TaxTMI 
TaxTMI 
2021 (8) TMI 801
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....onstruction of STP, ETP and sewage systems, in respect of which a demand of service tax was made by alleging that the construction undertaken was commercial in nature and would qualify as a taxable service under the category of 'commercial or industrial construction service [CICS ], defined under section 65(25b) of the Finance Act and made taxable under section 65(105)(zzq) of the Finance Act. Accordingly, three show cause notices were issued to the appellant for the period prior to 30.06.2012. The demands proposed in these notices were dropped by the Tribunal by an order dated 17.01.2019. 4. The present show cause notice dated 22.05.2014 has been issued for the subsequent period July 2012 to March 2013 in continuation of the previous show cause notices and proposes a demand of service tax of Rs. 17,92,08,222/- on the services, which include construction of STPs, ETPs, and laying of sewage pipes, rendered to Government bodies and other entities. 5. The appellant filed a detailed reply contesting the demand on the ground that the services rendered by it were exempt by virtue of a Notification dated 20.06.2012 that was issued in exercise of the powers conferred by section 93(1)....
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..... 1 and 2, namely construction of ETPs in the oil fields of ONGC, have been recorded by the Commissioner in paragraphs 74 to 77 of the order. The benefit of the Notification dated 20.06.2012 under Serial No. 13(d) has been denied for the reason that the services have been rendered in the factory area. The findings are reproduced below: "74. I find that the noticee is not entitled for the exemption Notification as claimed of the following projects, the detail analysis report of the project wise is mentioned hereunder:- (a) Oil & Natural Gas Corporation Ltd., Ahmedabad:- As per the contract agreement the service recipient is Oil & Natural Gas Corporation Ltd., Ahmedabad and UEM is the service provider. As per the agreement the nature of work is Survey (per-engineering, preconstruction/ pre-installation and post installation), Design, Detailed Engineering, Procurement & supply, Transportation, Fabrication, Installation/erection Hook-up, Testing, Pre-commissioning, Commissioning for Construction of Six Effluent Treatment Plant at Ahmedabd and Anlkleshwar assets, India and 7 years of operation and maintenance responsibility with details further described in part-IV of Bidding Docume....
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....oil failed falls under the Mines Act, 1952 and does not falls under Factory Act, 1948. I find that the extraction of crude oil is also a part of the manufacturing activities and therefore as per definition of the Factory it falls within a factory premises. The benefit of the exemption Notification cannot be available to the noticee on the ground that the operation in the oil filed comes under the Mines Act, 1952. For Service Tax Rules/ The Finance Act, 1994, the Factory Act, 1948 is not relevant." (emphasis supplied) 10. The findings in regard to the service at Serial No. 3, namely construction of STPs for NBCC are contained in paragraphs 78 to 80 of the order passed by the Commissioner. The benefit of the Notification at Serial No. 13(d) has been denied for the reason that the contract was for sewerage treatment plant, which is not for pollution control. The findings are reproduced below: "78. National Building Construction Company Ltd. (NBCC):- As per the contract agreement the service recipient is National Building Construction Company Ltd. (NBCC) and UEM is the service provider. As per the agreement the nature of work is Design, construction, Erection, commissioning, Trial ....
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....alify as a 'factory'. As per section 65B of the Finance Act, in a situation where a word or expression is not defined under the Finance Act, reference may be drawn to the Excise Act under which a factory is a premise where 'goods are either manufactured' or a 'process in relation to their manufacturing is undertaken'. Extraction of crude oil does not qualify as manufacture, as the activity involving extraction of natural resources would quality as 'production', which is independent and different to manufacture. In this connection, reliance has been placed on the following decisions: a) Commissioner of Income Tax vs. NC Budharaja & Co. [(1993) 70 Taxman 312 (Supreme Court) ]; b) Chowgule and Co. Private Limited vs. Union of India [1980 (11) TMI 61 (Supreme Court)]; c) Commissioner of Income Tax vs. Singareni Colleries Limited [1995 (11) TMI 36- Andhra Pradesh High Court ]; d) Commissioner of Income Tax vs. Sesa Goa Limited [(2005) 142 Taxman 16 (Supreme Court) ]; e) Commissioner of Income Tax vs. Sesa Goa Limited, DO Bandodkar and Songs Private Limited; and Chowgule and Co. Limited [2003 (7) TMI 30-Bombay High Court ]; and f) Chrestien Mica Industries Limited vs.....
