Custom, Excise & Service Tax Tribunal
Sreenivasa Engineering vs Coimbatore on 16 July, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. III
Service Tax Appeal No. 41780 of 2014
(Arising out of Order-in-Original No.05/2014-Commr. dated 30.04.2014 passed
by Commissioner of Central Excise, Customs and Service Tax, No.6/7, A.T.D.
Street, Race Course, Coimbatore - 641 018)
M/s. Sreenivasa Engineering .... Appellant
No.90, Balan Nagar,
Kovundampalayam,
Coimbatore - 641 030.
VERSUS
The Commissioner of CGST & Central Excise ... Respondent
Coimbatore Commissionerate No.6/7, A.T.D. Street, Race Course, Coimbatore - 641 018.
WITH Service Tax Appeal No. 41927 of 2014 (Arising out of Order-in-Original No.05/2014-Commr. dated 30.04.2014 passed by Commissioner of Central Excise, Customs and Service Tax, No.6/7, A.T.D. Street, Race Course, Coimbatore - 641 018) The Commissioner of CGST & Central Excise ... Appellant Coimbatore Commissionerate No.6/7, A.T.D. Street, Race Course, Coimbatore - 641 018.
VERSUS M/s. Sreenivasa Engineering .... Respondent No.90, Balan Nagar, Kovundampalayam, Coimbatore - 641 030.
APPEARANCE :
Shri J. Shankarraman, Advocate, for the Assessee Shri N. Sathyanarayanan, Authorized Representative for the Department CORAM :
HON'BLE MS. SULEKHA BEEVI.C.S., MEMBER (JUDICIAL) HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) 2 Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 FINAL ORDER Nos.40871-40872/2024 DATE OF HEARING : 08.07.2024 DATE OF DECISION: 16.07.2024 Per: Ms. Sulekha Beevi. C.S These appeals arise out of the same impugned order and therefore were heard together and are disposed of by this common order. For the sake of convenience, the parties are referred to as Assessee and Department.
2. Brief facts are that the assessee viz. M/s.Sreenivasa Engineering is engaged in providing various services. On specific intelligence gathered by the officers of Directorate General of Central Excise Intelligence, Coimbatore that the assessee, though has engaged in providing Site Formation and Clearance Service, Excavation and Earth Moving, Demolition Services, has not registered with the Service Tax Commissionerate for payment of service tax on the amounts received for rendering such services, Investigations were conducted.
3. It was noted that M/s.UPL Environmental Engineers Ltd. (M/s.UPL, for short) who are leading environmental construction and Project Management Company had executed an agreement with Coimbatore Municipal Corporation for Integrated Waste Management. M/s.UPL, in turn, appointed the assessee as sub- contractor for carrying out the work orders in respect of such agreements executed with the Coimbatore Municipal Corporation (CMC, for short). The assessee furnished copies of orders given by CMC during the period from November 2007 to February 2008. On perusal of the work orders, it was revealed that the assessee had been given the work of site clearance and excavation at Vellalore compost yard for which the CMC had engaged excavators, bull dozers etc. provided by the assessee. Besides this, the assessee 3 Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 also did the work of site clearance, levelling, earth moving and excavation. The time given for each work order for completion of the work of site clearance and excavation at Vellalore compost yard was 1 month. The details of the 8 work orders awarded to the assessee are as under :
Order No. Date Work relating to 1941/07/MD 4 21.11.2007 Engaging truck type hydraulic excavator HP online basis for the work of excavation of garbage mounds at the Vellalore dumping yard.
1941/07/MD 4 21.11.2007 Engage of track type bull dozer online basis for the work of dozing, levelling of excavated garbage of the Vellalore dumping yard.
1941/07/MD 4 21.11.2007 Engaging of track type bull dozer online basis for the work of dozing, levelling of excavated garbage of the Vellalore dumping yard.
19512/07/MD3 10.01.2008 Engaging tract type hydraulic excavator of capacity 200 HP online basis for the work of excavation of garbage mounds at Vellalore yard.
19510/07/MD3 10.01.2008 Engaging crawler type D80 bull dozer for the work of debris and levelling of excavated garbage at Vellalore.
19509/07/MD3 10.01.2008 Engaging crawler type D80 bull dozer for the work of debris and levelling of excavated garbage at Vellalore.
