Custom, Excise & Service Tax Tribunal
M/S Aravali Construction Company Pvt. ... vs Cce, Jaipur Ii on 26 July, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. I DATE OF HEARING : 21/07/2016. DATE OF DECISION : 26/07/2016. Service Tax Appeal No. 309 of 2009 [Arising out of the Order-in-Original No. 1/2009/ST/JP-II-COMM dated 29/01/2009 passed by The Commissioner II, Central Excise & Customs, Jaipur.] For Approval and signature : Honble Shri Justice Dr. Satish Chandra, President Honble Shri B. Ravichandran, Member (Technical) 1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? M/s Aravali Construction Company Pvt. Ltd. Appellant Versus CCE, Jaipur II Respondent
Appearance S/Shri B.L. Narsimhan and Rachit Jain, Advocates for the appellant.
Shri Amresh Jain, Authorized Representative (DR) for the Respondent.
CORAM : Honble Shri Justice Dr. Satish Chandra, President Honble Shri B. Ravichandran, Member (Technical) Final Order No. 52560/2016 Dated : 26/07/2016 Per. B. Ravichandran :-
Aggrieved by the order dated 30/1/2009 of Commissioner of Central Excise, Jaipur II the appellants preferred this appeal. They are engaged in Mine Development, Exploitation and Mining of Ores for Hindustan Zinc Limited in various underground mines. The Department entertaining a view that the appellants are liable to service tax in respect of various work executed by them in these mines initiated proceedings against them for recovery of service tax of Rs. 72,73,737/- under the category of site formation service prior to 01/6/2007 and thereafter under the category of mining of mineral, oil or gas service. Service tax not paid on the value of free supply items given by the service recipient (Hindustan Zinc Limited) to the appellant was also sought to be demanded. On conclusion of the proceedings, the Original Authority vide the impugned order confirmed the demand of service tax of Rs. 72,73,737/- and imposed penalty of equivalent amount under Section 78 and also penalty under Section 76 of Finance Act, 1994.
2. The learned Counsel appearing for the appellant submitted mainly on the following grounds :-
(a) by examining the scope of the work undertaken by the appellant as available in the tender documents it is clear that the appellants have entered into composite contract involving various work like drilling, cross cutting, conventional raising, ramp excavation, long hole blasting, withdrawal of blasted ore etc. w.r.t. underground mines already in operations with Hindustan Zinc Limited. All these activities are relating to mining of ore and cannot be considered as site formation service ;
(b) After the introduction of mining as taxable service w.e.f. 01/6/2007, the appellants have discharged service tax on these services. It is not legally sustainable to tax the same activity under different category for different periods unless the pre-existing definition for site formation has been changed to create a new taxable service out of that ;
(c) Regarding inclusion of value of free items supplied by Hindustan Zinc Limited in the taxable value reliance was placed on the Larger Bench decision in Bhayana Builders (P) Ltd. vs. CST, Delhi reported in 2013 (32) S.T.R. 49 (Tri. Del.) : 2013 TIOL 1331 CESTAT DEL LB ;
(d) w.e.f. 01/6/2007, the appellants are liable to service tax under mining services which they have discharged, though with some delay. The service tax amount alongwith applicable interest has already been discharged much before the issue of show cause notice and there is no justification to include that amount in the present proceedings, apparently with the sole intention of imposing equivalent amount of penalty ;
(e) the whole demand is issued invoking extended period of limitation which is not sustainable as the appellants have intimated their activities to the Department in connection with a correspondence with Jurisdictional Superintendent on 23/11/2004 itself. There is no suppression of any fact by the appellants. In any case, it could be seen from the Boards circular dated 12/11/2007 w.r.t. certain disputes relating to service tax applicability to mining sector, the clarification was issued after obtaining feed back from the stake holders. In such situation there cannot be any allegation of suppression on the part of the appellants. As such the penalty imposed is not sustainable.
3. The learned AR contested the submissions of the appellant mainly on the following grounds :-
(a) the appellants were engaged in excavation, drilling, construction of ramp which are all relatable to activities of site preparation for ore extraction. Such activity can be correctly classified for service tax under site preparation ;
(b) the appellants did not take registration for purpose of discharging service tax for such work in 2005. Their information to the Department made on 23/11/2004 was in a different context of taxability of civil structure and hence extended period of demand has been correctly invoked against appellant.
4. Heard both the sides and examined the appeal records. On the first issue regarding appellants service tax liability prior to 01/6/07 under the category of site preparation we find on careful consideration of the terms of agreement with Hindustan Zinc Limited that these services are primarily w.r.t. mining of ore. The agreements are composite involving various connected work with main objective being raising of ore. Similar issue has been subject matter of decision earlier by the Tribunal in Arvind Kumar & Co. vs. CCE, Jaipur II vide final order No. ST/737-738/2012 CU (DB) dated 30/11/2012, in Associated Soapstone Distributing Co. Pvt. Ltd. vs. CCE, Jaipur II reported in 2013 VIL 08 CESTAT DEL. and in National Construction Company vs. CCE, Jaipur reported in 2014 TIOL 387 CESTAT DEL. Tribunal held that in such situation the activities of site formation and clearance are to be treated as an activity ancillary to mining and since the overall contract for mining the contract being indivisible the same should be treated as mining contract. It was also held that w.e.f. 01/6/2007 when the activity of the appellant has been accepted by the Department as mining service, for the period prior to 01/6/2007 the same activity cannot be classified under site formation service. We find that the impugned order cannot be sustained on this ground.
5. Regarding inclusion of value of free supply items for service tax purpose the matter has been settled by the Larger Bench of the Tribunal in Bhayana Builders (P) Ltd. vs. CST, Delhi (supra) and in Karamjeet Singh & Co. Ltd. vs. CCE, Raipur reported in 2013 (32) S.T.R. 740 (Tri. Del.) and AMR India Ltd. vs. CCE, CUS & ST, Hyderabad II reported in 2015 TIOL 2834 CESTAT BANG. It has been held that value of free supply items cannot be held to be charge for services provided by the appellant. Hence following the ratio of decided cases we find the impugned order cannot be sustained on this ground also.
6. Regarding the service tax payable by the appellant under the category of mining services w.e.f. 01/6/07, the admitted fact is that appellants discharged the service tax in full before the issue of show cause notice. However, there has been a delay in payment for which interest also has been discharged. For the payments made in December 2007 show cause notice has been issued in July, 2008. The payment of tax has been taken note of in the show cause notice. We find that the appellants have all along admitted the tax liability and paid the same with the interest, wherever there is a delay. They are only contesting penalties imposed on them invoking suppression, fraud etc. We are in agreement with the appellant that there is no case for imposing any penalty leave alone equal amount of penalty in this case.
7. In view of the above analysis and finding, the impugned order is set aside and the appeal is allowed. It is noted that the service tax liability under the category of mining service w.e.f. 01/6/2007 is not contested and the same is upheld.
(Order pronounced in the open court on 26/07/2016.) (Justice Dr. Satish Chandra) President (B. Ravichandran) Member (Technical) PK ??
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