Custom, Excise & Service Tax Tribunal
Tirupati Build Con P Ltd vs Commissioner, Cgst & Central Excise, ... on 1 August, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO.3
Service Tax Appeal No. 51052 Of 2020
[Arising out of Order-in-Original No. 09/COMMR/ST/JBP/2019 dated 17.03.2020
passed by the Commissioner of Central Goods, Service Tax, Central Excise &
Customs, Jabalpur]
M/s Tirupati Build-Con Private Limited : Appellant
Opposite Burhar Railway Station, Station Road
Burhar, Distt. Shahdol-484110
Vs
Commissioner, Central Goods Service : Respondent
Tax & Central Excise, Customs, Jabalpur
GST Bhawan, Mission Chowk, Napier Town
Jabalpur, M.P.
APPEARANCE:
Shri Mukul Gupta, Shri Prateek Gupta and Shri Bharat Agarwal, Advocates
the Appellant
Shri Aejaz Ahmad, Authorized Representative for the Respondent
CORAM :
HON'BLE MS. BINU TAMTA, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINALORDER No. 51101/2025
Date of Hearing:25.07.2025
Date of Decision:01.08.2025
SANJIV SRIVASTAVA
This appeal is directed against the Order-in-Original No.
09/COMMR/ST/JBP/2019 Dated: 17.03.2020 passed by the
Commissioner Central G S T, Central Excise & Customs Jabalpur. By
the impugned order following has been held, -
―ORDER
A. In respect of Para 1:-
(I) I determine and confirm the amount of late fee of
Rs.28,200/- (Rupees Twenty Eight Thousands Two Hundred
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Only) for late filing of service tax returns for the 04/2016 to
06/2017 and order for its recovery from the Noticee under
Section 70(1) of the Finance Act, 1994 read with Section 174 of
CGST Act, 2017.
B. In respect of Para 2: -
(I) I determine and confirm the amount of interest of
Rs.1,22,937/- (Rupees One Lakh Twenty Two Thousands Nine
Hundreds Thirty Seven Only) on late payment of service tax and
order for its recovery from the Noticee under Section 75 of the
Finance Act, 1994 read with Section 174 of CGST Act, 2017.
C. In respect of Para 3: -
(I) I determine and confirm the amount of Service tax of
Rs.4,12,960/- (Rupees Four Lakhs Twelve Thousands Nine
Hundred Sixty Only) on royalty amount, for the period
04/2016 to 06/2017 and order for its recovery from the
Noticee under Section 73(2) of the Finance Act,1994 read
with Section 174 of CGST Act, 2017.
(II) I order recovery of interest, at appropriate rate, on
demand of Service tax of Rs.4,12,960/- from the Noticee
under Section 75 of the Finance Act, 1994 read with
Section 174 of CGST Act, 2017.
(III) impose penalty of Rs.4,12,960/- (Rupees Four Lakhs
Twelve Thousands Nine Hundred Sixty Only) under Section
78(1) of the Finance Act,1994 read with Section 174 of
CGST Act. 2017. However, the Noticee is given an option
to pay only 25% of this penalty amount subject to
condition that entire amount of Service tax and interest
along with 25% penalty under Section 78(1) are paid
within thirty days of communication of this order.
D. In respect of Para 4:-
(I) I determine and confirm the amount of Capital Goods
credit of Rs.93,59,799/- (Rupees Ninety Three Lakhs Fifty
Nine Thousands Seven Hundred Ninety Nine Only) for the
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period 04/2014 to 06/2017 and order for its recovery from
the Noticee under Section 73(2) of the Finance Act,1994
read with Section 174 of CGST Act, 2017.
(II) I order recovery of interest, at appropriate rate, on
demand of Capital Goods credit of Rs.93,59,799/- from the
Noticee under Section 75 of the Finance Act, 1994 read
with Section 174 of CGST Act, 2017.
(III) I impose penalty of Rs.93,59,799/- (Rupees Ninety Three
Lakhs Fifty Nine Thousands Seven Hundred Ninety Nine
Only) under Section 78(1) of the Finance Act,1994 read
with Rule 15(3) of the Cenvat Credit Rules, 2004 and
Section 174 of CGST Act, 2017. However, the Noticee is
given an option to pay only 25% of this penalty amount
subject to condition that entire amount of Cenvat credit
and interest along with 25% penalty under Section 78(1)
are paid within thirty days of communication of this order
E. In respect of Para 5: -
(I) I determine and confirm the amount of Rs.29,55,763/-
(Rupees Twenty Nine Lakhs Fifty Five Thousands Seven
Hundred Sixty Three Only) which has been taken or input
services and order for its recovery from the Noticee under
Section 73(2) of the Finance Act,1994 read with Section
174 of CGST Act, 2017
(II) I order recovery of interest, at appropriate rate, on
demand of Rs. 29,55,763/- from the Noticee under Section
75 of the Finance Act, 1994 read with Section 174 of CGST
Act, 2017.
(III) I impose penalty of Rs.29,55,763/- (Rupees Twenty Nine
Lakhs Fifty Five Act,1994 read with and Section 174 of
CGST Act, 2017. However, the Noticee is given an
Thousands Seven Hundred Sixty Three Only) under Section
78(1) of the Finance Cenvat credit and interest along with
73(2) of the Finance Act,1994 read with Section 174 of
CGST Act, 2017
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F. In respect of Para 6: -
(I) I determine and confirm the amount of Service tax of
Rs.1,17,09,035/- (Rupees One Crore Seventeen Lakhs
Nine Hundred Thirty Five Only) on works contract
service, for the period 04/2014 to 06/2017 and order
for itsits recovery from the Noticee under Section 73(2)
of the Finance Act,1994 read with Section 174 of CGST
Act, 2017.
(II) I order recovery of interest, at appropriate rate, on
demand of Rs.1,17,09,035/- the Noticee under Section
75 of the Finance Act, 1994 read with Section 174 of
CGST Act, 2017
(III) I impose penalty of Rs.1,17,09,035/- (Rupees One
Crore Seventeen Lakhs Nine Hundred Thirty Five Only)
under Section 78(1) of the Finance Act,1994 read with
and Section 174 of CGST Act, 2017. However, the
Noticee is given an option to pay only 25% of this
penalty amount subject to condition that entire amount
of Service tax and interest along with 25% penalty
under Section 78(1) are paid within thirty days of
communication of this order.
21. The Show Cause Notice No. 01/Commr/ST/Audit/2019-20
dated 31.07.2019 is disposed of, in the above terms.‖
2.1 Appellant is holding Service Tax Registration No.
"AACCTO370RSD001", and is engaged in construction of roads & other
civil constructions and providing taxable service i.e. "works contract
service" as defined under Section 65B(54) of Chapter V of the Finance
Act, 1994. On the GTA and Security Service appellant as service
recipient is required to pay service tax under Reverse Charge
Mechanism (RCM). They are also availing Cenvat credit on input
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Service Tax Appeal No. 51052 Of 2020
services and capital goods under the provisions of the Cenvat Credit
Rules. 2004.
2.2 During the courses of audit covering the period from 04/2017 to
06/2017 following was observed:
(I) Non-payment of late fee of Rs.28,200/- for late filing of
service tax returns for the period 04/2016 - 09/2016 to
04/2017 - 06/2017 hereby alleging contravention of the
provisions of Section 70 of the Finance Act, 1994 read
with Rule 7C of the Service Tax Rules, 1994.
(II) Short payment of interest of Rs.1,22,937/- on late
payment of service tax for the period_04/2016 to
03/2017 thereby alleging contravention of the
provisions of Section 75 of the Finance Act, 1994.
(III) Non-payment of service tax of Rs.4,12,960/- on 'royalty
paid to State Government Mineral Department during
the period 04/2016 to 06/2017 under reverse charge
mechanism (RCM) thereby alleging contravention of the
Notification No. 6/2016-ST dated 18.02.2016 and
30/2012-ST dated 20,06,2012, as amended
(IV) Wrong availment of cenvat credit of Rs.93,59,799/- on
capital goods used exclusively in providing exempted
service during the period 04/2014 to 06/2017 thereby
alleging contravention of the provisions of Rule 4 and
6(4) of the Cenvat Credit Rules, 2004
(V) Non-Payment/ Non reversal of amount of
Rs.29,55,763/- on input service credit availed as
required under Rule 6 of Cenvat Credit Rules, 2004
during the period 04/2014 to 06/2017 thereby alleging
contravention of the provisions of Rule 6 and 6(3A) of
the Cenvat Credit Rules. 2004.
(VI) Non-payment of service tax of Rs.1,17,09,035/- on
works contract service' during the period 04/2014 to
06/2017 thereby alleging contravention of the
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Service Tax Appeal No. 51052 Of 2020
provisions of Section 67, 68 and 70 of the Finance Act,
1944.
2.3 A Show Cause Notice dated 31.07.2019 was issued to the
Appellant asking them to show cause as to why:
A. In respect of Para 1 of the Final Audit Report: -
(I) Late Fee amounting to Rs.28,200/- for late filing of service
tax returns for the period Apr 2016 to June 2017 should not be
demanded and recovered from them under Section 70(1) of the
Finance Act, 1994.
