Custom, Excise & Service Tax Tribunal
Hyderabad - G S T vs Vijay Mining And Infra Corp Pvt Ltd on 20 June, 2025
(1)
ST/30512, 30324 & 30342/2019
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench - Court No. - I
Service Tax Appeal No. 30512 of 2019
(Arising out of Order-in-Original No. HYD-EXCUS-AUDIT-COM-014-18-19 dt.31.12.2018
passed by Commissioner of Central Tax, Audit-II, Hyderabad)
Vijay Mining & Infra Corp Pvt Ltd
H.No. 8-2-684/K/27, Kimtee Enclave, ......Appellant
Banjara Hills, Road No.12, Hyderabad - 500 034
VERSUS
Commissioner of Central Tax
Hyderabad - GST
GST Bhavan, LB Stadium Road,
......Respondent
Basheerbagh, Hyderabad - 500 004 with Service Tax Appeal No. 30324 of 2019 (Arising out of Order-in-Original No. HYD-EXCUS-AUDIT-COM-014-18-19 dt.31.12.2018 passed by Commissioner of Central Tax, Audit-II, Hyderabad) Ch. Vijay Sekhar Reddy Managing Director, M/s Vijay Mining & ......Appellant Infra Corp Pvt Ltd., 8-2-684/K/27, Kimtee Enclave, Road No.12, Banjara Hills, Hyderabad- 500 034 VERSUS Commissioner of Central Tax Hyderabad - GST GST Bhavan, LB Stadium Road, ......Respondent Basheerbagh, Hyderabad - 500 004 and Service Tax Appeal No. 30342 of 2019 with Service Tax Cross Application No. 30330 of 2019 (Arising out of Order-in-Original No. HYD-EXCUS-AUDIT-COM-014-18-19 dt.31.12.2018 passed by Commissioner of Central Tax, Audit-II, Hyderabad) Commissioner of Central Tax Hyderabad - GST ......Appellant GST Bhavan, LB Stadium Road, Basheerbagh, Hyderabad - 500 004 VERSUS Vijay Mining & Infra Corp Pvt Ltd H.No. 8-2-684/K/27, Kimtee Enclave, Banjara Hills, Road No.12, Hyderabad - 500 034 ......Respondent (2) ST/30512, 30324 & 30342/2019 Appearance Shri S. Sunil, Advocate for the Appellants.
Shri M. Anukathir Surya & Shri V. Srikanth Rao, ARs for the Respondent.
Coram: HON'BLE MR. A.K. JYOTISHI, MEMBER (TECHNICAL) HON'BLE MR. ANGAD PRASAD, MEMBER (JUDICIAL) FINAL ORDER No. A/30206-30208/2025 Date of Hearing: 07.04.2025 Date of Decision: 20.06.2025 [Order per: A.K. JYOTISHI] M/s Vijay Mining & Infra Corp Pvt Ltd., formerly known as Vijay Leasing Company (hereinafter referred to as VMICPL) are in appeal against the Order-in-Original dt.31.12.2018 (impugned order), whereby, the Adjudicating Authority has adjudicted the demand raised in terms of SCN dt.05.07.2018. They have come in appeal vide Appeal No. ST/30512/2019 only to the extent of confirmation of demand of Rs.4,97,28,034/- along with interest and penalty. Similarly, Mr. Ch. Vijay Sekhar Reddy, Managing Director of VMICPL has also come in appeal vide Appeal No. ST/30324/2019 against the impugned order to the extent of imposition of penalty. The Revenue has also come in appeal vide Appeal No. ST/30342/2019 against the said impugned order to the extent of demand dropped by the Adjudicating Authority. Since all these three proceedings are emanating from the same SCN and impugned order, these appeals are being taken up together for the purpose of disposal.
