2026 (1) TMI 854 - AT - Service Tax

Drilling, blasting and site-preparation activities held non-taxable under Notification No.25/2012-ST; classification demand set aside, appeal allowed

Whether drilling/blasting/site-preparation activities constituted taxable works-contract/service or fell under Notification No.25/2012-ST and transitional ... Classification Of goods - Works contract service - drilling and blasting and site-preparation services - exempt service under Notification No.25/2012-ST - transitional provisions u/s 174(2)(e) of the CGST Act, 2017 - Imposition for suppression and extended period of limitation - suppression and failure by the appellant to discharge service tax liability - HELD THAT:- Since the Appellant failed to register, file returns, and suppressed the extent of their taxable activities, the demand confirmed under the extended period of limitation and the imposition of penalties for suppression of facts are legally justified. We note that the said issue is no more res-integra and stands covered by this Tribunal’s decision in M/s. Navdeep Traders [2023 (5) TMI 12 - CESTAT NEW DELHI] held that ' undisputedly, the assessee – respondent was purchasing explosives from the authorized seller under a license for being used for the blasting purposes at customer’s site. Though the assessee was not selling the explosive to the mine blaster and was issuing the same for execution of mining works but there is no simultaneous denial to the fact that the assessee was issuing bills to the customer in which they were charging for the explosive material and blasting service separately and that the assessee was paying applicable VAT on the explosive material. From the entire above discussion dominant intention test to ascertain the factum of sale no more holds a good law. ' We respectfully follow the ratio of the aforesaid judgment and set-aside the impugned order. The appeal stands allowed accordingly. Issues: (i) Whether the drilling, blasting, quarrying, loading and transporting activities performed by the appellant for road construction (GSB portion) are taxable as works contract services attracting service tax, and whether the demand, interest and penalties confirmed by the adjudicating authority are liable to be set aside.Analysis: The Tribunal examined prior decisions including a recent Tribunal decision in M/s. Navdeep Traders and authoritative apex court jurisprudence interpreting the effect of the 46th Amendment and Article 366(29A) (deemed sale) on works contracts. The reasoning applied the principle that services involving utilization and incorporation of goods in works contracts fall within the concept of works contract and are thereby treated as deemed sale; the dominant intention test is not determinative. The Tribunal also considered application of exemption notifications and the position under the State VAT law and valuation rules, and found the factual matrix comparable to the precedent where blasting and related services were held to be classifiable under works contract and exempted when below threshold limits.Conclusion: The impugned demand, interest and penalties are set aside and the appeal is allowed in favour of the assessee.