B. In respect of Para 2 of the Final Audit Report: -
(I) The amount of interest of Rs.1,22,937/- on late payment of
service tax should not be demanded and recovered from them
under Section 75 of the Act.
C. In respect of Para 3 of the Final Audit Report: -
(I) Service tax amounting to Rs.4,12,960/- for the period
04/2016 to 06/2017, should not be demanded and
recovered from them under proviso to sub-section (1) of
Section 73 of the Act.
(II) Interest at appropriate rate should not be recovered from
them under Section 75 of the Act, on the service tax so
demanded.
(III) Penalty should not be imposed upon them under Section
78 of the Act, for non- payment/ short payment of service
tax in violation of the provisions of the Act and the rules
framed there under with intention to evade payment of
service tax.
D. In respect of Para 4 of the Final Audit Report: -
(I) Capital Goods credit amounting to Rs.93,59,799/- for the
period 04/2016 to 06/2017, should not be disallowed and
recovered from them under Rule 14(1)(i) of the CENVAT
Credit Rules, 2004 read with proviso to Sub-Section (1) of
Section 73 of Finance Act, 1994.
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Service Tax Appeal No. 51052 Of 2020
(II) Interest at appropriate rate should not be recovered from
them under Section 75 of the Act on the amount of
CENVAT credit so disallowed.
(III) Penalty should not be imposed upon them under provisions
contained in Rule 15(3) of the Cenvat Credit Rules, 2004
read with Section 78 of the Act for wilfully suppressing the
facts with intention to evade payment of service tax equal
to the amount of CENVAT credit wrongly availed and
utilized.
E. In respect of Para 5 of the Final Audit Report: -
(I) Amount of Rs.29,55,763/- which has been taken on input
services should not be recovered from them under the
provisions contained in explanation III of sub-rule 3(D) of
rule 6 and Rule 14 of the Cenvat Credit Rules, 2004 read
with proviso to Sub-Section (1) of Section 73 of Finance
Act,1994.
(II) Interest at appropriate rate should not be recovered from
them under Section 75 of the Act on the amount so
recovered.
(III) Penalty should not be imposed upon them under Section
78 of the Act, for contravention of the provisions Act and
the rules framed there under with intention to evade
payment of service tax equal to the amount required to be
paid under Rule 6 of the Cenvat Credit Rules, 2004.
F. In respect of Para 6 of the Final Audit Report: -
(I) Service Tax amounting to Rs.1,17,09,035/- for the period
04/2014 to 06/2017 should not be demanded and
recovered from them under proviso to sub section (1) of
Section 73 of the Act.
(II) Interest at appropriate rate should not be recovered from
them under Section 75 of the Act on the service tax so
demanded
(III) Penalty should not be imposed upon them under Section
78 of the Act, for non- payment/ short payment of service
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tax in contravention of the provisions Act and the rules
framed there under with intention to evade payment of
service tax.
2.4 The show cause notice has been adjudicated as per the order in
original referred in para 1 above. Aggrieved appellant has filed this
appeal.
3.1 We have heard Shri Mukul Gupta, Shri Prateek Gupta and Shri
Bharat Agarwal, Advocates for the appellant and Shri Aejaz Ahmad,
Authorized Representative for the revenue.
3.2 Learned Counsel for the appellant submits that,-
Notice for Departmental audits not legally valid as not covered
by Section 72, 72A & 82 of the Finance Act, 1994.
Proceedings initiated for the second time are time barred and is
an exercise of excessive use of delegated power.
Invocation of extended period of limitation not justified s
essential elements do not exist.
Issue of taxability of royalty is no longer res-integra and covered
by the decision in the case of S R Traders.
Cenvat Credit of Rs 93,59,799/- on capital goods cannot be
denied or varied for the reason that these capital goods have
been use for providing taxable and non taxable services.
As the appellant has provided both taxable and non taxable
services demand made in terms of Rule 6 for recovery of the
Cenvat Credit of Rs 29,55,763/- on input services cannot be
justified.
The services classified under the work contract service are
exempt as per the mega exemption notification.
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No interest and penalty is imposable as the demands do not
survive.
3.3 Authorized representative reiterated the findings recorded in the
impugned order.
4.1 We have considered the impugned order along with the
submissions made in appeal and during the course of arguments. From
the submissions made before us it is evident that appellant in this
appeal is pressing against the demand confirmed against them, by
invoking extended period of limitation in respect of,-
(i) Royalty charges paid by them against stone quarrying mines to
the Government of Madhya Pradesh,
(ii) Denial of CENVAT Credit in respect of Capital Goods availed by
them.
(iii) Denial of Cenvat Credit in respect of input services.
(iv) Demand of the service tax on work contract services.
Royalty charges paid by them against stone quarrying mines to
the Government of Madhya Pradesh
4.2.1 Impugned order records as follows for confirming this demand:
10.2 Now, in this regard, I would like to quote here the relevant
provisions of Chapter V of the Finance Act, 1994 and Rules,
Notification & Circulars issued there under:
(i) By virtue of Section 109 (1) of the Finace Act, 2015 read with
Section 66 D (a) 9iv) of the Finance Act, 1994, as amended, any
service provided by the Government or Local authority to a
business entity was made chargeable to Service tax, with effect
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Service Tax Appeal No. 51052 Of 2020
from 01.04.2016 vide Notification No. 06/2016-ST dated
18.02.2016.
(ii) Assigning he right to use a natural resource by the mode
granting permission to draw water from natural source for use and
such activities characterized by a consideration in the form of
"Royalty', have therefore been rendered as taxable with effect from
01.04.2016, for which suitable amendment in Rule 2(1)(d)(i)(E) of
the Service Tax Rules, 1994, was also brought forth vide
Notification No.17/2016-ST dated 01.03.2016.
(iii) The Central Government vide Notification No.22/2016-ST
dated 13.04.2016 and by way of the insertion of clause 61 in
Notification No.25/2012-ST dated 20.06.2012 has exempted such
services of the Government that was provided prior to 01.04.2016.
Further by virtue of entry at SI. No.6 of the Table in Notification
No. 30/2012-ST dated 20.06.2012, as amended vide Notification
No. 18/2016-ST dated 01.032016, the liability to pay Service Tax
on any such service provided by Government shall be on the
service recipient on 100% reverse charge basis.
(iv) Section 66B of the Finance Act, 1994, as amended,
mandates for the levy of a tax at the rate of fourteen per cent on
the value of al services, other than those services specified in the
negative list, provided or agreed to be provided in the taxable
territory by one person to another and collected in such manner as
may be prescribed
(v) Section 67(1)(i) ibid; mandates that where Service tax is
chargeable on any taxable service with reference to its value, then
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Service Tax Appeal No. 51052 Of 2020
such value shall, in a case where the provision of service is for a
consideration in money, be the gross amount charged by the
service provider for such service provided or to be provided by him.
(vi) Section 67(3) ibid; mandates that the gross amount
charged for the taxable service shall include any amount received
towards the taxable service before, during or after the provision of
such service.
(vii) Therefore, with effect from 01.04.2016, the services of
'assignment of right to use a natural resource' rendered by the
Government to category of person other than farmer stands
declared as taxable, because it does not fall in the "Negative List of
Services" as prescribed under Section 66D ibid.
(viii) A fact that fortifies the taxability of such services rendered
by the Government is that services provided prior to 01,04,2016
were specifically exempted vide Notification No.22/2016-ST dated
13.04.2016 and by way of the insertion of clause 61 in Mega
Notification No.25/2012-ST dated 20.06.2012.
(ix) This issue of the taxability of the services rendered by the
thereto, which explicitly discussed that "any activity undertaken by
Government or a local Circular No. 192102/2016-Service Tax dated
13/04/2016 at SI.No.5 in the Table annexed lo the assignment of
the right to use a natural resource had also Government with
regard been clarified in CBEC performing such activities is liable to
Service tax. It is immaterial whether such activities are undertaken
as a statutory or mandatory requirement under the law and
irrespective of whether the amount charged for such service is laid
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Service Tax Appeal No. 51052 Of 2020
down in a statute or not. As long as the payment is made (or fee
charged) for getting a service in return, it is to be regarded as a
consideration for that service and taxable irrespective of by what
name such payment is called. It is also clarified that service tax is
leviable on any amount, in lieu of any permission or license granted
by the Government or a local authority. The allocation of natural
resources by the Government or a local authority to categories of
persons other than individual farmers would be leviable to Service
Tax. In terms of Rule 2(1)(d)(E) of the Service Tax Rules, 1994,
service tax is liable to be recovered from the service recipients in
respect of the services provided by the Government or a local
authority under Reverse Charge Mechanism. In view of the above,
it is immaterial, by whatever name the payment is made to the
State Government against the services rendered by way of
assignment of right to use natural resources as mining lease. I
therefore do not agree with the submission of the Noticee and also
the case cited by them being specific to those respective cases are
found to be not relevant here in present context.
10.3 I find that the period involved in the instant issue is from
04/2016 to 06/2017. In viewof the aforesaid provisions, it is held
that the Noticee is legally required to pay service tax
ofRs.4,12,960/- (Service Tax Rs.3,85,430/-, SBC Rs.13,765/- & KKC
Rs.13,765/-), alongwith interest, on royalty amount of Rs.