2. The brief facts of the case are that the department issued SCN dt.05.07.2018 to VMICPL for the period from January, 2013 to March, 2017, based on certain intelligence that they were engaged in rendering taxable services but were not properly discharging their service tax liability. Based on further investigation and scrutiny of documents including statements recorded in respect of Mr. Vijay Sekhar Reddy, the department, inter alia, felt that they have not discharged service tax on services rendered by them during the period January, 2013 to March, 2016 when they had undertaken the work of excavation and removal of overburden and barytes ore including (3) ST/30512, 30324 & 30342/2019 drilling 110 dia holes, controlled blasting, loading, transportation, unloading, stacking and leveling at APMDC, Mangampet Barytes mines, Kodur. Relying on the provisions under section 65B(44) of the Finance Act, they felt that the activities would be liable to service tax as the claim of VMICPL for the year 2014-15 that the services being not taxable under clause (f) of section 66D of the Finance Act, 1994, was not correct. They also raised demand in respect of certain free supply of diesel by VMICPL while providing site formation services to M/s Singareni Collieries Company Ltd (SCCL) on the value which the department felt was in the nature of non-monetary consideration, which also needs to be taken into account for arriving at the taxable value. They also alleged that in spite of collecting service tax element from their client on the value of free supply of diesel, they have not discharged the service tax liability on the same. Department also alleged non-payment of service tax on expenditure incurred towards transportation of goods by road and irregular availment of Cenvat credit by VMICPL during the period January, 2013 to March, 2015 amounting to Rs.1,86,19,842/-. They have also noted that during the period October, 2012 to March, 2017, they have either filed ST3 return late or they have not filed the returns at all.
3. On adjudication, the Commissioner has examined the submissions made by VMICPL and has decided the issue both on merit as well as on limitation. For the sake of clarity, these issues are discussed as under:-
(A) Non-payment of service tax during the period January, 2013 to March, 2016:-
4. The Adjudicating Authority has examined the contract entered by VMICPL and the principal contractor i.e., VLCSCKCJV (hereinafter referred to as JV). He has taken into account the fact that while the mining activity has been made taxable w.e.f. 22.05.2007, which, inter alia, during the material time, also covered coal cutting or mineral extraction and lifting them up to the pithead. Thus, in view of the provisions under section 65B(44), their claim under section 66D(f) is not correct. He also noted that it is evident from 'grouping to the audited annual accounts' for the FY 2012-13 that VMICPL has collected applicable service tax in respect of mining services rendered by them to JV by treating them as taxable service. He also relied on the judgment of Coordinate Bench in the case of M/s Hind Metals & (4) ST/30512, 30324 & 30342/2019 Industries Pvt Ltd Vs CCE & ST, Bhubhaneswar [2018 (10) GSTL 547 (Tri- Kolkata)] to come to the conclusion that the activity of mining is service activity, which is subjected to service tax and not manufacturing activity as contended by VMICPL. Similarly, he has upheld the demand of service tax on transportation of goods by not accepting the defence of revenue neutrality even when the service tax was payable under Reverse Charge Mechanism. As regards irregular availment of credit on MS Angles, Sheets & Squares, as capital goods and availing credit of Rs.30,33,188/- on inputs and input services without having invoices, he considered the argument of VMICPL that the said goods were used for repairing tippers and dumpers and held that since dumpers and tippers are included in the category of capital goods, these goods would be eligible for Cenvat credit, having placed reliance on the judgment of Hon'ble Supreme Court in the case of CCE Vs M/s Rajasthan Spinning and Weaving Mills Ltd [2010 (255) ELT 481 (SC)] and on the decision of this Tribunal in the case of M/s Matrix Laboratories Ltd Vs CCE, Hyderabad [2016 (339) ELT 122 (Tri-Hyd)]. For credit of inputs and input services he, after going through the documents submitted by the appellant, allowed certain credit and upheld the remaining amount.
5. On the issue of limitation, which was invoked for raising demand on various grounds, he held that the department was aware of the issue and therefore, proviso could not be invoked. He has relied on certain SCNs and OIOs issued to VMICPL to come to the conclusion that demand is hit by time bar and he has also observed that the said conclusion was fortified by the decision of Hon'ble Supreme Court in the case of M/s Nizam Sugar Factory Vs CCE, AP [2006 (197) ELT 465 (SC)]. He has, however, confirmed the demand under section 73(2A) to the extent the demand was covered within the period of 30 months and held that demands made for the period from 2014-15 onwards are only sustainable and the demand made during 2013- 14 and earlier are hit by time bar.
