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TMI Blog2021 (8) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... ndependent and different from manufacture - Undertaking of an activity which results in emergence of a new commodity may amount to manufacture , such as in the case of manufacturing of medicines or cosmetics or textile. However, extracting of natural resources, including crude oil would amount to production and not manufacture . In COMMISSIONER OF INCOME-TAX VERSUS SINGARENI COLLIERIES COMPANY LIMITED [ 1995 (11) TMI 36 - ANDHRA PRADESH HIGH COURT] , the Andhra Pradesh High Court examined whether winning or excavation of coal from the mines amounted to production or manufacture. The High Court, after placing reliance on the decision of the Supreme Court in N.C. Budharaja, held that the mining or excavation of coal would qualify as production - In COMMISSIONER OF INCOME-TAX VERSUS SESA GOA LTD. [ 2004 (11) TMI 14 - SUPREME COURT] , the Supreme Court held that extraction of iron ore would amount to production . However, the Supreme Court had not addressed the question as to whether extraction of iron ore would amount to manufacture . It has to be determined whether a premise where only production takes place, would qualify as a factory. A factory would include a premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F 2016 - FINAL ORDER No. 51732/2021 - Dated:- 12-8-2021 - MR. DILIP GUPTA, PRESIDENT AND MR. P V SUBBA RAO, MEMBER (TECHNICAL) Shri B. L. Narasimhan, Advocate for the Appellant Shri R. K. Majhi, Authorized Representative for the Respondent ORDER The order dated 27.10.2015 passed by the Commissioner of Service Tax, Delhi-II [ the Commissioner ] confirming the demand of service tax of ₹ 2,34,79,557/- under the proviso to section 73(1) of the Finance Act, 1994 [ the Finance Act ] with interest and penalty has been assailed in this appeal filed by M/s. UEM India Limited [ the appellant ]. 2. The appellant is engaged in the construction of Sewage Treatment Plant [STP], Effluent Treatment Plant [ETP ] and laying down of Sewage pipelines for various customers, including several government bodies. 3. In the year 2009, an investigation was initiated with respect to the activities undertaken by the appellant on which service tax was not discharged. These activities related to construction of STP, ETP and sewage systems, in respect of which a demand of service tax was made by alleging that the construction undertaken was commercial in nature and would qualify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xx (b) xxxxxxx (c) xxxxxxx (d) a pollution control or effluent treatment plant, except located as a part of a factory; or a structure meant for funeral, burial or cremation of deceased; (emphasis supplied) 7. In terms of the Notification dated 20.06.2012, the services provided by way of construction of a pollution control or effluent treatment plant, except located as a part of a factory, has been exempted from the whole of the service tax leviable thereon under section 66B of the Finance Act. 8. The three services, in respect of which the demands have been confirmed, are tabulated below: Sl. No. Service Recipient Activity undertaken by the Appellant Service Tax (in Rs.) 1. ONGC Assam Construction of ETPs in the oil fields of ONGC, registered under the Mines Act, 1952 26,49,982 2. ONGC Ahmedabad 2,06,54,736 3. National Building Construction Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... air, maintenance, renovation, or alteration of a pollution control or effluent treatment plant, except located as a part of a factory; or a structure meant for funeral, burial or cremation of deceased 76. On going through the nature of job defined in the contract with the ONGC i.e. Surveys (per-engineering, pre-construction/ pre-installation and post-installation), Design, Detailed Engineering procurement supply, Transportation, Fabrication, Installation/ erection Hook-up, Testing, Pre-commissioning, Commissioning for Construction are not covered in Sl. No. 13(d) of the exemption Notification mentioned above. It is hold that the benefit of exemption is not allowed if the service has been provided in the factory area . I find that definition of factory has not been defined in the notification No. 25/2012-S.T. dated 20-06-2012, however that the definition of factory has been defined under Section 2(e) of the Central Excise Act, 1944 as follows:- factory means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... key basis on SBR technology with PLC, SCADA system in Roorkee Campus of IIT Roorkee (3.2 MLD and DPT Saharanpur campus of IIT Roorkee (0.5 MLD). I find that the exemption is available for a Pollution control and the M/s. UEM India Ltd., nature of contract meant for sewerage treatment plant does not fulfil the requirement of the Notification. (emphasis supplied) 11. Shri B.L. Narasimhan, learned counsel for the appellant made the following submissions under the following heads: A Order is beyond the show cause notice (i) Since the proposal in the show cause notice was solely on the ground that the appellant was rendering commercial construction services, the impugned order has gone beyond the show cause notice by confirming the demand on a wholly different footing, namely that the ETPs constructed by the appellant for ONGC were located in a factory and the STP constructed for NBCC did not qualify as an effluent treatment plant. To support this contention that an order cannot go beyond the show cause notice, reliance has been placed on the following decisions: a) Reckitt Coleman of India Ltd. vs. CCE [1996 (88) E.L.T. 641 (S.C.)]; and b) Toyo Engine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the demands, it shows bona fide on the part of the appellant and, therefore, no penalties are imposable. 