Custom, Excise & Service Tax Tribunal
Sardar Trading Company vs Rajkot on 12 August, 2022
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
REGIONAL BENCH- COURT NO.3
SERVICE TAX Appeal No.12174 of 2016
(Arising out of OIO-RAJ-EXCUS-000-PR-COM-30-16-17 dated 26/09/2016 passed by
Principle Commissioner Customs, Excise and Service Tax-RAJKOT)
Sardar Trading Company .........Appellant
Ashapura Chambers,
Shanala Road, Bypass,
Morbi,
Gujarat
VERSUS
C.C.E. & S.T.-Rajkot .........Respondent
Central Excise Bhavan, Race Course Ring Road...Income Tax Office, Rajkot, Gujarat-360001 WITH i. SERVICE TAX Appeal No. 11743 of 2018 (Sardar Trading Company) ii. SERVICE TAX Appeal No.11744 of 2018 (Sardar Trading Company) iii. SERVICE TAX Appeal No. 10286 of 2020 (Sardar Trading Company) APPEARANCE:
Sh. P P Jadeja, Consultant for the Appellant Sh. J A Patel, Superintendent (Authorized representative) for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. RAJU Final Order No. A/ 10978-10981 /2022 DATE OF HEARING: 26.07.2022 DATE OF DECISION:12.08.2022 RAMESH NAIR The brief facts of the case are that the appellant is engaged in providing of explosives and possessing valid license for it and the transaction of trading of 'explosives' are controlled by PESO (Petroleum and 2 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 ExplosivesSafety Organization,formerlyDepartment of Explosive,Government of India) and Governed by provisions of Explosive Rules, 2008. Explosives are to deal with Sold/delivered for transportation and blast use only through authorized/Registered/licensed persons under Explosive Rules, 2008. The appellant is licensed for sale and use explosive under Explosive Rules, 2008. Show Cause Notices were issued by the revenue, wherein it was alleged that supply and use of explosive to buyers at their side is amount to provision of service and the appellant has provided the taxable service of 'site formation, clearance, excavation, earth moving and demolition' services without obtaining Service Tax registration and not paid Service Tax.During initial statements of Shri Milesh D. Joshi, partner of appellant recorded under Section 14 of theCentral Excise Act, 1994. On the basis of the said statements the Revenue's allegation is that appellant was providing blasting material such asNitrate Mixtures, Detonators, Fuses, etc., to various clients on site through their certified vehicles for transport of explosives, along with trained and certified employees who were termed as 'shot- firer' who performed blasts at the site, by using the said explosives. The adjudicating Authority passed order in original wherein it was held that the appellant has provided services of 'site formation, clearance, excavation, earth moving and demolition'and consequently confirmed the demand of Service Tax,imposed penaltyand demandof interest. Being aggrieved by the orders in original appellant filed the present appeals.