6. The learned Advocate for the appellant is mainly contesting that the confirmation of demand of Rs.46,11,165/- for the period October, 2013 to 31.03.2015 is not correct as the provisions of section 65(105)(zzzy), which existed prior to negative list regime, was not at all applicable and accordingly, even the clarification issued by the Board, vide letters dt.02.02.2007 and 12.11.2007 were also not applicable. Further, even the (5) ST/30512, 30324 & 30342/2019 case laws relied by the adjudicating authority in the case of CUE, Hyderabad Vs Vijay Leasing Company [2011 (22) STR 553 (Tri-Bang)] and Mr. Ramakrishna Reddy Vs CCE, Tirupathi [2009 (13) STR 661 (Tri-Bang)] are not relevant to the present case due to change in imposition of service tax under negative list regime. He submits that their activities are falling under the negative list under section 66D(f) and therefore, in view of the charging section, no service tax can be levied if the activity/service is covered under negative list. He has also relied on the judgment of Hon'ble Supreme Court in the case of CIT Vs Sesa Goa Ltd [2004 (271) ITR 331], where the issue as to what would constitute 'production' has been examined in the context of mining and where, inter alia, it was held that the process of extraction and processing of iron ore amounts to 'production' within the meaning of the word in section 32A(2)(b)(iii). Similarly, even relying on ordinary meaning of the word 'produce' in terms of dictionary, as also certain decisions in respect of Income Tax Act, the activities being carried out by the appellant are nothing but production of ore. Therefore, from the combined reading of definition of 'production' and section 66D(f), their activities would be covered under the negative list and therefore, not liable to service tax.
7. We find that VMICPL is sub-contractor of the principal contractor VLCSCKCJV, who has entered into contract with APMDC. This agreement was for the excavation and removal of overburden and barytes ore (ROM). Therefore, it is obvious that this is a comprehensive contract for excavation of Rune-Of-Mine (ROM) barytes ore and some of the terms and conditions of the agreement also indicate that the ore produced from the mines shall not be dumped on the ramps/road leading from the miner order face to the stock yard and that they shall produce certain quantity of barytes ore and a certain quantity of overburden per annum. Therefore, what is obvious is that they are required to undertake total work right from the beginning of excavation and removal of overburden to the extraction of barytes ore and its further sizing, screening and transportation. It is also obvious that what was covered under the mining services prior to negative list regime may or may not be liable to service tax under negative list regime depending on whether the said activity is covered in the negative list or otherwise. The charging section i.e., section 66B provides for levy of service tax on all services other than those services specified in negative list. Therefore, if any service or activity is covered in the negative list, then that cannot be (6) ST/30512, 30324 & 30342/2019 charged to service tax. Section 66D(f) of the Finance Act, 1994 provides for coverage of 'services' by way of carrying out any process amounting to manufacture or production of goods, excluding alcoholic liquor for human consumption. A plain reading would indicate that if any activity is amounting to manufacture in terms of Central Excise Act or if it amounts to production of goods then the said services would be covered under the negative list. Even the dictionary meaning, inter alia, explains as under:-
Webster's New International Dictionary - 'Produce' is defined as 'something that is brought forth or yielded either naturally or as a result of effort and work' Short Oxford English Dictionary - 'Produce' means 'to bring forward, bring forth or not; to bring into being or existence'
8. The issue, whether the activating of mining would amount to production of ore or otherwise was dealt by Hon'ble Supreme Court in the case of Sesa Goa Ltd (supra). Though this was in the context of Income Tax Act, however, the fact remains that the Hon'ble Supreme Court, inter alia, held that extraction and processing of iron ore amounts to production. Here, it is important to note that the term 'production' is not defined under section 3 of Central Excise Act, which is the charging section provided for levy and collection of Cenvat on all excisable goods, which are produced or manufactured in India. While there is definition for the term 'manufacture', which, inter alia, includes any process, which is specified in relation to any goods in the section or chapter note as amounting to manufacture, there is no definition of what amounts to production or produce. Thus, once it is held that extraction of baryte ore from the mines is an activity, which would amount to production of baryte ore, it would obviously be covered in the negative list and therefore, not liable to service tax in terms of section 66B of the Finance Act.
