Custom, Excise & Service Tax Tribunal
Mettur Thermal Power Station vs Cce (St), Salem on 7 October, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
ST/286/2009
(Arising out of Order-in-Original No.1/2009 (Commissioner) dated 27.2.2009 passed by the Commissioner of Customs and Central Excise, Salem)
For approval and signature:
Honble Shri P.K. Das, Judicial Member
Honble Shri Mathew John, Technical Member
1. Whether Press Reporters may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether the Members wish to see the fair copy of the Order?
4. Whether order is to be circulated to the Departmental authorities?
Mettur Thermal Power Station Appellant
Vs.
CCE (ST), Salem Respondent
Appearance Shri Arvind P. Datar, Senior Advocate Assisted by Shri M. Ravindran, Advocate, for the Appellant Shri K.S.V.V. Prasad, Jt. Commr. (AR) for the Respondent CORAM Honble Shri P.K. Das, Judicial Member Honble Shri Mathew John, Technical Member Date of Hearing: 06.06.2013 Date of Pronouncement :
Final Order No. 40456/2013Per P.K. Das M/s. Mettur Thermal Power Station, Mettur Dam, the appellant herein, is a unit of Tamil Nadu Electricity Board, a Government of Tamil Nadu undertaking, engaged in the generation of electricity. During the course of generation of electricity, Fly Ash is generated as a by-product which was being dumped in the site. As per Order No. 248 dated 22.9.1997, as amended by Order GO (MS) 629 dated 29.7.1999, issued by Industry Department, Government of Tamil Nadu, the appellant supplied this Fly Ash to cement and asbestos sheet companies for manufacturing cement, bricks etc. and charged Rs.60/- per tonne on Dry Fly Ash and Rs. 40/- per Tonne on Wet Fly Ash. A Show Cause Notice dated 7.10.2010 was issued by the Commissioner of Central Excise, Salem proposing demand of service tax along with interest and penalty for the period May 2006 to June 2008 on this amount charged for the supply of Fly Ash under the category of Business Support Service. By the impugned order, the Commissioner confirmed the demand of service tax of Rs.1,42,29,961/- along with interest and extended cum-tax benefit and also granted relief from penalty under Section 76 and 78 in terms of Section 80 of the Finance Act, 1994.
2. The learned senior counsel submits that GO (MS) No. 629 dated 29.7.1999 was issued by the Government of Tamil Nadu providing guidelines for disposal and utilization of Fly ash. In terms of GO (MS) dated 29.7.1999, they collected the rates Rs.60/- and Rs.40/- per tonne on Dry Fly Ash and Wet Fly Ash respectively from cement and asbestos sheet companies. There is another provision in the said GO (MS) to supply fly ash free of cost for the purpose of laying roads, embankments or for any other construction activity. He submits that GO (MS) dated 29.7.1999 was issued as per the policy of Government of India and they are not rendering any service to anybody. In other words, they are disposing of Fly ash as per Government order and therefore there is no question of levy of service tax. He further submits that the Commissioner erroneously observed that it is an infrastructural support service to the cement companies. He further submits that the entire dispute is raised on the basis of a communication dated 29.3.2007 issued by the Deputy Commissioner of Central Excise, Anaimedu, Salem, showing these activities as service charges collected for fly ash removal. It is submitted that on the basis of that letter and the subsequent correspondences by the officers of the applicant mentioned these collections as service charges for disposal of Fly Ash. He also drew attention to the Bench page no. 46 of the compilation and submits that the amount so collected is revenue to the Tamil Nadu Electricity Board. He also drew the attention of the Bench that the cement companies and asbestos companies are paying procurement tax on fly ash procured as revealed from the GO (MS). The learned senior counsel placed a copy of the show-cause notice dated 17.4.2012 issued to the sister unit at Tuticorin proposing demand of Central Excise duty on such Fly ash on the ground that it is a manufactured product. He also submits that there is no suppression of fact with intent to evade payment of service tax and it is also revealed from the show-cause notice issued to the sister unit that there is a dispute whether tax is leviable or excise duty is payable and no penalty was imposed invoking Section 80 of the Finance Act, 1994 and therefore extended period cannot be invoked. He submits that the Commissioner has not given any finding on how he arrived at the conclusion that the activity of the appellant is classifiable as infrastructural service as defined under Section 65(104)(c) of Finance Act, 1994.
