2025 (11) TMI 1878 - AT - Service Tax

Coal transport held GTA service, CENVAT credit restored, tax demands and extended limitation set aside for assessee

M/s BLA Infrastructure Pvt. Ltd. Versus Commissioner of CGST & Central Excise, Kolkata

CESTAT Kolkata allowed the assessee's appeal in full. It held that the services rendered involved only transportation of coal, taxable as 'Goods Transport ... Reversal of Cenvat Credit for irregularly availed cenvat credit - time limitation - instant case relates to the period 2009-10 to 2013-14 whereas the SCN is issued on dated 24-07-2016 - penalty - classification of services - mining services or not. Classification of services - mining services - HELD THAT:- The documentary evidence clearly shows the consideration being received only towards transportation of coal and cannot be equated with ‘Mining Services’. This Tribunal in the case of Calcutta Industrial Supply Corpn Vs Commissioner of CGST & Excise Kolkata [2024 (9) TMI 926 - CESTAT KOLKATA], has held that 'The activity undertaken by the assessee, is the transportation of coal up to the distance of 7 km, which is incidental loading and the same is taxable under “Transport of Goods by Road Service” as held by the Hon’ble Supreme Court in the case of Commissioner of Central Excise and Service Tax, Raipur Vs. Singh Transporters [2017 (7) TMI 494 - SUPREME COURT], wherein it has been held that the transportation of coal from pit head to railway siding inside the mines is taxable as “Goods Transport Agency Services”.' The confirmed demand of Rs.53,01,004 set aside and the appeal allowed to this extent on merits. Availment of CENVAT credit - HELD THAT:- The Tribunals / Courts have been consistently holding that Cenvat is granted so as to avoid the cascading effect and so long as the goods in question reach the assessee and enough evidence is brought in towards payment for the invoices of such goods, the Cenvat Credit should not be denied on account of procedural lapses. This Tribunal in the case of Anvil Cables Pvt Ltd Vs CCE& ST Jamshedpur [2023 (8) TMI 655 - CESTAT KOLKATA], has held 'Further, it is an admitted fact that although the invoices were in the name of their Head Office, but the goods have been received in the factory at Gamharia Unit, which is registered with the Central Excise Department and the same has been used by the appellant for manufacture of their final product, which suffered duty.' - the confirmed demand set aside on merits. Regarding the balance demands, it is found that in case of confirmed demand of Rs.30052, the same is towards construction road, which is exempted from payment of Service Tax. The other demand of Rs.4,340 has been confirmed without specifying the service attracting this amount. On this factual basis, these demands set aside on merits. Extended period of limitation - HELD THAT:- There is no dispute that the appellant has been maintaining proper record for all the receipts and accounting for the same. The data has been taken from the P & L accounts and Balance Sheet for quantifying the demand. Based on the records produced by the appellant, most of the demands have been dropped at the adjudication stage. This shows that no case of suppression has been brought in by the Revenue. Therefore, the confirmed demand for the extended period do not sustain even on account of time-bar - the same is set aside. The appeal stands allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the appellant's coal transportation activities within mining areas are classifiable as 'Mining Services' or as 'Goods Transport Agency Services', and whether the resultant service tax demand is sustainable. 1.2 Whether the disallowance of CENVAT credit on capital goods, on the grounds of (a) non-tallying with capitalisation and (b) technical defects in invoices, is legally sustainable. 1.3 Whether service tax demand under 'Works Contract Service' on road construction is sustainable. 1.4 Whether a residual service tax demand, confirmed without specifying the nature/category of service, is sustainable. 1.5 Whether the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 was validly invoked for the period 2009-10 to 2013-14 in a show cause notice issued on 24.07.2016. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification of coal transportation services and sustainability of demand under 'Mining Services' Legal framework (as discussed): 2.1 The Court referred to the statutory scheme of classification under Sections 65, 65A/66F of the Finance Act, 1994, and the competing entries of 'Mining Services' and 'Goods Transport Agency Services'. It also relied on a prior Supreme Court decision holding that transportation of coal from pit-heads to railway sidings within mining areas is more appropriately classifiable as 'transport of goods by road service' and not as 'service in relation to mining of mineral, oil or gas'. A prior decision of the Tribunal following that view was also cited and applied. Interpretation and reasoning: 2.2 The work contracts and invoices produced showed that the appellant was engaged in 'loading & transportation of coal by tippers' from quarry bed to surface within specified leads, and transportation of crushed coal from open cast project to railway siding, with consideration charged exclusively for transportation of coal. 2.3 On examining the contract of Eastern Coalfields, the Court noted that 'Transportation of coal' was separately identified in the work description at distinct line items with separate rates, evidencing that the scope was transport-centric and not composite mining operations. 2.4 The Court held that such activities constitute transportation of goods by road and cannot, 'by any process of reasoning', be equated to 'Mining Services'. It followed the binding precedent that even transportation within mining areas from pit-heads to railway sidings is to be classified as 'Goods Transport Agency Services' and not as mining-related services. Conclusions: 2.5 The coal transportation services were held to be classifiable as 'Goods Transport Agency Services' and not as 'Mining Services'. Accordingly, the demand of Rs. 53,01,004 confirmed under 'Mining Services' was set aside on merits. Issue 2 - Disallowance of CENVAT credit on capital goods due to non-capitalisation and invoice deficiencies Legal framework (as discussed): 2.6 The Court examined the CENVAT Credit Rules, 2004, particularly the conditions for availing credit on capital goods and the nature of 'duty paying documents' under Rule 9, and noted that the Rules do not require capital goods to be capitalised in the books as a pre-condition for availing credit. 