9. The department has not properly appreciated this concept and instead relied on the grounds that since they were engaged in the activity which was aptly covered under mining services prior to 01.07.2012, they would still continue to be covered under the same service, even when there is no chargeability of service tax, based on specified service beyond 01.07.2012. Therefore, the submission of VMICPL that since they are engaged in (7) ST/30512, 30324 & 30342/2019 production of baryte ore, which is not disputed even in the SCN and which is also apparent from the composite contract awarded for baryte production as well as extraction and removal of overburden, is correct. The appellants have also relied on the judgment in the case of Avian Overseas Pvt Ltd Vs CCE, BBSR-II [2009 (15) STR 540 (Tri-Kol)], wherein the Coordinate Bench has, inter alia, held that coal is excisable product and the activity of mining coal and producing coal would come under the definition of 'manufacture' under section 2(f) of the Central Excise Act, 1944. VMICPL was given the sub-contract for production of baryte ore from the baryte mines of APMDC and such production would always entail removal of overburden first before the baryte ores in ROM condition can be extracted and thereafter, transported to designated place.
10. Therefore, in the backdrop of the agreement, its relevant clauses, as also provisions under the Central Excise Act and the judgment of Hon'ble Supreme Court in the case of Sesa Goa Ltd (supra), such extraction of ore from the mines would tantamount to production of ore. Therefore, once there is production of ore from the activities undertaken by them, the said activities would fall under negative list and therefore, cannot be charged to service tax. Reliance placed by the adjudicating authority on the judgment of M/s Hind Metals & Industries Pvt Ltd (supra) is distinguished on the fact as the issue which was being considered by the Tribunal was whether the mining services could be considered as services or the said services were towards production/manufacture of excisable goods of iron ore which was specified under Chapter 26. In view of nature of contract, it was observed that the activity carried out was that of mining of iron ore and not manufacture thereof. Whereas, as discussed supra, here the mining of ore is being treated as production of ore and the term 'production' is also covered within the purview of section 2(f) of the Central Excise Act apart from 'manufacture' and the same term has been used in the negative list and therefore, applying the ratio of Sesa Goa Ltd (supra), the said activity would tantamount to production of ore. Therefore, we find that on merit, no service tax can be levied on the amount received towards extraction of baryte ore. Since on merit itself there is no chargeability of service tax, we are not independently examining the issue on limitation for this demand.
(8)ST/30512, 30324 & 30342/2019 (B) Non-inclusion of value of free supply of diesel by M/s SCCL to VMICPL for rendering site formation services during the period April, 2014 to March, 2016:
11. The adjudicating authority has examined the issue of non-inclusion of receipt of diesel valued at Rs.21,49,19,752/- during the FY 2014-15 in the light of the judgment of Larger Bench of this Tribunal in the case of M/s Bhayana Builders Vs CST, New Delhi [2013 (32) STR 49 (Tri-LB)], which was affirmed by the Hon'ble Supreme Court reported at [2018 (10) GSTL 118 (SC)], wherein the Larger Bench has held as under:-
"15. From the several aids to interpretation, referred to supra we are compelled to conclude that goods and materials supplied/provided/used by the service provider for incorporation in the construction, which belong to the provider and for which the service recipient is charged towards the value of such supply/provision/use and the corresponding value hereof was received by the service provider, to accrue to his benefit, whether independently specified as attributable to the specific material/goods incorporated or otherwise, would alone constitute the gross amount charged. This is not to say that an exemption Notification cannot enjoin a condition that the value of free supplies must also go into the gross amount charged for valuation of the taxable service. If such intention is to be effectuated the phraseology must be specific and denuded of ambiguity.
16. In conclusion, we answer the reference as follows:
(a) The value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged, within the meaning of the later expression in section 67 of the Finance Act, 1994;
and
(b) Value of free supplies by service recipient do not comprise the gross amount charged under Notification No. 15/2004-ST, including the Explanation thereto as introduced by Notification No. 4/2005-ST."