2. Shri P PJadeja, Learned Consultant appearing on behalf of the appellant submits that the appellant have not provided any service of 'site formation, clearance, excavation, earth moving and demolition'. In fact they have sold explosive to the buyer on principal to principle basis. The appellant have issued invoices wherein applicable VAT i.e. 12.5 +2.5% was paid on 3 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 the entire value, no over and above the invoices value was charged representing any service. The appellant under legal obligation transported and delivered the explosive at the site of buyers for the purpose of blastingby use of theseexplosives'shot- firer'services was independently provided. The'shot- firer'were not on the pay rollor on the cost of the appellant as the appellant have not paid any amount to 'shot- firer'. The 'shot- firer' are also licensed under Explosive Rules, 2008. Therefore, the entire activities of the appellant is of sale of goods, hence no service is involved. The adjudication order demanded Service Tax under the head of 'site formation, clearance, excavation, earth moving and demolition'. Shri P PJadeja referred to the definition of said service as described in Section 65(a) Finance Act, 1944. He submits that firstly, the activity of the appellant pre-dominantly supply of explosive does not fall under the definition of 'site formation, clearance, excavation, earth moving and demolition'.Secondly, the said service falling under sub-clause (zzza) of Clause 105 of Section 65 of the Finance Act, 1994 was exempted under Notification No. 17/2005-S.T dated 07.06.2005. Therefore, the demand for the period prior to 01.07.2012 in any case is not sustainable. He submits that after 01.07.2012 in terms of Service under Section 65B (44) of Finance Act, 1944 under Clause a (ii), the activity such as transfer, delivery or supply of any goods, which is deemed to be a sale within the meaning of (29A) of Article 366 of Constitution does not include under the definition of service. He submits that even if it is assumed that the appellant's activities is of service but since the entire value represented the sale of the goods in terms of Clause(29A) of Article 366,the transfer of the property in goods (whether as goods orin some other form) invoked in the execution of aworks contract. Therefore, since the entire value charged by the appellant to their buyers is towards the transfer of property and goods, the activity is otherwise deemed sale, hence in terms of 4 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 Section 65B(44) (a)(ii), the activities of the appellant is not service and the same is not liable for Service Tax. He further submits that as per Rule 2A of Service Tax (Determinationof Value)Rules 2006 before or after 01.07.2012, value of goods was not to be included in the value of taxable service. In this case the entire amount collected to the appellant from their buyers of explosivesis against sale of goods which has been considered for demand of Service Tax and as such entire amount was to be deducted forcalculating value for Service Tax. Receipt of sale proceeds of goods from buyers was not taxable, which is decided in the case of Intercontinental Consultants And TechnocraftsPvt. Ltdby the Hon'ble Supreme Court as reported in 2018 (10)G.S.T.L 401(S.C). In case of the appellant, the entire value is for sale of the goods and not for any taxable services. He submits that the entire case was made on the basis of statements of one partner. He submits that the statement dated 02.06.2015 is not correctly or factually recorded and the same is not corroborated by any clinching positive evidences. He submits that the statementsof partner was also recorded underduress and pressure. Various statements were recorded in English,whereas partner has studiedupto only 12th in Gujarati Medium not knowing English language. Some facts shown in statements were twisted by the recordingofficer to suithis purpose, and this factwas also brought to the notice in adjudicating proceedings with a request that statements recorded in inquiry may not be used in proceedingsas circumstances and facts changes from time to time. Revenue has made baseless allegations without considering evidences in terms of provision of Section 9DofCentral Excise Act, 1944 applicable for service tax in terms of Section 83 of the Finance Act, 1944. A show cause notice has adopted the statements without examination and allowing cross examination of witness. Therefore, the said statementscannot be relied 5 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 uponin terms of Section 9D of Central Excise Act,1944.He relied upon the following decisions:
2015 (324)E.L.T. 641 (S.C)-ANDAMAN TIMBER INDUSTRIES 2013 (294) E.L.T.353 (Del.)-BASUDEV GARG 2019 (366) E.L.T.659 (All.)-CCE Vs PREMIER ALLOYS LTD 2018 (362) E.L.T.961 (Chattisgarh)- HI TECH ABRASIVES LTD vs CCE 2018 (361) E.L.T. 90 (P & H)- AMBIKA INTERNATIONAL vs UOI 2017 (358) E.L.T. 87 (Del.)-CCE vs BALAJEE PERFUMES 2016 (340) E.L.T.67 (P & H)- JINDAL DRUGS PVT. LTD vs UOI 2016 (339) E.L.T. 209 (P & H) - G-TECH INDUSTRIES vs UOI 2016 (332) E.L.T. 416 (Del.) - FLEVEL INTERNATIONAL vs CCE 2015 (325) E.L.T. 532 (Kar.) - DHARIWAL INDUSTRIES LTD vs CCE 2017 (7) G.S.T.L. 276 (Ori)- KAY PAN SUGANDH PVT. LTD vs CCE 2.1 He further submits that the Revenue relied upon only data/information provided to the Explosive Department without any independent inquiry of verification of the said data in accordance with law before issuance of the SCN and confirmation of demands. Thus, the basis relied upon in Show Cause Noticeis not corroborated with any other evidence. Hence, the said relied upon basis of statement and data should not have been or could not been used as evidence against appellant for demand of Service Tax. He further submits that the onus of proof lies on the department to prove that appellants have provided service during the disputed period. This onus has not been discharged by investigating agency. Show Cause Notice presumed entire receipt as consideration of taxable services which is against the principal of law settled by the Hon'ble Supreme Court in case of Larsen and Tourbo as reported in 2014 (303) ELT 3 (SC). Show Cause Notice suffer from incurable deficiencyon taxability of service and computation of Service Tax. 6
ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 Therefore, the impugned orders are liable to be set aside, in the facts of these appeals. In support he placed reliance on the following judgments:
United Telecom 2011 (22) STR 571 (Tri. Bang) SwapnilAsnodkar 2018 (10) GSTL 479 (Tri. Mumbai) Balaji Enterprises 2020 (33) GSTL 97 (Tri. Del) ITC Ltd. 2014 (33) STR 67 (Tri. Del) Kafila Hospitality & Travels Pvt. Ltd. Vs. CST- 2021 (47) G.S.T.L. 140 (Tri. LB) 2.2 He submits that the demand of Service Tax is based on the definition of service existed prior to 01.07.2012. However, period of dispute in present case is also falling on or after 01.07.2012. The demand of Service Tax on definition based in erstwhile regime cannot be confirmed. Show Cause Notice has failed to analyse transactionsproperly andmechanically raised demand of Service Tax. Without prejudice, he further submits that the order is beyond the scope of Show Cause Notice. Demand of Service Tax confirmed is under specific head in the impugned order but not specifically proposed in the show cause notices. It is settled law that the impugned orders should not travelledbeyond the scope of show cause notice. He relied upon the judgment of Hon'ble Supreme Court in the case of Caprihans India Ltd.
Vs.CCE,2017(51) SRT- 239- (S.C). He further submits that revenue has alleged that the appellant prepared holes at sites of its clients forplacing explosives and blasts explosivesbased by it in those holes by deploying its qualified employees (Shot Firer) and as such fulfils requirement of excavation/earth digging/breaking of stones/rocks; that explosives were never handed over to clients and same were used for the purpose of providing the service involved in carrying out blasts at the site of its clients. 7
ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 However, the appellant submit that said "Short Firers" who conducted the blasting operations were not examined during inquiry/investigation. Statements of "Shot Firers" are not recorded at any time."ShotFirer"were not employees of appellant and as matter of fact "Shot Firers" were engaged by buyers forconducting blasting at the sites. He refers to the various affidavits of Shot Firers, the affidavits to the effect that"Shot Firers" permit has been issued after examination under taken by the Explosive Department under Explosive Rules, 2008.They are competent to carry outblasting operations with such license.For carrying out such blasting operations, they are not employees of M/s Sardar Trading Company, Morbior receiving anysalary,remunerationor Commission from them.Whenever any person purchases explosives from the said M/s Sardar Trading Company, Morbithey look for any shot firers for conducting blasting operation and such purchasers contact the appellant to conduct the blasting operations and such purchasers only take them to the blasting sitesand alsogive to the Shot Firers agreed consideration for