27,53,067/- paid to the State Government for miningof Minor
Mineral namely '27-Stone Crusher Gitti" under proviso to sub-
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Service Tax Appeal No. 51052 Of 2020
section (1) of Section73 of the said Act read with Section 174 of
CGST Act, 2017. Held accordingly.
4.2.2 Against the above findings the contention of the appellant before
us is that undisputedly the appellant was quarrying stones from the
designated mines allocated to them by Assignment Order No 414/
Mineral/2008/Sub Leas/ Umaria dated 17.06.2008, granting
them the mining right for 10 years and another mining lease
agreement for the period of 10 years from 04.12.2007 was executed
and registered on 27.02.2008. As both the mining lease agreements
were registered prior to 01.04.2016, the royalty charges paid in terms
of these agreements will be exempted even if these amounts are paid
after 01.04.2016 as has been held by the CESTAT.
4.2.3 We find that CESTAT has in case of S R Traders (Final Order No
50660/2023 in Service Tax Appeal No 54002 of 2018 held as follows:
3. Section 66D of the Finance Act, 19942 which contains the list
of negative services, includes services by Government and local
authority excluding services mentioned in clauses (i), (ii), (iii)
and (iv). It needs to be noted that prior to April 01, 2016, under
clause (iv) only „support service‟, other than services covered
under clauses (i) to (iii) provided to business entities was
mentioned, but ―support service‟ from April 01, 2016 was
substituted by ―any service‟. Thus, w.e.f. April 01, 2016, the
service provided to the appellant became taxable.
4. Though the agreements were entered prior to April 01, 2016
in the present case, the contention of the Department is that
since the payment under the agreements were to be made after
April 01, 2016, the appellant would be liable to pay service tax.
5. This precise issue came up before a Bench of the Tribunal in
M/s. Madhya Pradesh State Mining, Corporation Limited vs.
Principal Commissioner, CGST & Central Excise, Bhopal (M.P.)
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Service Tax Appeal No. 51052 Of 2020
[2023 (4) TMI 1075-CESTAT New Delhi] . In regard to short
payment of service tax on dead rent paid by the appellant to the
State Government, which was taxable on a reverse charge basis
against the receipt of services concerning grant of mining rights,
the Bench held that for the purposes of levying service tax, the
taxable event is construed at the time the service is provided or
agreed to be provided. Therefore, in order to determine whether
levy of services tax is applicable on a particular activity, it is
necessary to determine the point of time when such activity is
provided or agreed to be provided and since the agreements
between the appellant and the State Government regarding
grant of mining right were executed prior to April 01, 2016, on
which date the transaction in mining of right to use natural
resources became taxable, the appellant would not be liable to
pay the service tax. The relevant portions of the decision are
reproduced below:
―13. The second category of demand pertains to the
alleged short-payment of tax to the extent of dead rent
surface rent paid by the appellant to the State
Government, which has been held to be taxable on reverse
charge basis against the receipt of service concerning
grant of mining rights.
14. The contention of the learned counsel for the appellant
is that the demand is not sustainable as the service was
received prior to 01.04.2016, when such services from the
Government were not subject to tax.
15. The charging provision prescribing levy of tax is
section 66B of the Finance Act and it is as follows:
―66B. There shall be levied a tax (hereinafter
referred to as the service tax at the rate of fourteen
per cent on the value of all services, other than
those services specified in the negative list, provided
or agreed to be provided in the taxable territory by
one person to another and collected in such manner
as may be prescribed."
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16. Thus, for the purpose of levying service tax, the
taxable event is construed as the time when the service is
provided or agreed to be provided. Thus, in order to
determine whether levy of tax is applicable on a particular
activity, it is necessary to determine the point of time
when such activity is provided or agreed to be provided. In
the present case, the agreement between the appellant
and State Government for grant of mining rights was
executed on 02.01.2016 and on this date, the transactions
involving assignment of right to use natural resource was
not taxable. 17. In this connection section 66D of the
Finance Act, as it existed prior to 01.04.2016, can be
referred to and it is as follows:
"66D The negative list shall comprise of the following
services, namely:-
(a) services by Government or a local authority
excluding the following services to the extent they
are not covered elsewhere-
(i) services by the Department of Posts by way of
speed post, express parcel post, life insurance
and agency services provided to a person other
than Government;
(ii) services in relation to an aircraft or a vessel,
inside or outside the precincts of a port or an
airport;
(iii) transport of goods or passengers; or (iv) Support
services, other than services covered under
clauses (i) to (i) above, provided to business
entities"
18. Thus, prior to 01.04.2016, barring a few exceptions, all
services provided by the Government were covered under
the negative list and accordingly, not subjected to service
tax.
19. With effect from 01.04.2016, however, section 66D
(a)(iv) of the Finance Act was amended and 'all services
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Service Tax Appeal No. 51052 Of 2020
provided by the government to a business entity were
excluded from the negative list of services. Thus, services
rendered by the government to a business entity became
chargeable to service tax with effect from 01.04.2016. 20.
In the present case, the appellant received services in
relation to assignment of right to use natural resources
from the State Government by virtue of the agreement
dated 02.01.2016 and, therefore, the provisions of service
tax, as were in force prior to 01.04.2016, would be
applicable. Grant of natural resources was not excluded
from the scope of negative list prior to 01.04.2016 and so
no tax implication can be fastened on the appellant for
such period.‖
(emphasis supplied)
4.2.4 Similar view has been expressed by the Kolkata Bench in the
case of Broad Son Commodities Pvt Ltd. [2024 (21) CENTAX 392 9Tri-
Cal)]. In view of the above decisions, we do not find any merits in the
confirmation of the demand made on this account, and set aside the
same.
Wrong availment of CENVAT Credit of Rs.93,59,799/- on Capital
Goods used exclusively in providing exempted service
4.3.1 For denying the CENVAT Credit in respect of the capital goods
impugned order observes as follows:
11. It has been alleged in the impugned show cause notice that
on scrutiny of ST-3 Returnsof the Noticee, for the period
04/2014 to 06/2017 and capital goods credit documents on
which the Noticee had availed Cenvat credit during the said, it
was observed that Noticee had availed Cenvat credit amounting
to Rs.93,59,799/ on capital goods i.e. Concrete Batching Plant,
Air Cooled Chillers, Paver Finisher, Vibratory Soil Compactor
Model HAMM-311 and other road construction machineries,
which were used exclusively in providing exempted service for
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Service Tax Appeal No. 51052 Of 2020
construction of public roads. It was alleged that the Noticee had
utilized the Cenvat credit of Rs.27,13,774/- towards payment of
their service tax liability during he said period and the remaining
amount of Cenvat credit of Rs.66,46,025/- wa scarried
forwarded to TRAN-1 during transitional period of GST.
11.1 I find that the Noticee in their defence submission has not
disputed the availment and utilization of said amount of Cenvat
credit on aforesaid capital goods during the period under
consideration and therefore the details of computation of Cenvat
credit on capital goods during the period under consideration are
not reiterated here. However, they they inter-alia primarily
contended that they are into provision of integrated construction
services consisting of various taxable as well as exempted
services; that the capital goods are not used solely in the
provision of exempt services, but also for providing taxable
services; that when capital goods have been utilized in the
provision of exempted as well as non-the exempted services, no
violation of Rule 6(4) of the Credit Rules can be found against
Noticee. They therefore contended that the said amount of
Cenvat credit on capital goods are admissible to them.
11.2 For the sake of convenience and better understanding, let
me reproduce here-in-below the relevant provisions of Cenvat
Credit Rules, 2004.
i. ......
11.3 I find that though the Noticee has claimed that the
aforesaid capital goods were not used solely in the provision of
exempt services, but also for providing taxable services and that
when the capital goods have been utilized in the provision of
exempted as well as non-exempted services, the provisions of
Rule 6(4) of the Cenvat Credit Rules, 2004 are not applicable,
but has not produced any material evidence in support of their
contention. They have also not given the details of taxable and
non-taxable projects/ services undertaken by them during the
period under consideration or any material evidence of any
nature to prove that the aforesaid capital goods were used for
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providing both taxable and exempted services. In absence of any
supporting material evidence, I do not find the submission of the
Noticee convincing and hence, the same in not acceptable.
11.4 l find from ST-3 returns of the Noticee for the year 2014-15
that they had availed cenvat credit of Rs,4,29,909/- during the
financial year 2014-15 and utilized the same for the payment of
service tax. Sub-rule (4) of Rule 6 of Cenvat Credit Rules,
2004,which prevailed during this period, reads as 'CENVAT Credit
shall not be allowed on capital goods which are used exclusively
in the manufacture of exempted goods or in providing exempted
services'. It therefore indicates that the Cenvat credit of
Rs.4,29,909/- is not admissible to the Noticee, as they have
availed Cenvat credit on road construction machineries which are
used exclusively in providing exempted services for construction
of public roads and other exempted civil structures.