19385/07/MD3 10.01.2008 Engaging tract type hydraulic excavator of capacity online basis for the work of excavation of garbage mounds at Vellalore yard.
20937/07/MD 4 04.02.2008 Engaging earthmoving machinery front end loader for transferring daily collection of debris from Ukkadam sewage to Vellalore yard.
4. Apart from the above, the assessee furnished details of 7 work orders given by M/s.UPL. Perusal of the work order revealed that assessee had been given the work of dumping, filling, dozing, compacting and levelling of waste using required machineries at Vellalore compost yard. The work includes waste reformation, gravel filling, earth work, mixing bentonite, providing 4 Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 and spreading of soil liner system. In other words, not only site clearance, site formation and earthwork had to be done, but compacting had to be done by mixing bentonite essentially impure clay and spreading of soil liner system. They also furnished copies of bank statements showing the receipt of payments from M/s.UPL.
5. M/s.UPL vide their letter dt. 05.08.2011 inter alia furnished the work orders issued to the assessee which also included the work order furnished by assessee discussed above and ledger account of the assessee for the year 2008-09 till 07.01.2011.
6. After examining the different work orders, the Department was of the view that the activity rendered by the assessee would fall under the definition of "Site Formation Clearance, Excavation and Earth Moving Services" as defined under Section 65 (97a) of the Finance Act, 1994. As per Section 65 (105) (zzza) of the Finance Act, 1994 the taxable service means any service provided or to be provided to any person, by any other person, in relation to Site Formation and Clearance, Excavation and Earthmoving and Demolition and such other similar activities. In consequence to the investigations, the department issued show cause notice dt. 27.08.2012 to the assessee alleging that the assessee has provided the Site Formation, Clearance, Excavation and Earth Moving and Demolition Services to the CMC and M/s.UPL and proposing to demand the service tax along with interest and for imposing penalties. After due process of law, the original authority vide order impugned herein dropped the proceedings in respect of certain work orders. However, in respect of two work orders dated 13.02.2009 and 24.03.2009, which were services of jungle clearance and site clearance, excavation etc., the original authority held that the services would fall under the category of "Site Formation and Clearance, Excavation and Earthmoving and Demolition Service" and demand of service tax to the tune of Rs.19,50,571/- was confirmed along with interest. The original authority imposed equal penalty under Section 78 of the Finance Act, 1994 and imposed separate penalty of Rs.20,000/- under 5 Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 Section 77 of the Finance Act, 1994. Aggrieved by the confirmation of the service tax demand, interest and penalties imposed, the Assessee has filed Appeal ST/41780/2014.
7. As per various work orders, the original authority had held that the services rendered by the assessee with respect to transport, dumping, filling, dozing, compacting, reformation and shifting of waste (Municipal Solid Waste) in respect of eight contracts of CMC as narrated in para 33.1 (i) and seven contracts of M/s.UPL as narrated in impugned order, in para 33.1 (ii)A and hiring of machinery as narrated in para 33.1 (ii)B are not classifiable as Site Formation and Clearance, Excavation and Earthmoving and Demolition Services under Section 65 (105) (zzza) of Finance Act, 1994 read with Section 65 (97a). The original authority dropped the demand in respect of these work orders. Aggrieved by such order of dropping the demand, the Department has filed Appeal ST/41927/2014.
8. The Ld. Counsel Shri J. Shankarraman appeared and argued for the assessee. The Ld. Counsel made the following submissions :
8.1 Pursuant to an investigation by DGCEI which started on 27.11.2009, a show cause notice dated 27.8.2012 was issued to the assessee seeking to demand service tax of Rs.83,94,239 for the period from 30.11.2007 to 27.8.2011 alleging that the assessee has rendered 'Site Formation and Clearance, Excavation and Earthmoving and Demolition Services' (SFCE to UPL & Coimbatore Municipal Corporation at certain places. The notice invoked larger period of limitation. The Commissioner vide Order-
in-Original No.5/2014 dated 30.4.2014 dropped major portion of the demand and confirmed a part of the demand and imposed equal penalty. The Assessee as well as the Department have filed appeals against the above order.
6Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 8.2 As per Section 65(97a) of the Finance Act, 1994, the said service is defined as under :
"(97a) site formation and clearance, excavation and earthmoving and demolition includes,-
(i) Drilling, boring and core extraction services for construction, geophysical, geological or similar purposes; or
(ii) Soil stabilization; or
(iii) Horizontal drilling for the passage of cables or drain pipes; or
(iv) Land reclamation work; or
(v) Contaminated top soil stripping work; or
(vi) Demolition and wrecking of building, structure or road, but does not include such services provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovating or restoring of water sources or water bodies."