conducting the blasting operations by the purchasers of the explosives. Appellant submits that revenue has not correctly appreciated the facts to confirm Service Tax demandsagainst the appellant. The facts are that the short firers were not the employees of the appellant and they hadcarried out the blasting operations on behalf of buyers of appellant and received payments/consideration from the buyers. The buyers of appellant had engaged qualified persons as "Shot Firers" as per Rule 2(51) of Explosive Rules, 2008; that such "Shot firers" were separately recognised and certified persons under the Explosive Rules, 2008. Thus, appellant was not providing any service to its clients/customers after carrying Explosive in its vehicle.Sales invoices/evidencessupport this fact.He submits that the activity in Trading of Explosive are under Section66D (e) of the Finance Act,1994 not attracting Services Taxliability after July, 2012. 8
ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 Therefore, the question of demand of Service Tax in sale of explosive is not in accordance with law and deserves to be set aside. He further submits that this Tribunal being a final fact finding authority can very well admit fresh evidence and argument. In this regard he take support from Hon'ble Supreme Court judgment in the case of National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax reported in 1998 (99) ELT 200 (S.C). He also relied upon the following judgments:
Devangere Cotton Mills Ltd. Vs. Commissioner- 2006 (198) ELT482 (S.C) UtkarshCorporate Service Vs. CCE, 2014- (34) STR (35)(Guj) 2.3 He also submits that Show Cause Notice is not sustainable on the ground of time limitation. Without prejudice he submits that the demand is barred by limitation, to invokethe extended period, the revenue has to prove that there is a deliberate attempt on the part of the assesse to suppress the facts from the department with an intention to evade payment of Service Tax which is absent in the present case. In this regard he placed reliance on the following judgments:
CosmicDye Chemical Vs. CCE, Mumbai - 1995 (75) ELT- 721 (SC) Tamil Nadu Housing Board - 1994 (74) ELT - 9(SC) Aditya College of Competitive Exam Vs. CCE - 2009 (16) STR -154 (Tri- Bang.) NizamSugar Factory - 2006 (197) ELT 465(SC) 2.4 He also submits that the penalty proposed in the Show Cause Notice and confirmed in the impugned order is not sustainable as there is no positive wilfullaction to avoid payment of Service Tax. He submits that there are more than 500such persons/entities whocarry out alleged activities 9 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 but,such similarly placed other entities have not been saddledwithany demands of Service Tax like what the appellant faces.It seems that appellant has been singled out in this connection and saddled with this huge Service Tax demand for this reason also the demand of Service Tax is not sustainable. He prays for setting aside the impugned order and allowing the appeals.
3. Shri J A Patel, Learned Superintendent Authorized Representative appearing on behalf of the revenue reiterates the finding of the impugned order.
4. We have carefully considered the submissions made by both the sides and perused the records. In all the present appeals the issue for consideration before us is that whether the activity of the appellant for supply of explosives is sale or provision of service and consequently whether liable to Service Tax. We find that the appellant's main argument is that they have not provided any service whereas they have sold the goods namely explosives to their customers on principle to principle basis, hence no services are involved. To ascertain that the activity is of sale or otherwise, we have perused the various documents. The following sample documents are scanned below:
(1) Licence for sale of Explosives.10
ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 11 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 (2) Representative purchase Invoices Of Explosives by the appellant (3) Representative Sales Invoices Showing Sale Of Explosives 12 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 13 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 (4) Profit and loss account 14 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 (5)List of sale of goods in terms of sub Rule (2) of Rule 19 of Explosive Rules in form 201 A 15 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 (6) VAT registration issued by Government of Gujarat. (7)VAT payment challanfor sales 16 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 (8)VAT returns for period upto 30.06.2017.
