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2025 (3) TMI 384 - AT - Service TaxLiability to pay Service Tax on the construction of roads and related activities under the Finance Act 1994 - amounts received by the appellant for the sale of machinery land and other services were correctly included in the taxable value for Service Tax purposes or not - Taxability of amount has been received prior to the introduction of the supply of tangible goods service i.e. prior to 16th May 2008 - penalties. Liability to pay Service Tax on the construction of roads and related activities under the Finance Act 1994 - amounts received by the appellant for the sale of machinery land and other services were correctly included in the taxable value for Service Tax purposes or not - HELD THAT - From the N/N. 17/2005-ST dated 07.06.2005 it is observed that by virtue of the same site formation and clearance excavation and earthmoving and demolition and such other similar activities referred to in sub-clause (zzza) of clause (105) of section 65 of the Finance Act provided to any person by any other person in the course of construction of roads airports railways transport terminals bridges tunnels dams ports or other ports is exempt from the whole of service tax leviable thereon under section 66 of the said Finance Act 1994. However we find that the Ld. Commissioner has not extended the benefit of the said notification on the ground that the road constructed is not for the use of general public. In this regard it is observed that construction of road being private or public is not the criterion for eligibility to the benefit under Notification No.17/2005-ST dated June 7 2005. The Ld. Commissioner erred in distinguishing the roads being public or private while examining the eligibility to Notification No.17/2005-ST dated June 7 2005 when no such criteria is present is the body of the said notification. Accordingly it is held that by virtue of N/n. 17/2005-ST dt. 07.06.2005 the appellant is eligible for the exemption provided for the Site formation and clearance excavation and earthmoving and demolition and such other similar activities rendered by them. Thus the demand of service tax confirmed in this regard is not sustainable and hence we set aside the same. It is also observed that the appellant has raised the ground that they are eligible for exemption from Service Tax with respect to the payment of Rs.48, 17, 022/- received from M/s. JUD Cements (P) Ltd. on account of sale of land. The submission of the appellant agreed upon that sale of land value is not liable to Service Tax. However this needs to be verified by the ld. adjudicating authority and for that purpose the issue needs to be remanded back to the adjudicating authority. Taxability of amount has been received prior to the introduction of the supply of tangible goods service i.e. prior to 16th May 2008 - HELD THAT - If the evidences available on record indicate that these amounts have been received prior to 16.05.2008 then no Service Tax is payable on these amounts. However this needs to be verified by the ld. adjudicating Authority and for that purpose the issue needs to be remanded back to the adjudicating authority. Penalty - HELD THAT - The service tax liability is to be re-quantified as per the discussions in the previous paragraphs and hence the demand of Service Tax along with interest and penalty confirmed in the impugned order is set aside. On re-quantification of their Service Tax liability the adjudicating authority may decide the liability of penalty if any required afresh based on his findings. Conclusion - i) The demand of service tax confirmed with respect to construction of road is not sustainable. ii) By virtue of Notification No. 17/2005 ST Dt. 07.06.2005 the appellant is eligible for the exemption provided for the Site formation and clearance excavation and earthmoving and demolition rendered in connection with road construction. iii) The issues relating to exemption from service tax claimed by the appellant needs to be verified by the ld. adjudicating authority. Appeal disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment were:
2. ISSUE-WISE DETAILED ANALYSIS Construction of Roads and Related Activities - Relevant Legal Framework and Precedents: The appellant argued that the construction of roads is exempt from Service Tax under the Finance Act, 1994, supported by Notification No. 17/2005-ST and a precedent set in the case of M/s. Rajendra Singh Bhamboo vs Commissioner of Central Excise and Service Tax. - Court's Interpretation and Reasoning: The Tribunal agreed with the appellant's interpretation that the construction of roads, whether public or private, is exempt from Service Tax as per the cited notification and precedent. The Tribunal emphasized that the type of road (private or public) is not a criterion for exemption. - Key Evidence and Findings: The appellant provided invoices and contracts showing the construction of roads as a separate activity, which the Tribunal found credible. - Application of Law to Facts: The Tribunal applied the exemption under Notification No. 17/2005-ST to the appellant's road construction activities. - Treatment of Competing Arguments: The Tribunal dismissed the Revenue's argument that the road's private nature disqualified it from exemption, citing the absence of such a criterion in the notification. - Conclusions: The demand for Service Tax on road construction was set aside. Sale of Machinery and Land - Relevant Legal Framework: The appellant contended that the sale of machinery and land should not be included in the taxable value for Service Tax. - Court's Interpretation and Reasoning: The Tribunal agreed that the sale of land is not subject to Service Tax. However, the discrepancy in the machinery sale amount required verification. - Key Evidence and Findings: The appellant provided a table showing the actual value of land sales, which the Tribunal found credible but required further verification. - Application of Law to Facts: The Tribunal remanded the issue of machinery sale for verification of the correct amount. - Treatment of Competing Arguments: The Tribunal required the adjudicating authority to verify the appellant's claims regarding machinery sales. - Conclusions: The issue was remanded for verification of the sale amounts. Exemption Claims and Penalties - Relevant Legal Framework: The appellant claimed exemptions under Notification No. 17/2005-ST for site formation and related activities. - Court's Interpretation and Reasoning: The Tribunal found that the appellant's activities qualified for exemption, as they were part of road construction. - Key Evidence and Findings: The Tribunal noted that the appellant had already deposited a portion of the Service Tax and interest, which needed verification. - Application of Law to Facts: The Tribunal remanded the issue for verification of the appellant's claims and the appropriateness of penalties. - Treatment of Competing Arguments: The Tribunal required the adjudicating authority to reassess penalties based on the re-quantified tax liability. - Conclusions: The penalties were set aside, pending re-quantification of the tax liability. 3. SIGNIFICANT HOLDINGS - Verbatim Quotes: "On perusal of the above definition, it would reveal that construction of roads is excluded from the preview of such taxable service... the benefit of exclusion clause provided in the definition under 65(25)(b) of the Act should be available, for non-levy of Service Tax." - Core Principles Established: The construction of roads, whether for public or private use, is exempt from Service Tax under the relevant notifications. The type of road is not a criterion for exemption. - Final Determinations: The demand for Service Tax on road construction was set aside. The issues regarding the sale of machinery and land were remanded for verification. Penalties were set aside, pending re-quantification of the tax liability.
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