(emphasis supplied) 8.3 'Site Formation' is also mentioned in paragraph 6 of the Budget Letter dated 27 July, 2005 and relevant portion is reproduced below :-
"6. Site formation and clearance, excavation, earth moving and demolition services 6.1 Any service provided or to be provided to any person, by any other person, in relation to site formation and clearance, excavation and earthmoving and demolition and such other similar activities is leviable to service tax under sub-clause (zzza) of Section 65(105) of the Finance Act, 1994. "Site formation and clearance, excavation and earthmoving and demolition" has been defined in clause (97a) of Section 65 of the Finance Act, 1994.
6.2 The definition of site formation and clearance, excavation and earthmoving and demolition is an inclusive definition and the activities specifically mentioned are indicative and not exhaustive. Prior to construction of buildings, factory or any civil structure, activity of mining or laying of cables or pipes, preparation services of site formation and clearance, excavation and earthmoving or levelling are normally undertaken for a consideration to make the land suitable for such activities. Such services include blasting and rock removal work, clearance of undergrowth, drilling and boring, overburden removal and other development and preparation services of mineral properties and sites, and other similar excavating and earthmoving services.7
Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 Demolition of structures, buildings, streets or highways is also undertaken for a consideration as a preparatory activity for subsequent construction activity or for clearing the site for any other purpose. All such activities fall within the scope of this service."
(emphasis supplied) 8.4 A bare perusal of paragraph 6.2 quoted above indicates that the activities mentioned for site formation are prior to construction of buildings, factory or any civil structure, activity of mining or laying cables or pipes, and they are in the nature of preparation services of Site Formation to make the land suitable for such activities.
8.5 In the present case, there is no attempt or proposal to construct buildings, factory or any civil structure etc. The activity carried out by appellant took place on Government land to safeguard the neighbouring areas from pollution by converting garbage to agriculture manure and also by filtering the water to save the water table/water bodies from contamination. The activity should be termed as "garbage/waste management" and not "site formation and clearance, excavation and earth moving and demolition service".
8.6 From the works executed, it could be seen that they are in the nature of services provided in relation to agriculture. The municipal waste are converted as compost by adopting various process and used in agricultural field after some years. Any service in relation to agriculture is specifically excluded from SFCE. Similarly, effort taken in preventing contamination of water has helped the nearby residents and the water table as well as water sources or water bodies. This also falls under the exclusion clause and therefore any demand under SFCE is not sustainable in law.
8.7 It is worthwhile to note that Notification No.17/2005 exempts this service provided in the course of construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, ports or other ports.
8Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 8.8 A plain reading of the definition of SFCE, Board's circular dated 27.7.2005 and the above notification would help in understanding the scope of this service and legislative intent behind including certain areas and excluding some from the taxation. The service SFCE, on the face of it, aims to recover, or work on a site for exploitation of the vacant ground so recovered or of the resources beneath the earth, like construction of building/factories any civil structure. The aim is to recover or prepare, or work on a site to make it ready for some revenue yielding exploitation. However, the Government has thought it fit to exclude from its scope similar services when made in relation to construction of roads, airports, railways, transport terminals, dams, ports etc. Thus, the Government has intended to keep out activities which are in the nature of infrastructure and public utilities providing of which are the essential job of statutory authorities, even if some of them may yield huge revenue like Railways, Transport Terminals, Air Ports, Sea Ports.
8.9 In terms of Mega Exemption Notification No.25/2012-ST dated 20.6.2012 [Sl.No.25(a)] services provided by a local authority by way of carrying out any activity in relation to any function ordinarily entrusted to municipality in relation to water supply, public health, sanitation conservancy, solid waste management etc., is exempted from service tax. Thus, the legislative intent is clear and explicit.
8.10. The Commissioner erroneously confirmed service tax on jungle clearance (actually clearing of bush) at Vellalore Compost Yard. This activity has been classified under SFCE. This activity is only a preliminary work or part of the total work while undertaking work relating to waste management.