On going through the above documents, it is absolutely clear that the entire activity of the appellant is sale of Explosives. we observed that the revenue 17 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 has demanded the Service Tax on the total invoice value which is of sale invoice and it is issued against sale of the explosives. No bifurcation was provided in the invoice such as sale of goods and service charge. With this undisputed fact it is clear that the appellant have raised the invoices for the entire value only for sale of goods on the total sale value. The appellant have discharged the VAT on actual sale value of goods and not even on composition scheme like Works Contract Tax (WCT). The appellant have paid the entire VAT to the State Government. They have also booked the transaction in their profit loss account as sale of goods only. Accordingly it is clear that the appellant have sold the explosives and no any additional consideration was recovered towards any service. The revenue's case is that the appellant have provided the service of 'site formation, clearance, excavation, earth moving and demolition'. The Learned Counsel post hearing also submitted VAT FORM- 205 B (annual return) for the entire period involved. He has also submitted a chart sharing summary of such return summary of such return which is reproduced below:
Fin. Year. 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 upto (30-
06-2017)
Purchase 3,56,21,205 4,16,69,195 2,95,75,342 2,91,96,266 2,03,02,286 1,94,75,152 88,35,612
Sales 3,67,90,533 4,30,67,914 3,66,72,119 3,53,58,505 2,43,86,071 2,37,63,656 1,04,47,6
15
VAT payable 30,22,540 47,43,954 41,80,305 44,19,813 30,49,479 29,70,577 13,05,782
on sales
Additional Tax 6,41,594 9,63,837 8,45,560 8,84,020 6,09,007 5,94,115 2,61,235
payable
Total Tax 36,64,134 57,07,791 50,25,865 53,03,833 36,58,486 35,64,692 15,67,017
payable
Tax credit 35,62,093 52,98,636 43,18,773 43,47,413 30,36,054 28,85,033 13,25,368
admissible
Tax payable in 1,02,041 4,09,155 7,07,092 9,56,420 6,22,432 6,79,659 2,41,649
Cash
18
ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 Actual cash 1,02,041 4,09,155 7,07,092 9,56,420 6,22,432 6,79,659 2,41,469 Tax paid Acknowledgem 999101611 999164271 999245478 999550791 999913938 99R003440 ent No. 21 05 90 28 17 50 DT : 22 DT : 06 DT : 01 DT : 01 DT : 03 DT : 24 JUN 12 JUN 13 AUG 14 FEB 16 FEB 17 FEB 18 The above summary of VAT FORM-205B also shows that entire transaction of the appellant is indeed sale of explosives and VAT was paid at full rate. Therefore, there is no iotl of doubt that appellant's activity is only of sale and no service was involved. The contention of the revenue is based on the fact that the appellant have supplied the explosives in their own vehicle and the same was delivered at site. The goods were meant for blast at the particular place where the blasting was to be carried out. Therefore, the appellant have not only supplied the explosive but also carried out the blasting. Therefore, the revenue's contention is that the appellant have provided the service of 'site formation, clearance, excavation, earth moving and demolition'. In this regard we find that since the appellant have raised the said invoice towards the supply of explosives and paid the VAT on the entire amount and no extra consideration towards the service was recovered the entire value recovered by the appellant from their client is indeed a sale value. Hence, no amount towards the service charge was recovered, therefore even if some incidental activity was carried out by the appellant, the overall transaction cannot be taken away from the transaction of sales in terms of sale or goods act. We further find that the revenue has heavily relied upon the involvement of "Shot Firers". The "Shot Firers" are the technically qualified persons who actually carries out the blasting with the explosive supplied by the appellant. It is the contention of the revenue that the "Shot Firers" were acting on behalf of the appellant. Hence, the blasting activity was carried out on behalf of the appellant therefore, the activities amount to service of 'site formation, 19 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 clearance, excavation, earth moving and demolition'.We find from the fact on record that the "Shot Firers" are independent and technical expert to carry out the blasting, they are licensed with the Government's Department of explosives. The revenue has not adduced any evidence to show that the "Shot Firers" were acting as an agent of the appellant. Therefore, the "Shot Firers" job was carried out not on the behalf of the appellant but on behalf of the buyer of the goods. In this regard the appellant have submitted the affidavits of some "Shot Firers" one sample affidavit along with English translation are reproduce below:20
ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 21 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 From the above affidavit of the "Shot Firers" it is abundantly clear that the "Shot Firers" are not working on behalf of the appellant whereas they were deputed by the purchaser of the explosives for carrying out the blasting and for which they were paid the required consideration. In this fact the entire basis of the revenue that the "Shot Firers" have acted on behalf of the 22 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 appellant is far from truth. Hence the entire foundation of the case gets demolished. Since as per the above fact and discussion the activity undoubtedly is of sale of goods. The sale of goods does not attract Service Tax either before 01.07.2012 and subsequent thereto. Post 01.07.2012 the definition of individual service was done away, the new definition of service was introduced under Section 65B (44)(a)(i) of the Finance Act, 1944 which is as under:
(44) "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include-
(a) an activity which constitutes merely,-
(i)a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or
(ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of Article 366 of the Constitution, or
(iii) a transaction in money or actionable claim.