11.5 I also find that the Noticee had availed the Cenvat credit of
Rs.89,29,890/- on capital goods during the period 04/2016 to
06/2017 and utilized the Cenvat credit of Rs.22,83,865/-for the
payment of their service tax liability during that period. Sub-rule
(4) of Rule 6 of CENVAT Credit Rules,2004 as amended by
Finance Bill 2016, which prevailed during this period reads as 'No
CENVAT Credit shall be allowed on capital goods exclusively in
the manufacture of exempted goods or in providing exempted
services for a period of two years from the date of
commencement of the commercial production or provision of
services'. The Noticee had availed and utilized Cenvat credit on
capital goods before the period of two years stipulated in sub-
rule (4) of Rule 6 of the Cenvat Credit Rules, 2004 as amended
by Finance Bill, 2016. It therefore indicates that the Cenvat
credit of Rs.89,29,890/- is not admissible to the Noticee, as they
have availed Cenvat credit on road construction machineries
which are used exclusively in providing the exempted services
for construction of public roads and other exempted civil
structures
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11.6 In this regard, it has also been alleged in the impugned
show cause notice the Noticee have shown availment of Cenvat
credit on capital goods in their ST-3 returns filed for the period
04/2016 to 06/2017 before the issuance date of invoices and the
same is inadmissible in terms of Rule 4 of the Cenvat Credit
Rules, 2004, which is reproduced hereinbelow:
"4. Conditions for allowing CENVAT credit - (1) The CENVAT
credit in respect of inputs maybe taken immediately on receipt of
the inputs in the factory of the manufacturer or in the premises
of the provider of output service.
(2) (a) The CENVAT credit in respect of capital goods received in
a factory or in the premises of the provider of output service at
any point of time in a given financial year shall be taken only for
an amount not exceeding fifty per cent., of the duty paid on such
capital goods in the same financial year."
I find that the Noticee in their defence submission has not
submitted anything in this regard. Undoubtedly, the date of
receipt of capital goods should always be after the date of
issuance of the invoice, but the silence of the Noticee on this
aspect substantiate the allegations levelled in the impugned
show cause notice to be true. It is therefore held that inaddition
to the above reasons for disallowance of Cenvat credit on capital
goods, the Noticee is also not legally entitled for the aforesaid
amount of Cenvat credit on this ground too. In view of the above
provisions and facts of the case, it is held that the Cenvat credit
ofRs.93,59,799/- is not admissible to the Noticee and the same
is liable to be recovered from them under Rule 14(1)(i) of the
Cenvat Credit Rules, 2004 read with proviso to Sub-Section(1) of
Section 73 and 75 of Finance Act, 1994 read with Section 174 of
CGST Act. 2017. Held accordingly.
4.3.2 Undisputedly appellant in the present case are providing the
taxable and exempted services. Even the exemption in respect of the
road construction services etc., being provided by the appellant is
conditional exemption notification providing exemption in respect of
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Service Tax Appeal No. 51052 Of 2020
the construction of public road. Appellant have claimed before the
adjudicating authority that the capital goods against which they have
claimed the CENVAT credit were not used exclusively for providing the
exempted services but were used for providing both taxable and
exempted services. To substantiate there claim they have produced
the copy of Letter of Award iisued by Reliance Industries Limited vide
LOA No: RIL/CBM/045/LOA/112822/2013 dated 10.12.2013 for
carrying out "Early Civil Works - CBM Projects, Shahdol M.P." for
construction of roads and other amnesties which do not fall within the
category of public roads and hence not exempted. It is settled law that
if the capital goods are used for providing both the taxable and
exempted services then the CENVAT credit in respect of such capital
goods cannot be denied or varied. Reliance is placed on the decision of
Mumbai Bench in case of Finolex Industries Ltd [FINAL ORDER NO.
A/85393-85395/2022 dated 02.03.2022 in Excise Appeal No. 1214 to
1216 of 2012].
4.3.3 The second ground for denial as per the impugned order is that
appellant could not have availed the said credit prior to expiry of two
years of usage of the said capital goods as per the provisions
contained in CENVAT Credit rules, as they existed at the relevant time.
We do not find any merits in the said submission for the reason that
the said condition is not qua the availment of the credit, but qua the
use of capital goods for providing both taxable and exempted services.
In terms of the said condition the credit could not have been denied or
varied if after the expiry of usage of the capital goods for providing
both taxable and exempted services, the capital goods were put to use
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Service Tax Appeal No. 51052 Of 2020
exclusively for providing the exempted services. The said condition is
not applicable if the goods are being used for providing the taxable
and exempted services.
4.3.4 The last ground, for denial of this credit is that the appellant had
taken the credit even before the date of the invoice. We are not able
to make any sense of the said ground. Credit is admissible to the
appellant immediately on the receipt of the capital goods, under the
cover of duty paying documents, it may be invoice or any other
document as per the Rule 9 of CENVAT Credit Rules, 2004. In absence
of the invoice goods would have been received by the appellant under
cover of any of the documents specified in rule 9, giving the details of
the duty paid against the goods, otherwise how could have appellant
have taken the credit. The credit taken against any of such document
as specified, cannot be denied just for the reason that the credit has
been taken prior to the date of the invoice. If the reason for the denial
of credit is to be agreed to then revenue should have made demand
against the person clearing the goods without cover of invoice or the
document evidencing the payment of duty.
4.3.5 In view of discussions as above we do not find any merits in the
denial of this credit, and the confirmation of this demand.
Non-Payment/Non reversal of an amount of Rs.29,55,763/- on
Input ServiceCredit availed under Rule 6 of CCR, 2004:
4.4.1 For denying the CENVAT Credit in respect of the input services
impugned order observes as follows:
12. It has been alleged in the impugned show casue notice that
on scrutiny of ST-3returns of the Noticee and Cenvat credit
documents for the period 04/2014 to 06/2017, itwas, observed
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Service Tax Appeal No. 51052 Of 2020
that they have availed Cenvat credit of Rs.29,55,763/- on input
services which is not admissible to them in terms of Rule 6 of the
Cenvat Credit Rules,2004
as during the period under consideration they had provided both
exempted and non-exempted services.
12.1 I find that the Noticee in their defence submission has not
disputed the availment and utilization of said amount of Cenvat
credit on input services during the period under consideration
and therefore the details of computation of Cenvat credit on
capital goods during the period under consideration are not
reiterated here. However, they inter-alia primarily contended
that they are into provision of integrated construction services
consisting of various taxable as well as exempted services; that
the capital goods/ input services are not used solely in the
provision of exempt services, but also for providing taxable
services; that when capital goods/ input services have been
utilized in the provision of exempted as well as non-exempted
services, there is no violation of Rule 6 of the Credit Rules and
the said amount of Cenvat credit on input services are
admissible to them.
12.2 Rule 6 of the Cenvat Credit Rules, 2004 is relevant here to
decide the instant issue. Rule 6 is reproduced hereinbelow:
12.3 Further, the following are the judicial rulings which have
bearing on the issue involving the reversal of Cenvat credit
availed on inputs/ input services which are used in providing
exempted services in terms of Rule-6(3A) ibid or payment of an
amount
equivalent to seven percent of the value of exempted services.
i. ........
12.4 I find that though the Noticee has claimed that the capital
goods/ input services were not used solely in the provision of
exempt services, but also for providing taxable services and that
when the capital goods/ input services have been utilized in the
provision of exempted as well as non-exempted services, the
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Service Tax Appeal No. 51052 Of 2020
provisions of Rule 6 of the Cenvat Credit Rules, 2004 are not
applicable, but has produced any material evidence in support of
their contention. They have also not given the details of taxable
and non-taxable projects/services undertaken by them during
the period under consideration or any material evidence of any
nature to prove that the input services availed by them were
used for providing both taxable and exempted services. In
absence of any supporting material evidence, I do not find the
submission of the Noticee convincing and hence, the same is not
acceptable. It is explicit that the Noticee have taken Cenvat
credit on input services, which were used for providing the
exempted services, as they failed to prove their claim of Cenvat
credit on capital goods as well as input services. Noting is on
record which could prove that they have maintained separate
account for the capital goods/ input, input services, which are
used for providing the exempted services and that they have
availed only proportionate Cenvat credit on input, input services
used for providing the exempted services, so that the benefits of
Cenvat credit specified in Rule 6 in this regard, could be
extended to them. It is also undisputed that they have not
followed the procedures prescribed in this regard in as much as
they have not exercised the option for payment of proportionate
amount of credit as set out under sub-rule 3(A) of Rule 6 of the
Cenvat Credit Rules, 2004. As the Notice have not exercised
option to pay under Sub-Rule 3(A) of said rules, they are
required to pay an amount equal to seven percent of value of the
exempted services subject maximum of the sum total of opening
balance of the credit of input and input services available at the
beginning of the period 2014-15 to 2017-18 (up to June 17) and
the credit of input and input services taken during of that period.