8.11 In any case, in terms of CBEC circular dated 24.5.2010 it has been clarified that 'Site Formation and Clearance, Excavation, Earthmoving and Demolition services' are attracted only if the service providers provide these services independently and not as part of a complete work such as laying of cables under the road. In 9 Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 the present case, the activity undertaken by the assessee is only a preliminary work while undertaking work relating to waste management. Hence the demand on this ground is not correct.
8.12 For same reasons, demand on work order dated 24.3.2009 is also not sustainable in law.
8.13 A perusal of the activity undertaken by the assessee would show that they are only assisting a statutory authority viz., Coimbatore Municipal Corporation in the discharge of statutory functions and by no stretch of imagination they are rendering any SFCE service. From the facts of the case, it is apparent that the Coimbatore Municipal Corporation has outsourced part of their work to the assessee and thereby the assessee have in fact assisted the statutory functions of the authorities and have not in any case rendered SFCE. In view of the above, the demand fails and so also imposition of penalty. For the same reason dropping of the demand by the Commissioner is in line with the above contention and therefore the appeal filed by the Department is prayed to be dismissed and the appeal filed by the appellant may be allowed. The Ld. Counsel relied on the decision of the Tribunal in the case of Rosmerta Technologies Ltd. Vs CCE - (2023) 8 Centax 183 (T) which has been maintained by the Hon'ble Supreme Court in CCE Vs Rosmerta Technologies Ltd. - (2023) 8 Centax 184 (SC). Further the decision of the Tribunal in the case of CCE Vs Awasti Traders - 2017 (3) GSTL 438 (T) lends support to the above view.
8.14 Without prejudice to the above contention that the activity undertaken by the assessee is not liable to be taxed, a perusal of the purchase orders would show that there was supply of material and labour by the assessee. Even assuming without admitting that it would amount to service then also it would be covered under Works Contract Service and not under Site Formation and Clearance, Excavation and Earthmoving and Demolition services and therefore classification adopted in the show cause notice is incorrect. Hence the entire demand is not sustainable. Once the 10 Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 demand is not sustainable, the penalties imposed are also not correct.
8.15 Without prejudice to the above submission, the issue involved is one of interpretation and therefore does not call for invoking larger period of limitation. The appellant has done a meritorious job in alleviating the problems faced by the local residents of that area and the same should be taken into consideration. The appellant need not be given bouquets but at least let him not get brick bats in the form of demand invoking larger period, alleging suppression of facts with intent to evade payment of tax. All figures were taken from the documents furnished by assessee when called upon by department. There is no suppression on the part of appellant. The appellant was under
bonafide belief that the work undertaken by CMC is Municipal Solid Waste management and not taxable. There was no intention to evade tax.
8.16 Without prejudice to the above submission, it is submitted that in the case of V.N.K. Menon & Co. Vs CESTAT - 2015 (323) E.L.T. 524 (Mad.) it was held that larger period of limitation cannot be invoked after starting the investigation. Applying the same analogy in the present case, the investigation was started on 27.11.2009 and therefore invoking of larger period after this date is also not correct.
8.17 Without prejudice, it is submitted that there is nothing on record to show that the assessee had collected service tax, while so, the Commissioner ought to have allowed cum-tax benefit while quantifying the demand.
9. In view of the above submissions, the Ld. Counsel prayed that Appeal No. ST/41780/2014 filed by the assessee may be allowed and Appeal No.ST/41927/2014 filed by the Department may be dismissed.11
Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014
10. Ld. A. R Shri N. Sathyanarayanan appeared and argued for the Department.
10.1 Para-3 of the Review Order dt. 16.07.2014 was referred to by the Ld. A.R. The original authority after considering the arguments put forth by the assessee and various material evidences produced by them gave findings to the effect that the work orders based on which notice was issued could be divided into three groups; (i) services rendered by assessee to Coimbatore Municipal Corporation under 8 work orders, (ii) services rendered by assessee to M/s.UPL under 7 work orders and (iii) 1 work order involving certain service of hiring of earthmoving machineries and 2 work orders which were related to civil work where there was no specific mention about waste disposal.
10.2 It is submitted that in respect of 8 work orders of CMC and 7 work orders of M/s.UPL, it was held by the original authority that the activity is not classifiable under 'Site Formation Clearance', for the reasons as below:
(a) the service covered in the above work orders were related to management of solid waste for CMC and no site formation and clearance, excavation and earthmoving work was involved in the above work orders; that there is no evidence to prove that the service rendered in the above 8 work orders were site formation and clearance, excavation and earthmoving and demolition service.