From the above definition of Service it can be seen that any activity carried out by a person for another for consideration and includes a declared service is defined as "service".As per sub clause (a) (i) of section 65 (B) (44) activity of a transfer of title in goods by way of sale gift or in any manner is not included in the transfer "Service."
Accordingly, in the present case the activity being of "sale of goods" does not fall under activity of any "Service". Moreover, there is a negative list of service under Section 66D, wherein one service is specified under Clause "(e) trading of goods". From this activity under negative list the"trading of goods". The same is being listed under negative list of services is not leviable to Service Tax. Therefore, the appellant's activity which is 23 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 undoubtedly falling into the activity of trading is not liable to Service Tax. Without prejudice, we also find that even if it is assumed that the appellant's activity is a composite works contract service but the facts remains, the appellant have paid VAT on the entire value, the same should be treated as a deemed sale. In terms of Section 65B(44) (a)( ii) an activity which constitutes such transfer/delivering or supply of any goods, which is deemed to be a sale within the meaning of Clause (29 A) of Article 366 of Constitution. Therefore, even if these activities considered as service but there is no dispute that the appellant have raised the sale invoice and paid the VAT in such case as per the above Section 65B (44) (a)(ii). the activity being a sale is also excluded from the definition of service, for this reason also the activity of the appellant shall not be chargeable to Service Tax. 4.1 As regard the dispute that whether the activity is of sale or service, the Hon,ble Supreme Court in a recent judgment of Commissioner of Service Tax Delhi Vs. Quick Heal Technologies Ltd Civil Appeal Nos. 5168-5169 of 2022 vide order dated 5th August,2022 has held as under:
"We are of the view that the artificial segregation of the transaction, as in the case on hand, into two parts, is not tenable in law. It is, in substance, one transaction of sale of software and once it is accepted that the software put on the CD is "goods", then there cannot be any separate service element in the transaction. We are saying so because even otherwise the user is put in possession and full control of the software. It amounts to "deemed sale"
which would not attract service tax."
Similarly, the Hon'ble Madras High Court in the case of White Cliffs Hair Studio Pvt Ltd. WP. No,. 12198 of 2009 vide order dated 08.07.2022. In the case of the activities are as under:
"4.The business activity of the petitioner as captured in the impugned order is summarised below:24
ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020
(a) The manufacture of wigs falls under Chapter 67 of the Central Excise Tariff Act, 1985 and the petitioner remits Central Excise Duty in terms of Section 3(1) of the Central Excise Act, 1944 thereupon.
(b) The petitioner also admittedly offers the entirety of the turnover from manufacture and fitment of the wig to Value Added Tax (VAT) adopting the stand that it constitutes sale of a commodity, and the service rendered, of preparation and fitment, is only incidental to the sale.
(c) The wig, once manufactured, is to be fitted, the first step is to measure the head, then test the skin for endurance. The wig is thereafter prepared to the specific dimensions of the client. An option is also available to colour the wig if desired.
(d) The head is prepared by shaving and cleaning, and oil is applied to the scalp to rid it of dryness. A mud pack may be applied to rid it of excess sweat glands.
