Tribunal Upholds Service Tax on Tangible Goods, Sets Aside Penalties and Other Service Tax Demands.

The Tribunal set aside the demands for service tax under "Commercial and Industrial Construction Service" and "Cargo Handling Service." However, it upheld the demand for service tax under "Supply of Tangible Goods Service" amounting to Rs. 5,58,614/- with applicable interest. The penalty under Section 76 was also set aside, and the appeal was disposed of accordingly.

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Issues Involved:

1. Demand of service tax under "Commercial and Industrial Construction Service".
2. Demand of service tax under "Cargo Handling Service".
3. Demand of service tax under "Supply of Tangible Goods Service".
4. Imposition of penalties under Section 76 and 77 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Demand of Service Tax under "Commercial and Industrial Construction Service":

The appellant was engaged in providing services that involved both supply of goods and rendering of services. The Department raised a demand under "Commercial and Industrial Construction Service" (CICS) for the period 01/04/2012 to 31/03/2013, amounting to Rs. 3,11,604/-. The appellant contended that the services provided were actually "works contract services" and cited the Supreme Court judgment in the case of Commissioner of Central Excise and Customs, Kerala versus Larsen & Toubro Limited (2015), which established that works contract services cannot be charged under any other head. The Commissioner rejected this contention, stating that the appellant did not fulfill the conditions under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. However, the Tribunal concluded that even if the conditions were not fulfilled, service tax could not be charged under any other head. Therefore, the demand under CICS was set aside.

2. Demand of Service Tax under "Cargo Handling Service":

The demand under cargo handling service was based on two activities:
(i) Supply of raw material like river sand and crusher grit to M/s Enercom India Ltd.
(ii) Transportation of 40mm size limestone from RSMM's Sanu Mines to M/s GLPL, Barmer.

The Tribunal noted that the nature of the contracts was for supply and transportation, not for cargo handling. The earlier order No. 50287 of 2019 had already set aside similar demands, noting that the supply of materials and transportation activities could not be considered as cargo handling services. Consequently, the Tribunal found no reason to deviate from this view and set aside the demand under cargo handling service.

3. Demand of Service Tax under "Supply of Tangible Goods Service":

The appellant did not contest the demand under "Supply of Tangible Goods Service" for their JCB and tractor supplied to M/s Enercom India Ltd. project, amounting to Rs. 5,58,614/-. The Tribunal upheld this demand along with applicable interest under Section 75 of the Finance Act, 1994.

4. Imposition of Penalties under Section 76 and 77 of the Finance Act, 1994:

Given that the bulk of the demands were set aside, the Tribunal invoked the powers under Section 80 and set aside the penalty imposed under Section 76. The Tribunal concluded that the impugned order is upheld only to the extent of the demand in service tax on supply of tangible goods service amounting to Rs. 5,58,614/- along with interest. The remaining part of the impugned order was set aside.

Conclusion:

The appeal was disposed of with the Tribunal setting aside the demands under "Commercial and Industrial Construction Service" and "Cargo Handling Service", while upholding the demand under "Supply of Tangible Goods Service" along with interest. The penalty under Section 76 was also set aside. The order was pronounced in open court on 12/03/2021.

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