Without evidence on record, it could not be concluded that the above services rendered to CMC in respect of the above 8 work orders were Site Formation and Clearance, Excavation and Earthmoving and Demolition service.
(b) the 7 work orders given by M/s.UPL involve waste reformation which is to be carried out by assessee. The activities involved were cutting, shifting, transporting, dumping, filling, dozing, compacting, reformation, complete and levelling of Municipal Solid Waste using required machineries, gravel filling, earth work embankment, mixing of bentonite and providing and spreading of soil liner 12 Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 system, providing & supplying of liner system, providing & supplying and laying of C&D materials, MSW layer 200 mm C&D, 600 mm clay layer, 150mm C&D, providing and supplying and laying 300 mm soil above 200 gsm geo textile layer, providing/supplying 300 mm solid above 200 gsm geo textile layer, constructing path way along with periphery of the dumpsite as per drawings, constructing storm water drain along with periphery of the road; all the items of work mentioned in the work orders were related to waste reformation and are not classifiable under Site Formation and Clearance, Excavation and Earthmoving and Demolition service.
10.3 It is submitted that the original authority has arrived at this conclusion on the basis of the exclusion clause in the definition of 'Site Formation Servies'. In terms of the concession agreement made between CMC and M/s.UPL which is part and parcel of the work orders given to the assessee and various other evidences like photos, write-ups of the details furnished by the assessee, the original authority has held that these services are mainly with regard to Waste Management as per the Municipal Solid Wastes (Management and Handling) Rules, 2000 for safe guarding from pollution of the environment and ground water resources. The original authority has relied on CBEC Circular F.No.B1/6/2005-TRU dt. 27.7.2005 giving the legislative intent in introducing the service tax levy on Site Formation Services as well as Mega Exemption Notification No.25/2012-ST dated 20.06.2012. It was thus noted that the services provided to Government, a local authority or a Government authority by way of carrying out any activity in relation to any function ordinarily entrusted to a Municipality with regard to solid waste management are exempted from the service tax leviable thereon. The intention of the Government was to exempt solid waste management with effect from 1.7.2012. This has been wrongly extended to the exclusion clause in the definition of 'Site Formation Services' for the period prior to 1.7.2012. The said view taken by the original authority is erroneous.
13Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 10.4 It is submitted by Ld. A.R that when the notification dt. 1.7.2012 only exempts services in relation to solid waste management, the Commissioner ought not to have extended the same to the exclusion clause under SFCE.
10.5 The Commissioner has allowed relief to the assessee in respect of another work order where the work was for hiring of machinery for shifting liner, renting of poclain, tractor etc. 10.6 However, the Commissioner has not accepted the contentions put forward by the assessee in respect of two work orders of M/s.UPL involving jungle clearance and jungle cutting at the site. If such activities fall under Site Formation Clearance, the other work orders being part of these two work orders ought to fall under 'Site Formation Services'.
10.7 The perusal of 8 work orders give by the Coimbatore Municipal Corporation would show that the work involves excavating, levelling, dumping, filling, dozing, compacting etc. which are all related to SFCE. The definition of "SFCE" is wide enough to include all the activities carried out by the assessee as per the work orders. The services rendered by the assessee cannot be classified as 'Solid Waste Management Services' as it satisfies the ingredients under Site Formation Service.
10.8 The argument put forward by the ld. Counsel that as these are services provided to municipal corporation in relation to waste management, these are nothing but part of statutory sovereign function discharged to the public and therefore is not subject to levy of service tax, was countered by the Ld. A.R by submitting that such services do not fall under the sovereign function as the work orders have been given by the CMC to M/s.UPL who have subcontracted the work orders to the assessee herein.
10.9 In regard to invocation of extended period, the Ld. A.R submitted that the assessee has not discharged service tax and non-payment of service tax would not have come to light but for the investigation conducted by the department. It is clear 14 Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 suppression of facts and the demand raised invoking the extended period is correct and proper. Ld. A.R prayed that assessee's appeal may be dismissed and Department's appeal may be allowed.