12. The Revenue, vide their Appeal ST/30342/2019, has, inter alia, argued that the judgment relied upon is not correct as the said decision was in the context of entry in exemption (abatement) Notification No. 15/2004-ST dt.10.09.2004. The Department even argues that in another judgment Hon'ble Supreme Court in the case of Intercontinental Consultants & Technocrats Pvt Ltd [2018 (10) GSTL 401 (SC)], wherein the Hon'ble Supreme Court dismissed the department's appeal with regard to value of inclusion of value of free supply in the taxable service of site formation and clearance service. They have distinguished the reliance placed on these two (9) ST/30512, 30324 & 30342/2019 judgments on the grounds that in the present appeal, VMICPL's balance sheet for the year 2014-15 was recognised as 'direct income' against the head 'diesel-consumption-FOC (invoiced to SSL)' and that they had raised invoices against their client mentioning the value of diesel and charging service tax on the said value and thereby, collecting service tax of Rs.2,65,64,081/-, which however was not paid by them to the Government exchequer. These relevant facts were not considered by the adjudicating authority.
13. Learned Advocate has submitted that the grounds taken by the Revenue are factually incorrect as nomenclature would indicate that these are free supplies provided by the service recipient and that not a pie has accrued to them on account of free supply of diesel. In fact, he submits that in both the judgments of Bhayana Builders (supra) and Intercontinental Consultants & Technocrats Pvt Ltd (supra), the ratio of the Apex Court was based on the reason that service tax was leviable on gross amount charged in the invoice for the taxable services rendered and that value of free supply of material, which was not part of amount charged in the invoice and pertaining to goods/material would not form part of the taxable value. He has also pointed out that the Revenue has raised another contention that even assuming that service tax in this case was not leviable for any reason, the adjudicating authority ought to have ordered the said amount to be paid to the Government since the same attracts section 73A and this was based on the proposition that they had collected service tax. However, the fact remains that demand in this regard is raised under section 73 and not under section 73A and it is a settled law that adjudication order cannot traverse beyond the SCN.
14. We find that the ground for charging service tax on the value of free supply of diesel was that it was treated as non-monetary consideration. There is force in the argument that demand has been made under section 73 and not under section 73A and that they have not collected any service tax, per se, on the said amount. Therefore, section 73A could not have been invoked suo moto by the adjudicating authority. Department is of the view that in terms of section 67 of Finance Act, 1994, specially section 67(1)(ii), where provision of service is for a consideration not wholly or partly consisting of money, equivalent money value of non-monetary consideration (10) ST/30512, 30324 & 30342/2019 is to be added. However, we find that except that they noticed from balance sheet an entry of Rs.21,49,19,752/-, direct income against the diesel supplied free of cost and noticed that they have raised invoices for collection of service tax on said value, no other evidence is there to suggest that they have recovered any amount over and above the contract value. The treatment of this free supply as income in books of accounts of appellant would not make it a real income. There is no other evidence that contract was amended in which M/s SCCL has agreed to pay part in money terms and part as free of cost diesel. Further, even if certain amounts can be recognized as direct income but in case the amount has not actually been received, the same cannot be considered as income for the purpose of inclusion in the value. It is also obvious that when proposition was made in the SCN that the demand could have been raised in terms of section 73A, the Revenue was not very sure as to whether any service tax has been collected or even leviable on the said free supply of diesel.