3. On the other hand, the learned Authorized Representative on behalf of the Revenue reiterates the findings of the Commissioner. He submits that there are several correspondences between the department and the appellant from which it is very clear that the appellant repeatedly mentioned that the amount was collected as service charges. In this context, he particularly drew the attention of the Bench to letter dated 27.3.2008 to show that this amount was collected as service charges. He also submits that as revealed from the Gazette of India dated 14.9.1999, these Dry Fly Ash could not be sold and therefore the rates were cost of services. He placed a letter dated 10.5.2007 of the Chief Engineer of Mettur Thermal Power Station stating that service charges collected towards disposal of Fly Ash was for providing infrastructural support service etc. It is his contention that the appellant rendered the service to the cement companies for providing infrastructural support to collect fly ash. During the investigation, the officers unearthed evidences to prove that collection of rates was not for sale of fly ash but for providing infrastructural support as evident from the correspondences and hence extended period has been rightly invoked.
4. After hearing both the sides and on perusal of records, it is seen that Fly ash generated at the Thermal Power Plant containing several heavy metals, caused a potential threat to the environment when disposed of in open areas or dumped into waterbodies. Since Fly ash can be used as raw material for manufacture of building materials, such as cement industry, brick manufacturing units etc. Government of India announced various measures all over the country to promote the use of Fly ash in building materials in order to avoid disposal of Fly ash in open areas which would affect the environment.
4.1 Ministry of Environment & Forest, Government of India issued a draft Notification No. 453 (E) dated 22.5.1998 under Rule 5(3) of the Environment (Protection) Act, 1986 inviting objections and suggestions from all persons likely to be affected and thereby to protect the environment, conserve top soil and prevent dumping and disposal of Flyash, discharged from coal or lignite based thermal power plant.
4.2 The Government of Tamil Nadu, issued Policy decision vide Order G.O. No. 248 dated 22.9.1997 for utilization of Fly ash in Tamil Nadu. For the purpose of proper appreciation, the relevant portion of the G.O. No. 248 dated 22.9.1997 is reproduced below:-
4. Considering the adverse impact of Fly ash on the environment if released and dumped in pits and other related problem like huge requirement of land for ash ponds etc. and taking into account the various representations received and after examining carefully all aspects, the Government announces the following policy / guidelines to help promote fly ash to brick/building materials and other products manufacturing units:-
i) Tamil Nadu Electricity Board will supply Fly Ash to cement companies at the rate of Rs.60/- per tone and to manufacture of bricks and associated products, road, building etc. at the rate of Rs.10/- per tonne.
(ii) The sales tax on the Fly ash made brick is now levied at 4%. It has now been decided to reduce the sales tax from 4% to 3%. Commercial Tax and Religious Endowment Department will issue necessary Notification in this regard.
(iii) The Tamil Nadu Electricity Board will arrange to collect the Fly ash in a proper manner and make arrangements for proper storage in silos and for easy collection by the buyers either mechanically or manually.
(iv) Tamil Nadu Electricity Board will organize two shift operations so that the customers lorries do not have to wait for a long time. 4.3 The above order was subsequently amended by GO (MS) No.629 dated 29.7.99 insofar as Para 4(i) of earlier order was substituted, which is reproduced below:-
4(i)(a) The top soil shall not be excavated within a radius of 50 km from Thermal Power Plants.
(b) Fly ash shall be supplied free of cost for the purpose of manufacturing ash based building materials such as concrete blocks, bricks, panels or any other materials or for construction of roads, embankments or for any other construction activity.