11. Heard both sides.
12. The original authority vide order impugned herein has set aside the demand in respect of 8 contracts of Coimbatore Municipal Corporation as narrated in para 33.1 and 7 contracts of M/s.UPL as well as hiring of machinery to be not classifiable under 'Site Formation and Clearance Services'. Major portion of the demand raised in the SCN falls under these work orders. The Department has filed appeal against the dropping of demand to the tune of Rs.64,43,668/-. We therefore first proceed to analyse this issue.
13. The definition of "Site Formation and Clearance, Excavation, Earthmoving and Demolition Services" has already been reproduced above. From the facts, it is clear that M/s. UPL, who have been awarded the contract by CMC, are pioneers in environmental engineering and waste management etc. The work undertaken by the various work orders (8-CMC +7-UPL) are nothing but part and parcel of Integrated Waste Management system. In all these work orders the word 'waste' has been mentioned. It is to be noted that the activities done are not for site formation or clearance in connection with erection of a civil structure, building, factory or mining area. The work orders are for carrying out the activity of waste management. Ld. Counsel has explained that the site at Vellalore village was being used as dump yard for waste and as a result of protest from the public due to contamination of water table / water bodies, the Municipal Corporation took up the task of management of waste and protecting water table and water bodies. The contract of waste management was given to M/s.UPL who have subcontracted the 15 Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 work orders to the assessee herein. On the whole, thus, it can be seen that the work orders are part and parcel of Integrated Waste Management System undertaken by M/s.UPL.
14. The original authority has analysed the 8 work orders given by CMC and 7 work orders of M/s.UPL carried out by the appellant in detail. The scope of the 8 work orders of CMC has already been reproduced in the table in para 3 above. From the nature of works undertaken itself it is clear that the works are excavation of garbage mounds at the above dump yard, dozing, levelling of excavated garbage, engaging truck type hydraulic excavator for the work of excavation of garbage mounds, engaging crawler type bull dozer for the work of debris and levelling of excavated garbage, engaging earth moving machinery front end loader for transferring daily collection of debris from Ukkadam sewage to Vellalore yard. From the very nature of the work order itself it is clear that though the words 'excavating', 'earthmoving' are used in the work order, the nature and character of the works executed are management of waste and not site formation for the purposes of construction of a building, factory or civil structure. The proposal and object of carrying out the work orders is solely for management of waste and not for preparation of the land for construction or such other purposes.
15. The scope of the site formation and clearance services has been explained by the Board vide Circular No. B1/06/2005-TRU dated 27.07.2005. The said circular captures general situations where site formation and clearing activities take place. The circular says that prior to construction of buildings, factory or any civil structure, activity of mining or laying of cables or pipes, any preparation of land would be construed as site formation and clearance service. Thus, when the intention of the activities carried out by excavation, clearance, drilling etc. is to make the land 16 Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 suitable for further use. The excavation, clearance, earthmoving and other like activities would be SFCE. In the present case, the activities of excavation, earthmoving, dumping etc. are done for the purpose of managing the waste and protecting the water tables / water sheds. In para 33.2.2, the Commissioner has discussed the legislative intent of site formation service as brought out from the clarification issued by the Board Circular dt. 27.7.2005. The Ld. counsel has adverted to the works carried out along with the photographs to explain the nature of the work carried out at the site. The photographs placed on pages 99 to 126 of the appeal paper book filed by the assessee show various works carried out.
15.1 The main target was to prevent the existing garbage from contaminating the ground water as well as preventing air pollution. This was intended to be achieved by making suitable impermeable bed over the ground and cover the garbage with suitable liners. Upon these liners green grass was to be planed so as to stabilize the structure and prevent erosion. By such scientific method, over a period of years all the garbage would be degraded. This degraded garbage would be opened and then used as agriculture manure. The non-degraded plastics will be sent for recycling. This entire process is called Bio Mining.
15.2 It is explained that the said site was used as dump yard for garbage. Lot of garbage leachate stagnated on the ground and smoke was continuously coming from it. The garbage had to be covered perfectly in order to stop garbage leachate from contaminating the ground water. The machineries were procured by M/s.UPL and few machineries were procured by assessee. The lining materials, transport and fuel expenses were extremely costly incurred by the assessee.
15.3 A space was created in the area by shifting the garbage with equipments and then compacted for the base ground cover with liner soil. The base ground was covered with prescribed soil to act as an impervious liner to stop garbage leachate contaminating the 17 Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 ground water and there were frequent inspections conducted by officials to oversee the works carried out.