15. In Department's Appeal, the department has mostly submitted that reliance placed by the adjudicating authority on the earlier SCN dt.08.10.2014 and 31.12.2014 to conclude that department was aware of their activity and since extended periods were already invoked in respect of said SCNs, no further extended period is invokable in relation to present appeal, keeping in view the judgment in the case of M/s Nizam Sugar Factory Vs CCE, AP [2006 (197) ELT 465 (SC)]. The department has mainly contested that the earlier SCNs were on a different issue and also the fact that this appeal is not in relation to the SCN, which can be considered as periodical SCN and therefore, the reliance on M/s Nizam Sugar Factory case (supra) is not correct. They have also relied on catena of judgments where it has been held that presence of element of suppression, wilful misstatement, intent to evade payment of tax merits to be determined on the basis of material facts in respect of each case and that the issue of notice invoking extended period in respect of given period does not operate as bar for invoking extended period in respect of another period in the given facts. Reliance has been placed in the following case laws
a) Coaltar Chemicals Manufacturing Co. Vs UOI [2003 (158) ELT 402 (SC)],
b) Maldhari Sales Corporation Vs UOI [2016 (334) ELT 418 (Del)] (11) ST/30512, 30324 & 30342/2019
c) Days' Inn Deccan Plaza Vs CST (Appeals), Chennai-I [2016 (45) STR 502 (Mad)]
d) United Enterprises Vs CCE & ST, Patna [2013 (29) STR 605 (Tri-Kol)]
16. We find that the SCN has alleged the grounds for suppression at Para 10 and 10.1 to come to the conclusion that VMICPL has wilfully suppressed the facts and contravened various provisions of the Act and Rules and therefore, extended period is invokable. We find that the grounds taken are primarily that in the regime of self-assessment, the department comes to know about the facts of service rendered and payment made only during the scrutiny of the statutory returns and therefore, it places greater onus on the assessee to confirm to higher standards of disclosure of information in their statutory returns. It also stated that they have not paid the service tax and that they had suppressed value of services rendered in the taxable column of ST3 returns pertaining to the period January, 2015 to March, 2015 by deliberately claiming non-taxability of service with sole objective of averting service tax liability. They have also relied on Rule 9(6) of Service Tax Rules, which requires the appellant to maintain records for receipt and consumption of input services in which relevant information regarding the value, tax paid, Cenvat credit taken and utilized, the person from whom the input service has been procured is recorded and the burden of proof regarding the admissibility of the Cenvat credit shall lie upon the provider of output service taking such credit and since the fact of non-payment of service tax on (a) mining activities rendered by them to VLCSCKCJV, (b) goods supplied free of cost by SCCL, (c) expenditure incurred towards transportation of goods and (d) irregular availment and utilization of Cenvat credit has come to the light only on the basis of investigation conducted by the department and but for the investigation, the above facts and contravention of various provisions of the Finance Act, 1994 would not come to light.
17. We have gone through the analysis in this regard made by the adjudicating authority and we find that he has examined the entire issue of limitation keeping in view the SCN dt.30.12.2014 issued for the period 2011-12 to 31.12.2012, demanding service tax of Rs.15,80,12,866/- in respect of taxable services rendered by them, wherein, extended period was also invoked. He has also gone through another SCN dt.08.10.2014, wherein (12) ST/30512, 30324 & 30342/2019 various disputed services including mining service, transport of goods by road service, management consultancy service, site formation and clearance service, irregular availment of Cenvat credit, etc., were covered and thereafter, holding that the department had the prior knowledge about the activities being carried out by them and therefore, they cannot invoke extended period again and again and therefore, grounds of limitation raised by them are correct.
18. In view of the grounds taken in the SCN for invoking extended period, we find that apart from making certain allegations as discussed supra, they have not given any cogent and positive evidence alleging deliberate suppression or misstatement of facts. Insofar as non-payment of service tax is concerned, it was in view of their interpretation, especially fortified by the judgment in the case of Avian Overseas Pvt Ltd Vs CCE, BBSR-II (supra), the appellants were having a bonafide belief that they were not liable to pay service tax on such activity. Even the judgments relied upon by the department clearly shows that each fact has to be analyzed to come to the conclusion as to whether there was any deliberate attempt or deliberate withholding of information or intent to evade payment of tax to invoke extended period. We, therefore, in the facts of the case, find that the adjudicating authority has rightly held that department was well aware of their activities and especially in the absence of any other cogent and strong evidence by the department, there is no ground to invoke extended period. Therefore, to that extent, we dismiss the grounds taken by the Revenue and uphold the views of the adjudicating authority.