(e) The head is then washed, conditioned and sterilized with dettolThe wig is thereafter pasted onto the head with medical tape and glue and the hair on the wig is cut so as to match the existing hair style.
(f) The wig is also maintained, if the client so desires, and re-groomed either fully ie. by removal of wig, sterilization, cleaning of the scalp and replacing the wig or partly i.e. washing and tightening the loose ends."
In the above though the activities involved is preparation of wig and various other activities and fixing of wig on the scalp of the human being. Since the entire activity was subjected to payment of VAT, the Hon'ble Court held that the activity of the assessee is of sale and not amount to service. Applying the ration of the above decision of the Hon'ble Madras High Court, the present case is on better footing as the pre-dominant portion is the sale of explosives and very minuscule activity such as placing the explosive in the holes and blasting(even though the same was not carried out by the appellant) and entire value of the activity subjected to payment of VAT, the appellant's activity is clearly fall under sale of goods. 4.2 We further find that the appellant alternatively submitted that as per Rule 2A of Service Tax (Determination of value) Rules 2006, before or after 25 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 01.07.2012, value of goods was not to be included in the value of taxable service.
4.3 We find that as per Rule 2Aof Rules, 2006, it is clear that in any composite service, the value of goods is not to be included in the value of taxable service and in case of appellant, there is no dispute that the entire amount collected by the appellant from the buyers of Explosives is against sale of goods, which was considered by the revenue for the purpose of demand of Service Tax. Since, admittedly the entire amount is towards sale of goods, the same need to be deducted for calculating for value of Service Tax. According the receipt of sale proceedings of the goods from buyer is not taxable. This has been held by the Apex Court in the case of Intercontinental Consultants AndTechnocraftspvt Ltd.- 2018 (10) GSTL 401 (S.C). We find force in this submission of the appellant and accordingly, the entire value represent the value of sale of the goods cannot be subject to Service Tax. We find that from the entire facts based on the documentary evidence as discussed above, the transaction of the appellant is indeed sale of the goods. In the show cause notice heavy reliance was place on the statement dated 20.05.2015 of one partner of the appellant namely Shri MileshJoshi. We find that firstly the said statement is exculpatory and the second statement recorded on 02.06.2015 is partly exculpatory. In the peculiar facts of the present case, since all the documentary evidences established that the transaction is in the nature of sale, even if the partner of the appellant stated something which suits the revenue will not help the revenue for the reason that it is clearly contrary to the documentary evidences. It is also submission of the appellant that the statements of the partner were recorded under duress and pressure. They have also submitted that statements are recorded in English whereas partner has studied only upto 12 in Gujarati Medium, not knowing English language. The appellant during the 26 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 adjudication disputed the statement and submitted that the said statement may not be used in proceeding. In this position we are of the clear view that even the version of the statement of the partner being contrary to the documentary evidences. It was incumbent on the Adjudicating Authority to cross examine the witness Shri Milesh Joshi partner in terms of Section 9D of the Central Excise Act, which reads as under:
1[9D. Relevancy of statements under certain circumstances.--
(1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains,--
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceedings under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court.] From the above Section 9D it is statutory provision in law that for admitting any statement as evidence of the witness, the witness needs to be examined by the Adjudicating Authority and then only the same can be admitted as evidence.