15.4 The yard was compacted with grass which was spread on the water for safe base. There were works carried out for transporting soil through the narrow road of the village. Earlier, the Municipal Corporation used to bury the garbage by digging pits in the ground which led to contamination of water and due to the protest of the people, the clearance of garbage work was taken up by the Municipal Corporation to manage the waste. The land was reformed from all sides by compacting with rollers to give stability to the top structure. A slope was formed and drainage liner is laid over the garbage which is compacted. This drainage liner is to circulate gases formed inside the garbage and collect it through perforated pipes fitted in intervals throughout the structure. Over this drainage liner, 600 mm clay soil is laid and compacted. This creates impermeability to prevent rain water from seeping within the compacted structure so as to minimize the contamination of water. Over this liner again drainage liner / gravel liner is laid and compacted. Over the said liner, 200 GSM non-woven geo textile is spread and stitched without gaps over the entire structure. Over this geo textile garden soil around 300 mm is laid and compacted to plant specified grass to form a layer. This grass roots create tangles all over this structure and gives stability for the top structure. It also gives greenery and friendly atmosphere to the village. From the photographs as well as the illustrative explanation attached to it, it is very clear that the works carried out is for waste management and for protecting water tables / water resources. It cannot be said that these activities are for preparation of the site for future use in a commercial manner.
18Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014
16. The 7 work orders given by M/s.UPL also has been examined by us. The list is given in the following table :
Sl. Work Order Number Nature of Work No.
1. UPLEEL/COMB/MACHINERIES/08/05 Shifting of Municipal Solid Waste at Dated 08.02.2008 Ondipudur Compost Yard.
2. UPLEEL/COMB/MACHINERIES/08/06 Closure of Kavundampalayam dump Dated 22.02.2008 site
3. UPLEEL/COMB/KAVAN/WASTE Shifting of Garbage from Peelemedu SHIFTING/08/18 Dated 14.08.2008 Compost Yard to Kavundampalayam Compost yard
4. UPLEEL/COMB/EXT/KAVAN/08/017 Extension of Work Order No. Dated 22.08.2008 UPLEEL/COMB/MACHINERIES/08/06 Dated 22.02.2008
5. P.O. No.4500000319 Dated Removal of waste, gravel filling, earth 29.01.2009 work and spreading of soil liner
6. P.O.No.4500000647 Dated Construction of storm water drain at 16.03.2009 Kavundampalayam Compost Yard
7. P.O.No.4500016719 Dated Compacting of daily fresh waste 27.10.2009
17. We find that the scope of work is in the nature of waste reformation carried out by the assessee such as cutting, shifting, transporting, dumping, filling, dozing, compacting, reformation, levelling of municipal solid waste using required machineries, gravel filling, earth work embankment, mixing of bentonite, providing and spreading of soil liner system, providing & supplying and laying of geo textile layer, constructing path way along the periphery of the dumpsite etc. are seemed to be carried out. In para 33.2.2 onwards the original authority has considered these 7 work orders and held that these are in the nature of waste management and not classifiable under 'Site Formation and Clearance, Excavation and Earthmoving and Demolition Services'.
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18. It is also argued by the ld. counsel for the assessee that the purpose of the project was to convert the entire municipal waste into agricultural manure. In para 4 of the concession agreement dt. 19.11.2007 entered into between CMC and M/s,UPL under the heading 'Production of compost' the detailed process of production of compost waste from municipal solid waste has been mentioned. It is submitted by the learned counsel that after passing of several years, now, the municipal corporation has been able to convert the municipal waste as compost by adopting various processes and is being used in agriculture as manure.
19. The definition of "Site Formation and Clearance, Excavation, Earthmoving and Demolition Services", excludes the services provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovation or restoring of water resources or water bodies. In fact, the entire effort on the part of CMC by engaging M/s.UPL is to manage the waste and also to protect the watersheds / water bodies. The original authority in para 33.3.24 has discussed this aspect and held that the works carried out by the assessee as per the work orders of CMC as well as M/s.UPL would fall under the exclusion part of the definition.
19.1 As per work order dt. 9.1.2010 certain Earth Moving Machineris are hired. These machineries are used for work orders relating to these garbage dump yards.
20. After carefully examining the work orders and considering the submissions of both sides, we are in full agreement with the view taken by the Commissioner in setting aside the demand in respect of 8 work orders of CMC as well as 7 work orders of M/s.UPL and hiring of machineries.
