirmity in the impugned order passed by the ld. adjudicating authority in dropping the demand of service tax for the period prior to 01.06.2007 - the ld. adjudicating authority has rightly dropped the demand of Service Tax under the category of site formation and clearance, excavation and earth moving and demolition services for the period prior to 01.06.2007. Non-imposition of penalty - HELD THAT - It is observed that the appellant had discharged their entire service tax liability before issuance of the Show Cause Notice. They had also discharged major part of interest liability before issuance of the Show Cause Notice. In view of the above fact, the ld. adjudicating authority has extended the benefit of Section 80 of the Finance Act, 1994 and not imposed penalties under Sections 76, 77 and 78 of the Act - there is no suppression of fact with intention to evade tax established in this case - the ld. adjudicating authority has rightly extended the benefit of Section 80 of the Finance Act, 1994 and not imposed penalties under Sections 76, 77 and 78 of the Finance Act, 1994. The dropping of the demand of service tax and non-imposition of penalties in the impugned order by the ld. adjudicating authority is upheld - the appeal filed by the Department is rejected.

Summary

Issues:
1. Whether the demand of service tax under different categories and imposition of penalties were justified.
2. Whether the activities undertaken by the respondent were liable for service tax under the category of "site formation and clearance, excavation and earth moving and demolition services."

Analysis:

Issue 1:
The Revenue appealed against the Order-in-Original dropping the demand of Rs.1,97,60,087/- and refraining from imposing penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The Department contended that the services provided fell under "site formation and clearance, excavation and earth moving and demolition services" for the period prior to 01.06.2007. They referred to CBEC Circulars to support their argument. However, the Respondent argued that they were registered under "mining service" and had paid taxes accordingly. The Tribunal examined the work orders and found that the activities were related to mining services, not site formation, as per the detailed analysis provided in the Order-in-Original. Consequently, the Tribunal upheld the dropping of the demand and non-imposition of penalties, as the Respondent had already paid taxes under the correct category.

Issue 2:
The key point of contention was whether the activities undertaken by the respondent were taxable under "site formation and clearance, excavation and earth moving and demolition services." The Tribunal carefully analyzed the work orders and concluded that the services provided were in relation to mining service, not site formation. The detailed examination of each work order revealed that the activities did not fall under the category of site formation and clearance services. The Tribunal noted that the Respondent had started paying taxes under the correct category of "mining service" after registration, which was accepted by the Revenue. Therefore, the Tribunal held that the services rendered by the Respondent prior to 01.06.2007 were not liable for service tax under the category of site formation and clearance services. Additionally, the Tribunal found no suppression of facts to evade tax, leading to the non-imposition of penalties under the Finance Act, 1994.

In conclusion, the Tribunal rejected the Department's appeal, upholding the dropping of the service tax demand and the non-imposition of penalties by the adjudicating authority. The detailed analysis of the work orders and correct categorization of services played a crucial role in determining the tax liability and penalties in this case.