12. Shri R.K. Majhi, learned Authorised Representative for the respondent made the following submissions: (i) The order has not travelled beyond the show cause notice. The appellant had knowledge of charges and they replied accordingly. In this connection reliance has been placed on the judgment of the Delhi High Court in Commissioner of Service Tax vs. ICT Ltd [2014 (36) STR 481 (Del.)]; (ii) The contention of the appellant that it would be entitled to exemption under Serial No. 13(d) of the Notification dated 20.06.2012 is not correct as oil fields of ONGC would qualify as a factory ; and (iii) The effluent treatment plant will not include STPs and so the exemption under Serial No. 13(d) of the Notification dated 20.06.2012 would not be available to the appellant. 13. The submissions advanced on behalf of the appellant and the Department have been considered. A Order is beyond the show cause notice 14. The first contention raised by the learned counsel for the appellant would be examined, if considered necessary, after the second and the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity which results in emergence of a new commodity may amount to manufacture , such as in the case of manufacturing of medicines or cosmetics or textile. However, extracting of natural resources, including crude oil would amount to production and not manufacture . 21. In NC Budharaja, the Supreme Court explained the difference between production and manufacture and observed that even though manufacture would necessarily amount to production , it is not necessary that production would always tantamount to manufacture. The relevant portion of the decision is reproduced below: In short, the limited question is whether the construction of a dam to store water (reservoir) can be characterised as amounting to manufacturing or producing an article or articles, as the case may be. The words manufacture and production have received extensive judicial attention both under this-Act as well as Central Excise Act and the various Sales Tax Laws. The word production has a wider connotation than the word manufacture . While every manufacture can be characterised as production, every production need not amount to manufacture. 22. Reference can also be made to the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinary connotation, we have no doubt in our mind that the activity of winning or excavating the coal from the mines can be aptly described as production activity . It is common to use the expression that the coal or ore is produced from the mine and the statistics of total production of coal or other minerals are required to be given under the statutory provisions governing mines and minerals. (emphasis supplied) 24. In Sesa Goa, the Supreme Court held that extraction of iron ore would amount to production . However, the Supreme Court had not addressed the question as to whether extraction of iron ore would amount to manufacture . 25. In Chrestien Mica, the Supreme Court held that the process of mining mica would amount to production . 26. Learned Authorised Representative appearing for the Department however, placed reliance upon the decision of the Supreme Court in Vikram Cement vs. Commissioner of Central Excise, Indore [2006 (197) E.L.T. 145 (S.C.) ] and the decision of the Andhra Pradesh High Court in Ultra Tech Cement Ltd. vs. Commissioner of Central Excise, Hyderabad [2014 (308) E.L.T. A121 (A.P.) ] to contend that captive mines are integral part of facto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to, manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process manufacture or processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture. 13. The natural meaning of the word `process is a mode of treatment of certain materials in order to produce a good result, a species of activity performed on the subject-matter in order to transform or reduce it to a certain stage . According to Oxford Dictionary one of the meanings of the word `process is a continuous and regular action or succession of actions taking place or carried on in a definite manner and leading to the accomplishment of some result. The activity contemplated by the definition is perfectly general requiring only the continuous or quick succession. It is not one of the requisites that the activity should involve some operation on some material in order to its conversion to some particular stage. There is nothing in the natural meaning of the word `process to exclude i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34. The definition of factory caters to manufacturing processes in respect of both, manufactured and non-manufactured goods . In case of manufactured goods, the premise where the manufacturing activity is undertaken would qualify as a factory. In case of non-manufactured goods such as natural resources, the premises where the post-production processes take place towards making the produce commercially viable would qualify as a factory. 35. It, therefore, follows that the oil fields of ONGC, where only extraction of crude oil takes places, would not qualify as a factory . 36. The Commissioner, therefore, committed an error in denying the benefit under Serial No. 13(d) of the Notification dated 20.06.2012. C STPs Constructed for NBCC 37. In regard to the STPs constructed by the appellant for NBCC, the exemption under Notification dated 20.06.2012 has been denied for the reason that the exemption is available only in respect of pollution control plants and ETPs, and since STP is neither a pollution control plant nor an ETP, the benefit would not be available to the appellant. 38. It is a fact that the STP is set up for the purpose of removing pollutants an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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