21. We therefore hold that the order passed by the Commissioner setting aside the demand of Rs.64,43,668/- is legal and proper. Consequently, the appeal filed by the Department fails.
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22. The assessee has preferred appeal against the confirmation of demand in respect of 2 work orders dt. 13.2.2009 and 24.3.2009. The works to be carried as per the work order dt. 13.2.2009 are as under :
"Jungle clearance, Jungle cutting for Vellalore site, cutting, removing from the working place and stacking at appropriate place.
The works to be carried out by assessee as per work order dt.24.3.2009 are as under :
"Dresing and levelling the excavated or filled surface of the land filled area including rolling with light roller so as to achieve a uniform levelled surface without any undulation of rolling marks (ii) Earth work in excavation for foundation of all types, trenches for laying the pipes, cables to required grade, level in all types of clay/sandy soil including murrum etc., ramming the bottom surface, getting out the excavated earth upto 2m lift, disposal of surplus earth to 500 m lead, excavation from borrow pit area within the site 0 to 1.5m, lead, excavation for 300thk top layer including removal of all vegetate earth work (iii) earth work in filling for embankment upto the height of 3 m with contractors own earth brought from outside including royalties, excavating lifting, transporting, spreading, water, rolling within 10 tone roller and vibratory roller / pad foot vibratory rollers, compacting, levelling and dressing on required slope and camber as per drawing etc."
23. The original authority after analysing the above work orders has reached the conclusion that these works carried out have no connection with waste management and therefore would fall under Site Formation and Clearance Services. The Circular No.123/5/2010-TRU dt.24.4.2010 has also been referred by the Ld. Counsel. In para 36.3 of the impugned order the said circular 21 Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 which clarified that Site Formation and Clearance services is attracted only if the service providers provide the services independently and not as a part of complete work. The original authority held that these two work orders are for jungle clearance, dressing, levelling, excavation, earth filling, providing and laying drainage layer, providing and spreading of soil liner system, providing and fixing RCC pre cast slab, and backfilling by excavated earth and brick pitching etc. It is observed that these works are done independently and not as part and parcel of the waste management system. Ld. Counsel has submitted that these works of jungle clearance, levelling, excavation, earth filling, providing and fixing RCC pre cast slab, trenches for laying the pipes etc. are done as part and parcel of the waste management system to protect the water tables / water bodies. Without clearing of the bushes and vegetation and laying the precast slab for pipes, drainage etc., the appellant cannot carry out the work of waste management as per the project. It would require necessary dressing, levelling of the land, excavation and drainage layer etc. in order to treat and manage the waste scientifically. These works are indispensable activities so as comply to the Municipal Solid Waste Management Rules. The assessee has to comply with the rules and procedures of the Municipal Solid Wastes (Management and Handling) Rules, 2000. The works being part and parcel of the entire contract taken up by M/s.UPL who are pioneers in environmental engineering and waste management, it is argued that Commissioner ought not to have confirmed the demand of service tax on these two work orders.
24. After perusal of the work orders and the nature of works undertaken by assessee, we agree that the arguments by the learned counsel are tenable and acceptable. When the assessee has been given work orders by M/s.UPL and the Corporation with intention to prevent contamination of water, it cannot be construed that part of the works are done independently at the site and not as part of the complete work. The initial activities of clearing 22 Service Tax Appeal No. 41780 of 2014 Service Tax Appeal No. 41927 of 2014 unnecessary vegetation and levelling and removing bushes etc. cannot be said to be not part and parcel of complete work of waste management. Merely because the word 'waste' is not used in the work orders, the Commissioner has been carried away to conclude that these works undertaken are in the nature of Site Formation Service. Without executing works as per these work orders, the activity of waste management cannot be completed. From the above discussions, we find that the confirmation of service tax demand in respect of the two work orders requires to be set aside. Ordered accordingly.
25. In the result, the impugned order to the extent of confirming the service tax demand of Rs.19,50,571/- along with interest and penalties imposed is set aside. The assessee's appeal is allowed with consequential relief, if any. Department's appeal is dismissed.
(Order pronounced in the open court on 16.07.2024) sd/- sd/-
(VASA SESHAGIRI RAO) (SULEKHA BEEVI. C.S) Member (Technical) Member (Judicial) gs