In instant case, looking to the higher value of exempted
services, the Noticee are required to pay sum total of opening
balance and credit taken during the period and in the impugned
show cause notice, it works out to be Rs.29,55,763/- and
therefore the same or correctness of said amount. In view of the
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Service Tax Appeal No. 51052 Of 2020
aforesaid provisions of law and legal matrix is not reproduced
here as the Noticee has not disputed the quantification it is held
that the Cenvat credit of Rs.29,55,763/- is not legally admissible
to the Noticee and is liable to be Rule 6 and Rule 14 of the
Cenvat Credit Rules, 2004 read with proviso to Section 73(1) of
recovered from them under the provisions contained in
Explanation III of sub-rule 3(D) of the Finance Act, 1994 read
with Section 174 of CGST Act, 2017. Held accordingly.‖
4.4.2 We have already observed that in the case of the capital goods
the only thing that is required to be shown is that the same has been
used for providing the taxable service or have been used for the
manufacture of dutiable finished goods. If the usage of the capital
goods is for providing the taxable service or have been used for the
manufacture of dutiable finished goods then in that case the credit
taken in respect of the capital goods cannot be denied or varied for the
reason that the same have also been used for providing non taxable
service or used for manufacture of the exempt goods.
4.4.3 In case of input and input services, the law is quite clear that no
credit would be admissible in respect of input and input services which
have been solely used for providing non-taxable/ exempt services or
used for manufacture of non-dutiable/ exempt goods. Similarly credit
taken in respect of input and input services which have been used for
providing taxable services or used in manufacture of excisable goods
the credit cannot be denied or varied.
4.4.4 In case of the common inputs and input services which are used
for providing both taxable and non-taxable/ exempt services the credit
is to be reversed as per the formula as per the Rule 6(3) and 6 (3A) as
amended from time to time. It is settled law that that the benefit of
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Service Tax Appeal No. 51052 Of 2020
proportionate reversal will be available to appellant even if the
procedure outlined in the said rule is not followed.
4.4.5 In case of Galaxy Diesel [FINAL ORDER NO. 11280/2023
dated 19.06.2023 in SERVICE TAX Appeal No. 11147 of 2014-DB]
Ahmedabad Bench held as follows:
―We find that the Revenue's case is that even though the
respondent have admittedly paid back the entire Cenvat credit
availed along with interest which was partly attributed to
exempted service even then the respondent is liable to pay
8%/6%/5% amount of value of exempted services in terms of
Rule 6(3) of Cenvat Credit Rules, 2004. We find that on this
issue much water has been flown and in various cases, the
Courts and Tribunal held that once the Cenvat credit of the
common inputs used in relation to exempted service is reversed
along with interest, the demand of 8%/6%/5% in terms of Rule
6(3) will not sustain. The Commissioner has also taken support
from one of the land mark judgment in the case of Chandrapur
Magnet Wires Pvt. Limited vs. CCE, Nagpur - 1996 (81) ELT 3
(SC) wherein it was held that even though the modvat credit
was availed but subsequently the same is reversed along with
interest situation become as if no Cenvat credit is availed.
Accordingly the benefit of notification was extended. Some of the
judgments wherein the similar issue has been decided in favour
of the respondent are cited below:- (a) Mercedes Benz India (P)
Limited vs. CCE Pune-1 - 2015 (40) STR 381 (Tri. Mum.) (b)
Hello Minerals Water (P) Limited vs. UOI - 2004 (174) ELT 422
(All.) (c) Kundan Cars Pvt. Limited vs. CCE, Pune - 2016 (43)
S.T.R. 630 (Tri. - Mumbai) 3 Appeal No. ST/11147/2014-DB (d)
Bombay Minerals Limited vs. CCE & ST, Rajkot - 2019 (29) GSTL
361 (Tri. - Ahmd.)
5. As regards the judgments relied by learned AR, we find that
the judgment has been subsequently distinguished, therefore,
the same is not applicable.
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6. In view of the discussions made hereinabove and the
judgments cited, the demand of 8%/6%/5% cannot be made in
the facts of the present case when the respondent has
admittedly paid back the entire Cenvat credit along with interest
which was partly attributed to exempted service. Therefore, the
demand is not sustainable....‖
4.4.6 In view of the above discussions the appellant has either to pay
back the entire credit availed in respect of the common input services
availed by them during the period or the amount that can be
determined on the proportionate basis. The impugned order fails to
determine the said amount in correct perspective and have compared
the amount of credit taken in respect of the input services with
amount determined on the basis of the seven percent of the value of
exempted services, and asked for reversal of entire amount of credit
taken in respect of the input services. For determination of the correct
amount that needs to be reversed in terms of the above observations
the matter needs to be remanded back to the original authority.
Para 06: Non-payment of service tax of Rs.1,17,09,035/- on
Works Contract Service:
4.5.1 For confirming the demand made in respect of work contract
services, impugned order observes as follows:
―13. It has been alleged in the impugned show cause notice
that on scrutiny of ST-3returns and financial documents viz. i.e.
Balance Sheet, Profit & Loss A/c, Income ledger &Work Orders
for the period 04/2016 to 06/2017 of the Noticee, it was
observed that they had provided taxable services to M/s South
Eastern Coalfield Limited (SECL), Sohagpur Area and M/s M.P.
Power Generating Company Limited (STPS) (MPPGCL), Sarni,
received service charges totalling to Rs.20,25,57,300/- from
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Service Tax Appeal No. 51052 Of 2020
them, but failed to pay service tax ofRs.1,17,09,035/-, treating
them as exempted service.
13.1 The Noticee in their defence submission has stated that the
works contract undertaken by them in SECL, Sohagpur and
MPPGCL Sarni, does not involve the transfer of property in any
way. It is the basic aim and object of bringing those work
contracts in the net of service tax if work contracts involve
transfer of property. They stated that they mostly carry out only
those work contracts where transfer of property is not involved.
Since the receiver of their services does not pay back service tax
to them and whatever service tax, they have received the same
has been duly paid to the department. They stated that they
have carried out work related to roads, bridges and dams for
SECL, Sohagpur and MPPGCL, Sarni. They have also submitted
the copy of some work orders and contended that they
constitute a bona fide belief and in good faith that they are not
liable for service tax. They added that assuming but not
accepting if any service tax is payable that has to be paid by
recipient of the service as the service tax is an indirect tax
basically payable by the recipient of the service, though as per
the scheme of the Finance Act, 1994, they may be responsible
for depositing the tax with the Central Government. They also
added that as per Notification No 25/2012 dated 20.06.2012
work done by them has been specifically exempted from service
tax under point no 12(a), 12(d), 12(f) and 13(a) of the said
notification.
13.2 The perusal of Work Order Ref. No.
GM(C)SECL/BSP/WOSGP/2014/35 dated19.11.2014 of M/s.
SECL, Sohangpur Area revealed that it was for 'Construction of
R.C.C.Bridge over Baishaha Nala in approach road of Khairaha of
Sohagpur Area, Dist: Shahdol (M.P.). The total offer value
including service tax was Rs. 1,15,46,750.45 subject to certain
terms and conditions. It is specified in clause 3. of terms &
conditions that "no escalation is payable on account of materials,
labour and POL as stipulated period of completion is six months."
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Service Tax Appeal No. 51052 Of 2020
In clause 4., it is mentioned that "the arrangement of all
materials, tools and plants etc. required for the work will be the
responsibility of the Noticee." In clause 5, it is mentioned-that
"compaction of formation and paving materials is to be done
with the help of vibratory roller only as per latest MORT&HMOST
specifications.The bitumen pavement work has to be done by
using hotmix plant and paver finisher, asper latest
MORT&HMOST specifications for road& bridges works."In clause
9., it is mentioned that "The service tax will be applicable for the
work as per norms of the company. The amount towards service
tax will be reimbursed to the contractor from the Area, subject
to submission of documentary evidence with supporting
documents to the concerned department in regard to actual
payment made on that account. During evaluation, component
of service tax has been calculated @ 4.944% of the quoted value
amounting to Rs, 5,43,977.11 (Rs. Five Lakhs Forty-Three
Thousand Nine Hundred Seventy-Seven and Paise Eleven) only.
The total offer value including service tax is Rs. 1,15,46,750.45
(Rs. One Crore Fifteen Lakhs Forty-Six Thousand Seven Hundred
Fifty and Paise Forty-Fiveonly)".
Thus, from the above specified conditions, it is unambiguous that
the work of construction of R.C.C. Bridge over Baishaha Nala in
approach road of Khairaha of Sohagpur Area, Dist: Shahdol
(M.P.) was inclusive of materials, labour, tools, etc. as wellas
service tax. It involves transfer of property in goods, which is
leviable to tax as sale of goods It was done within the mining
area of M/s. SECL and exclusively meant for use of M/s. SECL,
primarily for the purpose of commerce or industry.
13.3 Further, the perusal of Work Order Ref. No. 03-
01/STPS/EES/2010/1683/4416 dated02.08.2010 revealed that it
was for 'Construction of Ash Bund in 111 Hectare land by raising
it from ground level for existing unit 1 to 9 including all allied
works at STPS, Sarni."The Para No. 2 of said work order
specifically mentioned that "The value of contract is estimated to
be Rs. 33,17,26,164/- (Rupees Thirty three Crores Seventeen
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Service Tax Appeal No. 51052 Of 2020
lakh Twenty Six Thousand One Hundred Sixty Four) only
inclusive of all i.e. cost of cement, steel, taxes, duties etc."