4.4 Section 9D Ibid expressly deals with the circumstances in which a statement recorded before an officer of the Central Excise (under Section 14 of CE Act 1944) can be treated as relevant for the purposes of proving the truth of contents thereof. Ruling of the Hon'ble Punjab & Haryana High Court 27 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 in case of Jindal Drugs (Infra), 2016 (340) E.LT. 67 (P & H) has laid down detailed procedure, inter alia, providing for cross examination of witness of Revenue by the Adjudicating Authority and thereafter, if Adjudicating Authority is satisfied that the statement of the witness is admissible in evidence than Adjudicating Authority is obligated to offer such witnesses for cross examination by other side/assessee. Such view has also been affirmed by the Hon'ble Supreme Court in the case of Andaman Timber (Infra) 2015 (324) E.LT. 541 (S.C.). Appellant submit that there are numerous decisions of the Tribunal laying down that such admission of persons, without following procedure u/s 9D Ibid, cannot be considered to be conclusive evidence to establish the guilt of the Appellant in such cases. Burden of proof is on the Revenue and same is required to be discharged effectively. The persons whose statement is relied upon by department was neither examined or cross-examined u/s 9D ibid. The Hon'ble P & H High Court in case of M/s. G- Tech Industries Ltd. v. Union of India [2016 (339) E.LT. 209 PBH] has held that Section 9D of the Act has to be construed strictly, as mandatory and not merely directory. The Hon'ble High Court in case of Jindal Drugs Pvt. Ltd. Vs. Union of India 2016 (340) E.LT. 67 (P & H) also held in favour of the Trade. In the present matter, the Adjudicating Authority has failed to follow the requirement of Section 9D of the Central Excise Act 1944 regarding examination in chief of witness and allowed cross examination of witness. Therefore, demand of service tax on the basis of such statements not sustainable. Adjudicating Revenue Authority has not Examined and allowed Cross Examination of shriMilesh Joshi partner u/s 9D of Central Excise Act 1944. In absence of such Cross Examination, statements taken and used against appellant to raise the Service Tax demand have to be discarded in terms of section 9D and decisions. Thus, by not allowing Examination and Cross Examination of witness u/s 9D of Central Excise Act 1944, the 28 ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 adjudicating authority has destroyed case of Revenue. The entire case of Revenue has been vitiated in these proceedings, making the Service Tax demand unsustainable for violation of the Principles of Natural Justice. Except statements of Partner shriMilesh D. Joshi (witnesse), there is nothing on record to establish case of Revenue. Thus, when Adjudicating Authority has neither examined partner Milesh Joshi u/s 9D ibid nor allowed his cross examination, then, all such statements need not be considered as valid evidences and consequently, Service Tax demands based thereon deserves to be dropped in facts of the cases.
4.5 This Hon'ble Tribunal at Ahmedabad in case of M/s Sakeen Alloys Pvt. Ltd. [2013 (296) ELT-392(Tri-Ahmd)] Affirmed in 2014 (308) ELT 655 (Gujarat High Court) and Maintained in 2015 (119) ELT A117 (Supreme Court) has held that there needs to be positive evidence for establishing the evasion, and that confessional statement in absence of any cogent positive evidence cannot make the foundation for levying the excise duty on the ground of evasion of tax. The above settled views are followed by the Hon'ble CESTAT, Ahmedabad in case of M/s. Mahesh Silk Mills Vs CCE reported at 2014 (304) ELT 703 (Tri Ahmd). Positive evidences are required for establishing evasion, and on facts, there is no material reflecting evasion of Service Tax. OnConsidering the factual matrix when there is no clinching, cogent positive evidence to sustain the allegation of evasion of Service Tax, the demands of Service Tax in the present Appeals, deserves to be set aside. From the above settled law viz-a-viz the facts of the present case, the statement in the present case has no evidentiary value, hence the same is discharged.
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ST/12174/2016, ST/11743/2018, ST/11744/2018, ST/10286/2020 As per our above discussion and finding, it is beyond any doubt that the appellant have carried out the activity of sale of goods. Hence, the same will not fall under the category of any service. The service Tax demand, interest and penalties not sustainable on this ground. The appellant have raised other issues such as limitation etc,. Since, we are deciding the matter on the first issue whether the activity is sale or service, we are not addressing other issues.
5. Accordingly, the impugned orders are set aside, appeals are allowed with consequential relief.
(Pronounced in the open court on 12.08.2022) RAMESH NAIR MEMBER (JUDICIAL) (RAJU) MEMBER (TECHNICAL) Palak