19. We find that this issue needs to be decided in terms of section 67 which deals with valuation of taxable services for charging service tax. A plain reading of the expression 'gross amount charged' would mean any amount charged by the service provider for the service provided or to be provided in relation to the said goods. In this case, there is no evidence on record to indicate that they have provided any service in relation to the said supply of diesel FOC outside the scope of contract and merely because they have accounted for this as income for the purpose of certain taxation under different law, it could not be considered as income attributable to any service provided by them to SCCL where the free supply could be considered as consideration. We find that in view of judgments in the case of Bhayana (13) ST/30512, 30324 & 30342/2019 Builders (supra) and Intercontinental Consultants & Technocrats Pvt Ltd (supra), unless there is consideration for taxable service, the same cannot be subjected to service tax and that is why precisely the Hon'ble Supreme Court held that in relation to free supplies of goods/material, the same could never form part of the assessable value for the purpose of determining service tax. We note that Tribunal in the case of Bhayana Builders (supra), inter alia, held that value of goods/materials supplied free of cost by service recipient to a provider of taxable service, being neither monetary or non- monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged. We also find that the department, in their grounds of appeal, has tried to point out the background in which the said judgment was given by the Tribunal and affirmed by the Hon'ble Supreme Court by saying that it was in relation to benefit or otherwise, which was admissible under Notification dt.01.03.2005, which essentially dealt with the abatement. Thus, it is very categorical assertion that a value which is not part of the contract between the service provider and service recipient will have no relevance in the determination of the value of taxable service provided by the service provider. In this case, it is apparent that department has not been able to specify that they have charged much more than the contract value entered between VMICPL and SCCL. We note that in this case it is obvious that they have discharged service tax on the gross value in terms of contract entered between VMICPL and SCCL and therefore, free supply of diesel cannot be considered as additional consideration for including the same in the gross value. Moreover, there is no evidence that they have collected any excess amount or any service tax in respect of said free supply.
20. Therefore, we find that it has been rightly relied upon by the adjudicating authority in the fact of the case and therefore, the ratio of Bhayana Builders (supra) would be applicable. In view of the same, the department's appeal to the extent of non-inclusion of free supply of diesel is not correct and the grounds taken by VMICPL in their cross objections are sustainable and therefore, the impugned order to this extent is also sustainable.
(14)ST/30512, 30324 & 30342/2019 (C) Irregular Availment of Cenvat Credit:-
21. The adjudicating authority has dropped the demand raised on the appellant for availing Cenvat credit on MS angles, sheets, squares etc., used for repairs of tippers and dumpers, both on merit and on the grounds of limitation. The department has contested that the adjudicating authority has not appreciated the factual matrix inasmuch as the said goods were actually used for repairs of tippers and dumpers as these goods are essentially used in construction/erection activities.
22. Department has also relied on various judgments where such credits have been denied. We find that in the SCN, the only ground taken for denial of said credit in respect of certain inputs was that said inputs were falling under Chapter 72 and therefore, cannot be treated as capital goods. Whereas, the adjudicating authority has considered various submissions and was satisfied that the said goods can be considered as components, spares, etc., of the capital goods and since dumpers and tippers were capital goods, the goods were eligible for the said credit. We also find that there were only limited grounds taken in the SCN for denying the credit and no other grounds were taken and therefore, when it is no longer res integra that the said inputs can also be allowed under various other categories, including as parts, components, etc., used for manufacturing/fabricating/repairing of capital goods or as inputs used for providing output services, the conclusion drawn by the adjudicating authority on the basis of limited grounds taken in SCN for denial of credit, is correct and therefore, we do not find any infirmity in the impugned order on this count.
(D) Irregular availment of Cenvat credit without producing relevant documents:
23. Insofar as this issue is concerned, the adjudicating authority has already considered various documents produced before him in the course of adjudication and allowed credit only to the extent of documents he was satisfied with, whereas, confirmed demand in respect of remaining inputs. Further, we find that the demand of Rs.1,55,86,654/- has been dropped on the grounds of merit itself and therefore, the adjudicating authority has not quantified any amount for normal period or otherwise. We find that the satisfaction of the adjudicating authority that the said inputs which were (15) ST/30512, 30324 & 30342/2019 claimed to be capital goods were eligible or otherwise. Once he was satisfied and when there were no other grounds in the SCN to arrive at a decision contrary to what the adjudicating authority has arrive at, the grounds now being taken by the department would not be sustainable. There is also no ground to interfere with his observation. Since it was allowed on merit, there is no need to examine the same from the angle of limitation. We also find that in any case the issue of availment of credit, etc., was also subject matter of earlier SCNs and therefore, the department was well aware that they were taking certain credits in respect of certain inputs, however, despite that they have not raised the demand within the normal period. Therefore, on both these counts, there is no merit in the grounds taken by the department to oppose the dropping of demand to the extent dropped by the adjudicating authority in respect of Cenvat credit taken on certain inputs as capital goods. Therefore, impugned order to this extent is also upheld and the appeal of Revenue is held as not tenable.