Thus, from the above stipulated conditions, it is unambiguous
that the work of construction of Ash Bund-in 111 Hectare land by
raising it from ground level for existing unit1 to 9 including all
allied works at STPS, Sarni was inclusive of materials, labour,
tools, etc.as well as service tax. It involves transfer of property
in goods, which is leviable to tax assale of goods. It was done
within the area of M/s MPPGCL (STPS), Sarni and exclusively
meant for the use of M/s MPPGCL (STPS), Sarni, primarily for the
purpose of commerce orindustry.
13.4 Above facts clearly show that in above contracts, the rates
are inclusive of service tax payable and the Noticee has already
recovered the amount of service tax involved therein, from their
service receivers. However, they have not deposited said amount
into Govt. account by falsely claiming exemption of Service tax.
14. Work Contract" is defined in Section 65B(54) of the Finance
Act, 1994, which reads as "(54) "works contract" means a
contract wherein transfer of property in goods involved in the
execution of such contract is leviable to tax as sale of goods and
such contract is for the purpose of carrying out construction,
erection, commissioning, installation, completion, fitting out,
repair, maintenance, renovation, alteration of any movable or
immovable property or for carrying out any other similar activity
or a part thereof in relation to such property."
It is evident that following conditions must be satisfied
cumulatively in order to consider` the service as works contract:
(a) There should be transfer of property in goods involved in the
execution of contract. which is leviable to tax as sale of goods
The words 'leviable to tax' refer to charging section of VAT Act
and would cover a situation where the tax is leviable on transfer
of property but is exempt by any notification. This iS S because
exemption by any notification does not mean that the tax is not
leviable Thus. it is not necessary that VAT has been actually paid
on the transfer of property involved in such contract. It is
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Service Tax Appeal No. 51052 Of 2020
enough if transfer of property is leviable to tax as sale of goods
for determining whether such contract is a works contract or not.
(b) Such contract is for the purpose of carrying out construction,
erection, commissioning., installation, completion, fitting out,
repair, maintenance, renovation, alteration and carrying out any
other similar activity or a part thereof, or in relation to, any
movable or immovable property.
The definition provided u/s 65B(44) is an exhaustive definition
but simultaneously ends with an inclusive limb i.e. "any other
similar activity". Hence, the last part of the definition for carrying
out any other similar activity or a part thereof in relation to such
property' has wide implication. Thus, it can be concluded that
work contract is the composite/ single contract for providing: -
a) transfer of property in goods and
b) provision of service
14.1 .......
14.2 ........
14.3 .........
14.4 In view of the above provisions, it would not be out of place
to conclude service providers uses the goods in execution of
Works contract, the property of which is transferred, it qualifies
as works contract. However, if the service provider only provides
the services of erection, construction, commissioning, installation
etc. without use of goods, the services will not be considered as
works contract but will be considered as specified services and
exemption under sr. no. 12, 13 & 14 of Notification No. 25/2012-
ST dated20.06.2012 would be available. I find that in the instant
case, the work for 'Construction of R.C.C. Bridge over Baishaha
Nala in approach road of Khairaha of Sohagpur Area, Dist:
Shahdol (M.P.) provided to M/s. SECL and the work for
'Construction of Ash Bund in 111Hectare land by raising it from
ground level for existing unit 1 lo 9 including all allied work sat
STPS, Sarni", are the works contract, as accordingly to the terms
& conditions of these
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Service Tax Appeal No. 51052 Of 2020
two work orders, the work includes the cost of service,
materials, labour, tools etc. The contention of the Noticee that
these two works does not involves transfer of property in goods
is incorrect and devoid of facts mentioned in the aforesaid two
work orders, which they have accepted and accordingly
performed the works.
15. The contention of the Noticee that they have carried out
work related to roads, bridges and dams for SECL, Sohagpur and
MPPGCL, Sarni and constitute a bonafide beliefand in good faith
that they are not liable for service tax, is also incorrect in as
much as it is forthcoming from the aforesaid two work orders
itself that they have constructed R.C.C.Bridge within the mining
area of M/s. SECL and have constructed 'Ash Bund' for M/s.
MPPGCL, which are meant for commerce and industry. The
aforesaid two work orders are not concerned with any
construction of road or dam. I do not agree with the submission
of the Noticee that they constitute a bonafide belief and in good
faith that they are not liable for service tax for the reason that it
has been specifically mentioned in the work orders that the value
of the work is inclusive of service tax, which the Noticee has
already recovered from M/s. SECL, Sohagpur and M/s. MPPCGL,
Sarni through their running bills. It is thus reasonably accepted
that the Noticee was aware of the terms and conditions of the
aforesaid work orders specifically that the work to be undertaken
by them was taxable under the Finance Act, 1994 and that they
were required to pay service tax on the same as also the service
receivers were ready to accept the works as taxable under the
Finance Act,1994 and accordingly they not only computed the
value of works but also paid the same tothe Noticee. I find that
these facts have not been disputed by the Noticee.
15.1 I also find that the Noticee in support of their contention
has submitted the copy of work order ref. no.
GM(C)/SECL/BSP/WO/SGP/2013/12 dated 23.01.2015 of M/s.
SECL, which was for preparation of sub base with WBM of
approach road to Khairaha UG Mine Project of Sohangpur Area,
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Service Tax Appeal No. 51052 Of 2020
Dist: Shahdol (MP) (Length -1.97 km)' and has also submitted
some of the photographs of the said work. They have also
submited the copy of Contract No. 045/112822 dated
21.01.2014 of Ms. Reliance Industries Ltd for 'early civil works
for GGS & WGS (earth work, area grading & development
works). I find that the reliance on these two work orders were
wrongly placed by the Noticee as these two work orders, are not
the part of impugned show cause notice and also no demand of
service tax has been made on the amounts involved in these two
work orders These two work orders, photographs and the
submissions of the Noticee regarding these two work orders. are
therefore out of place and not relevant in the instant case.
15.2 I further find that the Noticee has contended that as per
Notification No 25/2012 dated 20.06.2012 work done by them
has been specifically exempted from service tax under point no
12(a), 12(d), 12(f and 13(a) of said notification. I find that serial
no. 12 of Notification No. 25/2012-ST dated 20.06.2012 grants
exemption to construction services provided to Government or
local authority or Governmental authority. Serial No. 13 also
grants exemption to certain categories of works. Serial No. 12
and 13 reads as follows:
"12. Services provided to the Government, a local authority or a
governmental authority by way of construction, erection,
commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of -
(a) a civil structure or any other original work meant
predominantly for use other than for commerce, industry or any
other business or profession;
(b) ........;
(c) .........,
(d) canal, dam or other irrigation works;
(e) ........
(f) a residential complex predominantly meant for self use or use
of their employees or other persons specified in the Explanation
1 to clause (44) of Section 65B of the said Act;
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Service Tax Appeal No. 51052 Of 2020
13. Services provided by way of construction, erection,
commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of,-
(a) a road, bridge, tunnel, or terminal for road transportation for
use by general public;
.......
It could be seen from the serial number 12(a) of said notification that the exemption is available-only when a civil structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession. In theinstant case, the construction services viz. construction of RCC Bridge and Ash Bundhave been provided by the Noticee to M/S. South Eastern Coalfield Limited and M/S.M.P.Power Generating Company Limited which are meant predominantly for use for commerce/ industry/ business. M/s SECL is engaged in production/ mining of coal which is sold for a consideration. Whereas, M/s. MPPGCL is engaged in generation of electricity which is sold for a consideration and therefore, it would not be out of place to conclude that M/s. SECL and M/s. MPPGCL are commercial and profit oriented company. Hence, the exemption is not available to them under serial number 12(a) of said notification.
The Noticee has also claimed exemption under serial number 12(d) of said notification, which grants exemption to construction of canal, dam or other irrigation works. In the instant case, it is undisputed that accordingly to the aforesaid two work orders, the Noticee has constructed RCC Bridge and Ash Bund, which in any sense cannot be equated with canal, dam or other irrigation works. Hence, the exemption is not available to them under serial number 12(d) of said notification. The Noticee has also claimed exemption under serial number 12(f) of said notification, which grants exemption to construction of a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation I to clause 44 of Section 65B of the Act. In the 34 Service Tax Appeal No. 51052 Of 2020 instant case, it is undisputed that accordingly to the aforesaid two work orders, the Noticee has constructed RCC Bridge and Ash Bund and not residential complex. Hence, it is not covered under serial number12(d) of said notification. The Noticee has also claimed exemption under serial number 13(a) of said notification, which grants exemption to construction of a road, bridge, tunnel, or terminal for road transportation for use by general public. In the instant case, accordingly to the aforesaid two work orders, since the Noticee has constructed RCC Bridge within the premises of M/s. SECL and Ash Bund within the premises of M/s. MPPGCL, which are undoubtedly and predominantly meant for their own use and not for use by general public. Hence, the exemption is not available to them even under serial number 13(a) of said notification. 15.3 Further, Section 66D specify certain services on which service tax is not leviable. I find that the services provided by the Noticee are not covered under the said negative list, which indicates that these services are taxable.