(c) Supply of fly ash to cement and asbestos sheet companies at the following rates, being followed at present, shall continue Dry Fly ash : Rs.60 per tone Wet Fly ash : Rs.40 per tonne for the first 5000 tonnes off take per year and Rs.20/- per tone for the balance off take over and above 5000 tonnes per year
(d) Procurement tax exemption on fly ash it hereby granted to fly ash users except to cement and asbestos manufacturing companies. (Emphasis by us) 4.4 Ministry of Environment and Forest, Government of India vide final Notification No. S.D. 763 (E) dated 14.9.1999 issued under Section 5 of the Environment (Protection) Act, 1986 and in pursuance of order dated 25.8.1999 of the Honble Delhi High Court in W.P. No. 2145/99 (in the matter of Centre for Public Interest Litigation, Delhi Vs. Union of India), issued direction in detail on disposal of Flyash by Thermal Power Plants, all coal or lignite based Thermal Power Plant. One of the directions of the said Notification is relevant in the present case, as under:-
Every coal or lignite based thermal power plant shall make available ash, for at least ten years from the date of publication of this notification, without any payment or any other consideration, for the purpose of manufacturing ash-based products such as cement, concrete blocks, bricks, panels or any other material or for construction of roads, embankments, dams, dykes or for any other construction activity (Emphasis by us) 4.5 Ministry of Environment and Forest, Government of India, issued a draft Notification S.O. 2623 (E) dated 6.11.2008 under Section 3 and 5 of the Environment (Protection) Act, 1986 proposing to make further amendment of earlier Notification S.O. 763 (E) dated 14.9.1999. In the said draft notification, all coal or lignite based thermal power station would be free to sell Fly ash to the user agencies subject to the condition as specified therein. It is also notified in the draft notification that the amount from sale of Fly ash would be made in the following manner:-
The amount collected from sale of fly ash and fly ash based products by coal and/or lignite based thermal power stations or their subsidiary or sister concern unit, as applicable should be kept in a separate account head and shall be utilized only for development of infrastructure of facilities and promotion / facilitation activities for use of fly ash until 100 percent fly ash utilization level is achieved. Thereafter as long as 100% fly ash utilization levels are maintained, the thermal power station would be free to utilize the amount collected for other development programmes also. In case, there is a reduction in the fly ash utilization levels in the subsequent year(s), the use of financial return from fly ash shall get restricted to development of infrastructure or facilities and promotion or facilitation activities for fly ash utilization until 100 percent fly ash utilization level is again achieved and maintained
5. It is seen that as per Notification dated 14.9.1999, issued by Ministry of Environment and Forest, Government of India, thermal power plants are not permitted to receive any payment or any other consideration for supply of Fly ash at least ten years and Draft Notification dated 6.11.2008 allowed to sell Fly ash. On the other hand, Government of Tamilnadu issued order dated 29.7.1999 before the issue of the above Notification dated 14.9.1999 directing the Thermal Power Plants to dispose of Fly ash by charging a rate in respect of supply to cement and asbestos sheet companies and free of cost to others. In this context, Chief Engineer (Designs), Tamilnadu Electricity Board issued order vide Per B.P. (CH) No. 401 dated 11.12.2003, for collection of rates as service charges as they cannot sell Fly ash products. As per the said order and direction of Tamilnadu Electricity Board, in the present case, Superintending Engineer issued order for collection and removal of Fly ash from Mettur Thermal Power Station. It appears from Order No. SE/M.II/MTPS/EE-O&ASH/F.56B/10/260/2006 dated 31.8.2006 issued by the appellant to M/s. RBS Ready Mix Concrete, for collection and removal of WET/DRY flyash from Mettur Thermal Power Station, Mettur Dam, service charges of wet/dry Flyash would be collected as per the charges fixed by the Board from time to time.
6. By Notification No. 15/2006-ST dated 24.4.2006, service tax was levied on Support Services of Business or Commerce with effect from 1.5.2006. Section 65(104c) of Finance Act, 1994 defined as under:-
Support Services of Business or Commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.
Explanation For the purposes of this clause, the expression infrastructural support services includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security.
Section 65(105)(zzzq), Taxable Service means any service provided or to be provided to any person, by any other person, in relation to support services of business or commerce, in any manner.
7. The object of levy of Business Support Service as stated by the Joint Secretary (TRU) vide letter dated 28.2.2006 is as under:-
Business Support Services: Business entities outsourcing a number of services for use in business or commerce. These services include transaction processing, routine administration or accountancy, customer relationship management and telemarketing. There are also business entities which provide infrastructural support such as providing instant offices along with secretarial assistance known as Business Centre Services. It is proposed to tax all such outsourced services. If these services are provided on behalf of a person, they are already taxed under Business Auxiliary Service. Definition of support services of business or commerce gives indicative list of outsourced services.