2.7 Reference was made to Tribunal jurisprudence holding that CENVAT credit cannot be denied merely because invoices bear the address of a head office rather than the factory, if receipt and use of goods and duty payment are not in dispute, and that procedural lapses in documentation should not defeat substantive credit when goods are received and used in dutiable output. Interpretation and reasoning: 2.8 The show cause notice alleged that the appellant's capital goods did not tally with capitalisation figures vis-à-vis CENVAT credit claimed; it did not initially raise all invoice-format deficiencies later noticed. 2.9 The Court held that, under the CENVAT Credit Rules, credit entitlement does not depend on whether goods are capitalised or treated as revenue expenditure; classification in financial accounts is an accounting matter and not a statutory condition. The relevant enquiry is whether goods were received, accounted for, and used in providing output services. 2.10 The record contained no allegation that the capital goods were not received in the appellant's premises or that they were not used for providing taxable output services. The appellant produced a Chartered Accountant's certificate and ledger copies evidencing purchase and payment. 2.11 As to invoice deficiencies (absence of ECC number, Commissionerate/division particulars, tariff heading, etc.), the Court noted that these were procedural lapses discovered later because the appellant had not produced documents earlier. However, consistent with settled law, CENVAT credit is intended to avoid cascading of taxes and should not be denied when (a) duty-paid nature of the goods, (b) receipt, and (c) use in taxable output services are not in dispute, even if documents have technical defects. 2.12 The Court declined to accept the appellant's contention that the adjudicating authority had travelled beyond the show cause notice, observing that non-production of documents at the adjudication stage led to later identification of documentation lapses. Nevertheless, on merits, the Court applied the doctrine that substantive benefit cannot be denied for mere procedural or technical lapses. Conclusions: 2.13 Capitalisation in the books is not a statutory pre-condition for availing CENVAT credit on capital goods; treatment as revenue expenditure does not vitiate credit entitlement. 2.14 Where receipt, duty-paid character, and use of capital goods in providing output services are not disputed, CENVAT credit cannot be denied merely due to deficiencies in the invoice particulars. 2.15 The disallowance of CENVAT credit amounting to Rs. 23,41,941 was set aside on merits. Issue 3 - Taxability of road construction under 'Works Contract Service' Interpretation and reasoning: 2.16 The Court noted that the confirmed demand of Rs. 30,052 pertained to 'Works Contract Services' for road construction. 2.17 On the factual matrix, the Court found that the activity was road construction, which stood exempt from service tax during the relevant period. Conclusions: 2.18 The demand of Rs. 30,052 under the category 'Works Contract Services' was held to be unsustainable and was set aside on merits. Issue 4 - Validity of residual demand of Rs. 4,340 without specified service category Interpretation and reasoning: 2.19 The residual demand of Rs. 4,340 arose from a difference between Profit & Loss account figures and ST-3 returns. The adjudicating authority had confirmed this without identifying or specifying the nature/category of taxable service to which the amount related. 2.20 The Court held that confirmation of tax demand without identification of the specific taxable service or statutory charging provision is legally untenable. Conclusions: 2.21 The residual demand of Rs. 4,340 was set aside on the ground that it had been confirmed without specifying the nature of the service attracting tax. Issue 5 - Invocation of extended period of limitation under Section 73(1) proviso Legal framework (as discussed): 2.22 The Court referred to Section 73(1) of the Finance Act, 1994 and its proviso, which permits invocation of an extended period of limitation where non-payment arises due to fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade tax. 2.23 The Court noted Supreme Court authority holding that extended limitation under Section 73 requires an active and deliberate act to evade tax; mere non-payment or interpretational disputes, absent intentional suppression or fraud, do not justify invocation of the extended period. 2.24 A High Court decision was also noted, holding that where the demand is raised solely on the basis of figures from the assessee's own accounts and no fresh material indicating suppression is brought on record, the extended period cannot be invoked. Interpretation and reasoning: 2.25 The period in dispute was 2009-10 to 2013-14; the show cause notice was issued on 24.07.2016, beyond the normal period of one year, and thus sustainable only if conditions for the extended period were met. 2.26 The demand of Rs. 7.82 crores in the show cause notice was substantially dropped at the adjudication stage (over 90% of the demand), and even in respect of CENVAT credit, a significant portion was dropped. This indicated that a large part of the initial demand was not legally sustainable. 2.27 The quantification of demand was entirely based on the appellant's own Profit & Loss accounts and balance sheet; the Department did not bring on record any new or external material to show suppression, fraud, or intent to evade. 2.28 The appellant was maintaining proper books of account and there was no allegation that records were manipulated or concealed. The dispute essentially turned on classification and interpretation, not on discovery of hidden transactions. 2.29 In these circumstances, the Court held that the necessary ingredients of the proviso to Section 73(1)-namely, fraud, wilful misstatement, suppression of facts with intent to evade tax-were absent. Conclusions: 2.30 The extended period of limitation under the proviso to Section 73(1) was not validly invoked; the confirmed demand pertaining to the extended period was unsustainable on limitation grounds. 2.31 On both merits and limitation, all surviving demands were set aside, and the appeal was allowed with consequential relief as per law.