15.4 In the case of EXCEL ENGINEERING Versus COMMISSIONER OF CENTRALEXCISE & S.T., MEERUT-ll [2017(50)STR,295(Tri.-All.)] it has been held that .... This case is maintained in Supreme Court [Commissioner v. Excel Engineering . 2018 (12)G.S.T.L. J89 (S.C.)] In the case of GAMMON INDIA LTD. Versus COMMISSIONER OF C. EX., CUS. &S.T., NAGPUR [2015(37)STR.225(Tri.-Mumbai)] it has been held that .........
In the case of MANTRI DEVELOPERS P. LTD. Versus COMMR. OF CUS., C. EX.& S.T., HYDERABAD-IV [2014(36)STR.944(Tri.- Bang.)] it has been held that ........
16. In view of the aforesaid discussion, legal matrix and judicial rulings, it is held that the contract for the construction of RCC Bridge and Ash Bund is appropriately classifiable as 'works contract and an amount of Rs.20,25,57,300/- received by the Noticee from M/s South Eastern Coalfield Limited (SECL), Sohagpur Area and M/s M.P. Power Generating 35 Service Tax Appeal No. 51052 Of 2020 Company Limited (STPS) (MPPGCL), Sarni, is taxable under the provisions of the Finance Act, 1994 and the rules made thereunder. It is also held that the Noticee is legally required to pay Service tax of Rs.1,17,09,035/- (Service Tax- Rs.1,10,07,933/- EdCess-Rs.40,233/- SHEC Cess- Rs.20,117/- SB Cess- Rs.3,21,296/- KK Cess- Rs. 3,19,457/-)under the taxable category of works contract sub-section (1) of Section 73 and 75 of the service' and the same is recoverable from them along with interest in terms of proviso to Act read with Section 174 of CGST Act, 2017. Held accordingly.‖ 4.5.2 From the above findings recorded in the impugned order it is evident that the demand is made in respect of two specific work order which were for construction of R C C Bridge over the Baishaha Nala in the mining area of SECL and was not in respect of the approach road to KhairakhaU G Mine Project of Sohagpur District. The claim made by the appellant that the demand has been made in respect of this road which is a public road cannot be sustained.
Impugned order specifically records the details of the work order for construction of approach road and also observes that no demand has been made in respect of said work order in the show cause notice. We do not find any merits in the submissions made by the appellant in this regard that construction of roads for use of general public is exempted from the payment of service tax, as no demand has been made in respect of any such activity undertaken by the appellant. Impugned order has examined the work order specifically to conclude that these works involved transfer of property in the goods and hence qualify as "work contracts" as defined under Finance Act, 1994. Further the work order specifically provides as observed from clause 9 of the same that 36 Service Tax Appeal No. 51052 Of 2020 the value of work order is inclusive of service tax calculated @ 4.944% of the work value. Thus appellant was well aware that service tax was being paid by the service recipient to the appellant and he was duty bound to deposit the same with exchequer and follow the provisions of Chapter V of the Finance Act, 1994 and rules made thereunder.
4.5.3 The work order from the M/s MPPCGL Sarni is also not in respect of construction of "Dam" as claimed by the appellant but is in respect of construction ash bund/ ash dyke for the disposal of fly ash generated in the thermal power plant of the service recipient.
Appellant counsel to a specific query raised by the bench during the course of argument to effect that dams are built over river or streams, then on which stream this dam claimed to have been constructed by the appellant was built, counsel failed to provide any satisfactory reply, he only referred to certain pictures which were also produced before the adjudicating authority. We do no find any picture of the "dam" amongst the pictures referred. Impugned order also records specific finding negating the said claim. An ash dyke, also known as an ash pond or ash disposal site, is a structure used to store ash, a byproduct of coal-fired power plants, typically in a slurry form. These dykes are constructed with embankments, often using soil or other materials, to contain the ash and prevent it from spreading. The primary purpose of an ash dyke is to manage the large volumes of ash generated by thermal power plants and to minimize land wastage. The claim of appellant that they had constructed the "Dam" as per the work order of M/s MPPCGL is without any merits and needs to be rejected.
37Service Tax Appeal No. 51052 Of 2020 4.5.4 Thus we find that impugned order has rightly concluded the service tax is required to be confirmed against the said two work order.
Extended period of Limitation:
4.6.1 On issue of invoking extended period of limitation, impugned order observes as follows:
―17. I find that in the impugned show cause notice, the extended period of limitation as provided under proviso to Section 73(1) of the Finance Act, 1994 has been invoked for the dis-allowance and recovery of Cenvat credits and also for the demand and recovery of service tax, involved therein. 17.1 The Noticee in their defence has stated that the show cause proceeding initiated is illegal and as Internal First Audit under EA 2000 was conducted on 21.04.2017 for theperiod 04/2014 to 03/2017, whatever the demand was created same has been paid and again second audit was conducted on 21/22.02.2019 on the same issues involving the same period which is illegal. The Additional Commissioner (Audit), Central GST & Central Excise, Bhopal, was therefore requested vide letter F.No. V(ST)15-
88/Audit-BPL/TBC/ Adj-I/JBP/2019-20/16363 dated 21.01.2020 to throw light on the circumstances in which re-auditing the records of the party for the period of 2014-15 and 2016-17 was undertaken. The Assistant Commissioner (Audit), Central GST & Central Excise, Circle-lI1, Jabalpur vide letter F.No. V(ST)222/Tirupati/Gr-16/JBP-|1/2018-19/221 dated 30.01.2020 informed asunder:
"1 .........
2 ........
3. ........
On perusal of the records available, the circumstances for. re- audit are submitted as under:-38
Service Tax Appeal No. 51052 Of 2020
(i) The earlier Audit was under taken on 21.04.2017 and at that time the Assessee has not filed ST -3 Return for the period 2016-17. It is filed on03.11.2017 for the period Apr- Sep, 2016 and on 28.10.2017 for Oct'16 toMar17.
(ii) The letter for conducting Audit was issued to the Noticee by the Superintendent (Audit) on 21.06.2016. The Assessee has Opposed for conducting of EA-2000 Audit and filed Writ Petition No. 12506/2016 on25.07.2016 before the Hon'ble High Court of M.P. Principal Bench, Jabalpur for declaring he relevant provisions of EA-2000 Audit as Ultra virus and made the Superintendent (Audit) as one of the Respondent.
The WP is still pending before the Hon'ble High Court without any Stay vide Order dated02.03.2017, reproduced as under: -
"Challenging the constitutional validity of Rule 5A(2) of the Service Tax Rules,1994 read with Section 94(1) and 94(2)(k) of the Service Tax Rules, 1994. this writ petition has been filed. During the course of hearing, we are informed that the Delhi High Court inWrit Petition (C) No. 5192/15 M/s Mega Cabs Pvt. Ltd. Vs. Union of India and others vide judgment rendered on 3/06/16 has allowed the writ petition and the constitutional validity of the provision challenged before us has been heldto be ultra-vires.
Against the same, matter is pending before Hon'ble the Supreme Court in Special Leave to Appeal (C) No (s). 26675/16 Union of India & others M/s. Mega Cabs Pvt. Ltd. and there is stay of the impugned order passed by the Delhi High Court on 26/09/16. Accordingly, we adjourn hearing of the matter. The petition be listed for consideration after the pending S.LP. is decided by the Supreme Court.
Registry to inform, this Court after the matter is decided by the Supreme Court."
4. It clearly reflects that the Assessee was non-cooperative for conducting Audit and not provided the documents properly for conduction of Audit. Thus, the Audit was conducted on the basis 39 Service Tax Appeal No. 51052 Of 2020 of records made available to safeguard the Govt. Revenue, which was going to be time-barred on passage of time and accordingly DAR No. 01/ST/JBP/Gr-1/2017-18 dated 01.05.2017 was issued.
5. Again, the Audit for the further period April-June, 2017 was conducted and Balance Sheet based reconciliation was started with comparison to the taxable value declared in ST-3 Returns. On the basis of the same, new facts were noticed by the Audit Team while conducting Audit, which was suppressed (not disclosed) by the Assessee during the previous Audit. Accordingly, the direction has been given by the Hon'ble Commissioner (Audit) for re-audit for previous period
6. In view of the above, the suppression of facts invoked in the Show Cause Notice issued to the Assessee appears legal and proper.' 17.2 To follow the principle of natural justice, the submission of the Audit was communicated to the Noticee vide letter F.No. V(ST)15-88/AUDIT-BPL/TBC/ADJ-I/2019/ 76967 dated 07.02.2020 and they were requested to submit their comments on the same The Noticee vide their letter dated 11.02.2020 submitted as under:
i. They have challenged notice on the legal issue before the High Court. As far as cooperating in the first audit under EA 2000, a second notice was issued on 09.09.2016 and in compliance of the same they have submitted all the documents before the authorities That the first audit was completed on 21.04.2017 for the period 01/2013 to 03/2017.
ii. The second audit under EA 2000 was conducted on21/22.02.2019 for the period04/2017 to 06/2019 in which again the period from 04/2016 to 03/2017 was enquired against which they have raised the legal ground that it is illegal since the same period has already been considered in the first audit on 21.04.2017 than again same period cannot be covered under second audit dated 21/22.02.2019.40
Service Tax Appeal No. 51052 Of 2020 iii. In view of the above, they would like to submit that they have been fully cooperative in all the proceedings and nowhere it has been mentioned by any authority that they have not cooperated in the audit proceedings and the enquiry done by the audit authorities for the same period in the second audit is illegal.