24. Insofar as the input or input service credit taken without appropriate documents, we find that the adjudicating authority was already satisfied and has allowed only to the extent he was satisfied with the documents. We find that VMICPL has not been able to adduce any further tangible evidence that they were having sufficient documents to prove that they had taken credit only on the strength of eligible documents. Therefore, we do not find any merit in the objection of VMICPL as regards denial of credit, where the documents were not produced before the adjudicating authority. To that extent their appeal is not sustained on merit and appeal of Revenue is upheld.
(E) Service Tax on transportation activity under RCM:
25. In this case, the adjudicating authority has upheld the leviability of service tax to the extent it was relevant for the demand period and therefore, he has confirmed the demand of Rs.3,03,081/-. He has also dropped demand of Rs.4,32,521/- as time bar. We do not find that the grounds taken by the department are sustainable on the ground that extended period is rightly invokable. Since we have already discussed the issue of limitation based on prior knowledge of department, we hold that extended period cannot be invoked and we do not find any fault in the reasoning given by the adjudicating authority for dropping part of demand (16) ST/30512, 30324 & 30342/2019 on the grounds of limitation while upholding the part of demand. We also note that VMICPL has not contested this issue on merit, however, they have only taken ground of revenue neutrality that had they paid this tax they would have been eligible to take credit and therefore, demand is not sustainable in view of various judgments as under:
a) Dineshchandra R. Agarwal Infracon Pvt Ltd [2010 (19) STR 39 (Tri- Ahmd)]
b) CCE, Ahmedabad Vs Sagar Enterprises [2010 (18) STR 212 (Tri- Ahmd)]
c) CCE, Vadodara-II Vs Indeos ABS Ltd [2010 (254) ELT 628 (Guj)]
d) Precot Mills Ltd Vs CCE, Calicut [2014 (313) ELT 789 (Tri-Bang)]
e) CCE, Surat-II Vs Gujarat Glass Pvt Ltd [2013 (290) ELT 538 (Guj)]
f) Zenith Machine Tools Pvt Ltd Vs CCE, Belgaum [2010 (20) STR 554 (Tri-Bang)]
26. They have also contested the rate of service tax applied according to which the amount works out to Rs.4,60,136/- only for the entire period. We find some merit in his contention that there have been certain errors in calculating the amount of service tax. Further, we are not in agreement with the grounds of revenue neutrality taken for non-payment of tax. Thus, the demand upheld by the adjudicating authority is correct except to the extent of wrong application of rate of service tax prevailing during the relevant period which needs to be cross-checked and the confirmed demand can be reduced to that extent of mistaken calculation on account of wrong rate of service tax applied and thereafter, remaining amount shall be payable by VMICPL. Therefore, for this limited purpose, we remand the matter back to the adjudicating authority to redetermine the amount of service tax payable in view of the observations made above.
27. Further, as the entire demand being set aside, being a small amount on the grounds of non-payment of service tax on transportation and ineligible credit and the fact that no sufficient evidence on record to hold Mr. Ch. Vijay Sekhar Reddy responsible for all the non-compliance, penalty under section 78A on him is also not justifiable and is therefore, liable to be set aside.
(17)ST/30512, 30324 & 30342/2019
28. To sum up,
a) The appeal filed by the appellant is allowed except to the extent of computation of demand on denial of ineligible credit on input/input service due to non-production of eligible documents.
b) Appeal of Mr. Ch. Vijay Sekhar Reddy is allowed.
c) Appeal of Revenue is dismissed except to the extent of denial of ineligible credit by the adjudicating authority, which is upheld.
29. All the appeals are disposed of accordingly with consequential relief, if any, as per law.
(Pronounced in the Open Court on 20.06.2025) (A.K. JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) Veda