8. After introduction of service tax on Business Support Service, the Deputy Commissioner (Preventive), Anaimedu, Salem issued a letter dated 29.3.2007 to the Chief Engineer, Mettur Thermal Power Station, the appellant herein, to provide the details of service charge collected for fly ash removal. The appellant provided the details of service charge collected for removal of fly ash.
9. A show-cause notice dated 7.10.2008 was issued for the period 1.5.2006 to 30.6.2008 proposing demand of tax of Rs.1,59,81,395/- along with interest and penalty on the said service charges under the category of Business Support Service. It has been alleged that fly ash is collected by the customers from the silo / ash / dyke of the Thermal Plant and the customers are paying service charge for the collection of fly ash to the appellant and the service charge is for providing infrastructure, water, lighting, road maintenance etc. It is further alleged that the service charges received by the appellant from the customers is for providing them the infrastructural support, which the customer subsequently utilized in their industry for production.
10. The appellant in reply to the show-cause notice categorically denied the allegations. It is submitted that they have collected the rates as per the order of the Government of Tamil Nadu and it cannot be a service charge. It is also stated that the expression service charge as mentioned in their letters and in the order cannot be construed to imply that the appellant had rendered Business Support Service to the cement / asbestos manufacturing companies for supply of the fly ash. It is also contended that the demand of tax is barred by limitation.
11. The other aspect of the matter, which is required to be mentioned at this stage is that the learned senior counsel at the time of hearing before the Tribunal placed a copy of Show Cause Notice dated 17.4.2012 to show that there is a doubt in the mind of the authority, either the Service Tax or Central Excise duty would be levied on clearances of Fly ash. The said Show Cause Notice was issued by the Joint Commissioner of Central Excise, Tirunelveli to their sister unit M/s. Tuticorin Thermal Power Station, Tuticorin proposing demand of Central Excise duty along with interest and penalty on clearance of Flyash during the period 1.3.2011 to 31.8.2011. It appears from the said Show Cause Notice that Fly ash attracts Tariff rate of 10% of excise duty. Central Excise Duty Exemption on Fly Ash under Notification No. 76/86-CE dated 10.2.1986 has been withdrawn vide Notification No.17/2011-CE dated 1.3.2011. With effect from 1.3.2011, as per Notification No.1/2011-CE dated 1.3.2011 (Sl. No. 27), Fly Ash attracts 1% duty without CENVAT credit facility. A general effective rate of 5% is also prescribed without any condition vide Notification No.2/2011-CE dated 1.3.2011 (Sl. No. 14). However, in the present case, we are concerned with levy of service tax on clearance of Fly ash.
12. We find that the scope of levy of Business Support Service was clarified by Ministry letter dated 28.2.2006 as referred above. It is stated that business entities are outsourcing a number of services for use in their business or commerce and tax would be levied on all outsourced services. It is also stated that business entities are providing infrastructural support such as providing instant offices along with secretarial assistance known as Business Centre Service. In the present case, we do not find any material that the cement and asbestos sheet companies outsourced any service from the appellant for use in business or commerce. On the other hand, the appellant had also not provided any service to the cement and asbestos sheet companies in the nature of secretarial assistance or in any manner, for use in their business or commerce. It is seen from the order dated 31.8.2006 issued by the appellant to the cement and asbestos sheet companies for collection and removal of wet/dry Fly ash, that the Fly ash as available should be collected by the companies directly from the SILO/ASH DYRE. The companies have to make its own arrangement for collection and transporting of Flyash. The companies will have to bring its own labour for collection of fly ash, which will be under its own supervision and direction by the officers deputed by the appellant. There is no indication that the appellant had been providing any service to the company for collection and removal of Fly ash. It is apparent from the order that the appellant is supplying Fly ash to the companies, who are collecting it from the site on payment of rates as per Government order.
13. The main contention of the Revenue is that the appellant rendered support service of business or commerce to their customers who have collected fly ash and received a service charge from them for providing infrastructure, water, lighting, road maintenance etc. which is in conformity with the definition of support service of business or commerce. The learned AR submits that as evident from the letter dated 10.5.2007, the appellant rendered the service to the cement / asbestos manufacturing companies by way of providing infrastructure, water, lighting, road maintenance etc. at the premises of silos for the purpose of collection of the fly ash, which was used in the business of the said manufacturing company.