17.3 1 find that the Noticee has not submitted anything on the comments of the audit that when the earlier Audit was under
taken on 21.04.2017 at that time the Assessee has not filed ST - 3 Return for the period 2016-17 and it is filed on 03.11.2017 for the period Apr-Sep, 2016 and on 28.10.2017 for Oct16 to Mar'17. Further, though the Noticee has stated that they have submitted all the documents before the authorities but they have not submitted any material evidence of any nature as to how, when, for what period and what records were submitted by them to the audit. In view of the above facts, it is explicit that during the course of previous audit the entire records of the company was not produced before the audit officers for the purpose of audit and the objections raised in the previous audit report were based and limited to the records available with the department and those made available by the Noticee. Subsequently, when the second audit was conducted, the relevant records which were submitted by the Noticee including the records of the previous periods and the objections were raised by the auditors, which comprised of new facts, which was suppressed by the Noticee during the previous audit. Now, therefore, the contention of the Noticee that the show cause notice proceedings is illegal is not correct and hence is not acceptable to me.
17.4 .......
It is also on record and proven facts that during the period under consideration they had availed huge amount of Cenvat credit on input services which were used for both exempted and taxable output services and failed either to reverse the proportionate cenvat credit or to pay an amount equal to seven percent of thevalue of exempted service, as per provisions of Cenvat Credit 41 Service Tax Appeal No. 51052 Of 2020 Rules, 2004 discussed supra. Further, though they have claimed to have used the input services for providing both exempted and taxable services but failed to substantiate their claim by production of affirmative material evidences, including the maintenance of separate account of input and input services used for exempted and dutiable output services It is also on record that during the period under consideration they had 'works contract service' to M/s. SECL and Ms. MPPGCL by constructing RCC Bridge and Ash Bund within their business premises exclusively for their own use for consideration and which is held to a taxable service in the foregoing paras. However, the Noticee has deliberately suppressed these facts from the department by not disclosing the same in theirST-3 returns and deliberately evaded the payment of service tax, inspite of knowing the facts that the element of service tax in included in the value of the work order and said service tax has been recovered by them as detailed in foregoing paras, but not deposited into Govt. account The aforesaid deliberate commission of offence indicates their malafide intention behind knowingly suppressing these facts in their ST-3 returns or mis-stating these facts in their ST-3 returns with intent to evade payment of service tax and to avail inadmissible Cenvat credit on capital goods and input services. Undoubtedly, by doing so, the Noticee has contravened the various provisions of the Finance Act, 1994 and the rules made thereunder, as alleged in the impugned show cause notice. Thus, invocation of the proviso to Section 73(1) of the Finance Act, 1994 for demanding Service tax, was warranted and justifiable in the instant case. Following catena of decisions strengthen my aforesaid view.
a. In the case of DASWANI CLASSES LTD. Versus COMMISSIONER OF CENTRALEXCISE, JAIPUR-I
[2017(52)STR.264(Tri.-Del.)] it has been held that "......‖ 42 Service Tax Appeal No. 51052 Of 2020 b. In the case of Tamilnadu Coop Textiles Processing Mills Ltd Vs CCE Salem reported in 2007 (207) ELT 593 (Tri) the Hon'ble Tribunal has held that ‗.....' c.In the case of Kores India Ltd VS. CCE Chennai reported in 2003 (152) ELT 395(Tri.Che) the Hon'ble CEGAT has held in similar situation that, ".....‖ This case was affirmed in 2015(318)ELT.A,252 (SC). 17.5 Applying ratio of the above judgments and in view of the facts of the case, I do not agree with the contention of the Noticee and it is held that the invocation of extended period of limitation for demand of service tax and dis-allowance of wrongly availed Cenvat credit under proviso to Section 73(1) of the Finance Act 1994 read with Section 174 of CGST Act,2017, as detailed in the impugned show cause notice, is proper and justified. Held accordingly.‖ 4.6.2 From the above we find that the impugned order has recorded appropriate reasons for invoking extended period of limitation for making this demand. Except for ground of second audit appellant has not raised any other ground for invocation of extended period of limitation. We do not find any merits in the said ground as it is evident from the impugned order that appellant had not filed the ST-3 returns for the period of dispute at the time of first audit and have not produced all the records before audit officers. Even otherwise it is not the case of second audit but a case of re-audit of the records of the appellant after taking note of the fact that the appellant had not cooperated at the time of first audit and have not provided all the records to the audit officers for the relevant period. The factum of not providing the records for audit itself amounts to suppression of the facts with intent to evade payment of service tax.
43Service Tax Appeal No. 51052 Of 2020 4.6.3 It is settled law that no one should be allowed to take the benefit of his on wrongs. Appellant who had not produced the records for audit in first instance cannot argue against the re-audit of the records subsequently. Hon'ble Supreme Court has in the case of Municipal Committee Katra [Order dated 09.05.2024 in CIVIL APPEAL NO(S).
14970-71 OF 2017] held as follows:
―17. We have considered the submissions advanced at bar and have perused the material available on record and have gone through the impugned judgments.
18. The situation at hand is squarely covered by the latin maxim ‗nullus commodum capere potest de injuria sua propria', which means that no man can take advantage of his own wrong. This principle was applied by this Court in the case of Union of India v.
Maj. Gen. Madan Lal Yadav [(1996) 4 SCC 127] observing as below: -
―28. ...In this behalf, the maxim nullus commodum capere potest de injuria sua propria-- meaning no man can take advantage of his own wrong -- squarely stands in the way of avoidance by the respondent and he is estopped to plead bar of limitation contained in Section 123(2). In Broom's Legal Maxim (10th Edn.) at p. 191 it is stated:
―... it is a maxim of law, recognised and established, that no man shall take advantage of his own wrong; and this maxim, which is based on elementary principles, is fully recognised in courts of law and of equity, and, indeed, admits of illustration from every branch of legal procedure.‖ The reasonableness of the rule being 44 Service Tax Appeal No. 51052 Of 2020 manifest, we proceed at once to show its application by reference to decided cases. It was noted therein that a man shall not take advantage of his own wrong to gain the favourable interpretation of the law. In support thereof, the author has placed reliance on another maxim frustra legis auxilium invocat quaerit qui in legem committit. He relies on Perry v. Fitzhowe [(1846) 8 QB 757 : 15 LJ QB 239] . At p. 192, it is stated that if a man be bound to appear on a certain day, and before that day the obligee puts him in prison, the bond is void. At p. 193, it is stated that ―it is moreover a sound principle that he who prevents a thing from being done shall not avail himself of the non-performance he has occasioned‖. At p. 195, it is further stated that ―a wrong doer ought not to be permitted to make a profit out of his own wrong‖.
At p. 199 it is observed that ―the rule applies to the extent of undoing the advantage gained where that can be done and not to the extent of taking away a right previously possessed‖.
19. It is beyond cavil of doubt that no one can be permitted to take undue and unfair advantage of his own wrong to gain favourable interpretation of law. It is a sound principle that he who prevents a thing from being done shall not avail himself of the non- performance he has occasioned. To put it differently, ‗a wrong doer ought not to be permitted to make profit out of his own wrong'. The conduct of the respondent-writ petitioner is fully covered by the aforesaid proposition.‖ 45 Service Tax Appeal No. 51052 Of 2020 4.6.3 Thus we do not find any merits in the submissions made by the appellant for invoking the extended period of limitation for making the demand.
Interest and Penalty.
4.7 As the appellant has not discharged the tax liability by the due date the demand of interest cannot be faulted with. Reliance is placed on the following case laws:
Hemant N Talekar [2012 (26) STR 309 (Kar)] Bharat Sanchar Nigam Limited [2013 (30) STR 441 (T-Del)] Tata Steel Ltd. [2013 (29) STR 541 (T-Kol)] Inma International Security Academy Pvt Ltd [2005 (180) ELT 107 (T-Chennai).
4.8 In view of the decision of Hon'ble Supreme Court in the case of Rajasthan Spinning and Weaving Mills Ltd. [2009 (238) ELT 3 (SC)] we uphold the penalties imposed upon the appellant under Section 78 of the Finance Act, 1994 in respect of the demands upheld by us.
Summarizing our findings 4.9 In view of the discussions as above we summarize our findings as follows:
S Issue Amount Finding
No Involved' Rs
1 Royalty charges paid by them against 4,12,960 Dropped
stone quarrying mines to the
Government of Madhya Pradesh,
2 Denial of CENVAT Credit in respect of 93,59,799/- Dropped
Capital Goods availed by them.
3 Denial of Cenvat Credit in respect of 29,55,763/- Matter remanded
input services. for quantification
4 Demand of the service tax on work 1,17,09,035/- Demand Upheld
contract services.
46
Service Tax Appeal No. 51052 Of 2020
5 Extended period of Limitation is invokable.
6. Demand of Interest upheld
7. Penalty imposed under Section 78 upheld in respect of demand at 3 and 4 above.
5.1 The appeal is partly allowed as indicated in para 4.9 above.
(Order Pronounced on 01.08.2025) (BINU TAMTA) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) G.Y.