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.... 15. As noticed above, the demand for ETPs constructed for ONGC has been confirmed for the reason that the appellant has constructed the ETPs at the oil fields of ONGC, which qualify as factory, and would, therefore, not be exempt under Serial No. 13(d) of the Notification dated 20.06.2012. 16. It is seen that the exemption is available under the Notification dated 20.06.2012 under Serial No. 13(d) for construction of an ETP, except when located as a part of a factory. There is no doubt that the appellant was constructing ETPs at the location of the oil exploration wells (on-shore) of ONGC. The issue that needs to be decided is whether the oil fields of ONGC, which are registered under the Mines Act, would qualify as a 'factory'. The term 'factory' has neither been defined under the Notification nor under the Finance Act, However, section 65B of the Finance Act provides that in a situation where a word or expression is not defined under the Finance Act, reference may be drawn to the Central Excise Act, 1944 [the Excise Act ]. 17. Section 2(e) of the Excise Act defines 'factory' as under: "(e) "factory" means any premises, including the precincts thereof, wherein or in any part....
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....ticular specification. The Supreme Court held that the process undertaken by the assessee would not amount to 'manufacture'. The relevant portion of the decision is reproduced below: "5. The test that is required to be applied is: does the processing of the original commodity bring into existence a commercially different and distinct commodity? On an application of this test, it is clear that the blending of different qualities of ore processing differing chemical and physical composition so as to produce ore of the contractual specifications cannot be said to involve the process of manufacture, since the ore that is produced cannot be regarded as a commercially new and distinct commodity from the ore of different specifications blended together. What is produced as a result of blending is commercially the same article, namely, ore, though with different specifications than the ore which is blended and hence it cannot be said that any process of manufacture is involved in blending of ore." 23. In Singareni, the Andhra Pradesh High Court examined whether winning or excavation of coal from the mines amounted to production or manufacture. The High Court, after placing reliance on t....
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.... the Supreme Court in Vikram Cement. 29. The decision of the Supreme Court does not hold, as contended by the learned Authorised Representative, that captive mines are integral part of the factory. 30. Learned Authorised Representative appearing for the Department also placed reliance upon the decision of the Supreme Court in Collector of Central Excise vs. Rajasthan State Chemical Works [1991 (55) E.L.T. 444 (S.C.)]. The exemption under a Notification was available only when the goods were manufactured without the aid of power at any stage of a process. The Supreme Court examined what activity would amount to 'process' in or 'in relation to manufacture of goods' for the application of the Notification. It is in this context that the Supreme Court observed as follows: 11. Manufacture implies a change but every change is not manufacture, yet every change of an article is the result of treatment, labour and manipulation. Naturally, manufacture is the end-result of one or more processes through which the original commodities are made to pass. The nature and extent of processing may vary from one class to another. There may be several stages of processing, a different kind of proce....
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....to the further process of manufacture. 16. A process is a manufacturing process when it brings out a complete transformation for the whole components so as to produce a commercially different article or a commodity. But, that process itself may consist of several processes which may or may not bring about any change at every intermediate stage. But the activities or the operations may be so integrally connected that the final result is the production of a commercially different article. Therefore, any activity or operation which is the essential requirement and is so related to the further operations for the end-result would also be a process in or in relation to manufacture to attract the relevant clause in the exemption notification. In our view, the word `process' in the context in which it appears in the aforesaid notification includes an operation or activity in relation to manufacture. (emphasis supplied) 31. Thus, what follows from the above decisions is that there is a distinction between 'production' and 'manufacture' and extraction of natural resources (including crude oil) would amount to 'production' and not 'manufacture'. 32. Keeping in mind the aforesaid principl....