14. We have already discussed above that the Tamil Nadu Electricity Board issued order dated 11.12.2003 for collection of the rates as service charges in view of the Notification issued by the Central Government directing not to receive any payment or any consideration for fly ash and the order issued by State of Tamil Nadu is to charge rates. Subsequently, the appellant also issued orders and mentioned the rates as service charge. After introduction of levy of service tax on Business Support Service as on 1.5.2006, the Deputy Commissioner of Central Excise, by letter dated 29.3.2007 requested the appellant to furnish details of service charges collected for Fly ash removal for the last five years from 2002 03. So the submission of the learned Senior Advocate that the dispute was raised on the basis of letter dated 29.3.2007 of the Deputy Commissioner of Central Excise showing the activities as service charges, is factually incorrect. The appellant in the statement of Fly ash Generation / Utilisation and Disposal for the Period April 2005 to march 2006 mentioned the total amount as Revenue to Board. But, the Chief Engineer of Mettur Thermal Power Plant by his letter dated 10.5.2007 informed the Deputy Commissioner of Central Excise that the service charges is collected towards the disposal of fly ash for the infrastructure, water, lighting and road maintenance. The adjudicating authority on the basis of the said letter dated 10.5.2007 observed that the appellants are rendering certain facilities to their customers for lifting the fly ash from their premises, which is being charged as service charges. These facilities are indispensible for the customers to lift the fly ash from the premises of the appellant for further use as raw material in the production of their finished goods.
15. On perusal of the notifications issued by the Central Government, orders issued by the Government of Tamil Nadu directing the manner of collection and removal of Fly ash on a particular rate to the cement and asbestos sheet companies, we are unable to accept the finding of the adjudicating authority. The expression any service provided or to be provided to any person, by any other person in Section 65(105)(zzq) makes it clear that a person would provide a service to other persons. The Honble Bombay High Court in the case of Indian National Shipowners Association Vs. Union of India & Others 2009 (14) STR 289 (Bom.) observed as under:-
From the above judgments the inevitable conclusion that follows is that the services rendered by a person must have a direct or a proximate relation to the subject matter of the taxing entry and the context in which the words in relation to are used has to be borne in mind to judge the extent of the scope of an entry which may be of wide amplitude. In the circumstances of the case services having remote connections cannot be included in entry (zzzy) merely on the strength of the words in relation to.
In the present case, we have already stated above that the orders issued by the appellant to the cement and asbestos sheet companies do not disclose that the appellant provided any service to the companies. The appellants as per order of Government of Tamil Nadu removed the Fly ash from the site and collected rate as prescribed therein from the said companies. At the best, the amount collected by supply Fly ash utilized for water, lighting, road maintenance etc. in their site as referred in letter dated 10.5.2007 appears to be in conformity with the utilization of Fly ash as mentioned in Draft Notification dated 6.11.2008 issued by the Central Government, wherein the Thermal Power Stations are permitted to sell Fly ash. There is no mention in the contract between the appellant and cement and asbestos sheet companies that the appellant is providing any service to them.
16. In our considered view, the activity of collection and removal of Fly ash as per rate of the order of Government of Tamil Nadu would not constitute infrastructural support service under the definition of Support Service of Business or Commerce. We have noticed that Government of India, Ministry of Environment and Forests issued Notification dated 14.9.1999 to the effect that Fly ash should be supplied free of cost. Subsequently, by notification dated 6.11.2008, issued by Ministry of Environment and Forest, Thermal Power Stations are permitted to sell Fly ash to the user agencies. It makes it clear that the consideration received by the appellant from the cement and asbestos sheet companies for supply of Fly ash seems to be for sale of fly ash. In our opinion, it is not for any service provided to the persons taking delivery of Fly ash, notwithstanding the name under which, it is collected. Hence, the demand of service tax along with interest is not sustainable.
17. We also find force in the submission of the learned Senior Advocate on limitation insofar as the adjudicating authority had granted relief from penalty under Section 76 and 78 of Finance Act, 1994 by invoking Section 80 of the said Act, 1994. As the demand of service tax is not maintainable on merit, there is no need to discuss on limitation in detail.
18. In view of the above discussion, we set aside the impugned order. The appeal filed by the appellant is allowed with consequential relief, if any.
(Pronounced in open court on ___________)
(Mathew John) (P.K. Das)
Technical Member Judicial Member
Rex
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