TaxTMI 
TaxTMI 
2021 (8) TMI 801
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....not discharged. These activities related to construction 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 ....
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....Building Construction Company Construction of Sewage Treatment Plant 1,74,839 9. The findings, in regard to services at Serial No's. 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....
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....rocess connected with the production of these goods is being carried on or is ordinarily carried on". 77. The noticee submitted the letter dated 10.09.2012 issued by ONGC that the operation in the 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 contrac....
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....CE [1996 (88) E.L.T. 641 (S.C.)]; and b) Toyo Engineering India Limited vs. CC, Mumbai [2006 (201) E.L.T. 513 (S.C.)]. B ETPs Constructed for ONGC (i) The only question is whether the oil fields of ONGC, which are registered under the Mines Act, would qualify 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 ]; ....
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....e learned counsel for the appellant would be examined, if considered necessary, after the second and the third submissions relating to ETPs constructed for ONGC and STPs constructed for NBCC are decided, because in case these two matters are decided in favour of the appellant it may not be necessary to examine whether the order went beyond the show cause notice. B ETPs constructed for ONGC 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 No....
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.... be characterised as production, every production need not amount to manufacture." 22. Reference can also be made to the decision of the Supreme Court in Chowgule. The dispute was whether the goods purchased by the assessee would qualify as goods purchased for use in the 'manufacturing' process of goods. The assessee was undertaking mining of ore, which was washed, screened, transported, and mixed with different ores to arrive at a particular 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 to....
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....Ltd. vs. Commissioner of Central Excise, Hyderabad [2014 (308) E.L.T. A121 (A.P.) ] to contend that captive mines are integral part of factory. 27. In Vikram Cement, the Supreme Court observed that Modvat/CENVAT credit on capital goods, if the mines are captive mines so that they constitute one integrated unit together with the concerned cement factory, will be available to the assessee. 28. In Ultra Tech Cement, the Andhra Pradesh High Court followed the decision of 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 i....
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....ation on some material in order to its conversion to some particular stage. There is nothing in the natural meaning of the word `process' to exclude its application to handling. There may be a process which consists only in handling and there may be a process which involves no handling or not merely handling but use or also use. It may be a process involving the handling of the material and it need not be a process involving the use of material. The activity may be subordinate but one in relation 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 at....
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.... nor an ETP, the benefit would not be available to the appellant. 38. It is a fact that the STP is set up for the purpose of removing pollutants and contaminants from wastewater, primarily from household sewage. It includes various processes so as to obtain clean and environment safe treated waste water. Hence, STP may be understood as a Wastewater Treatment Plant. 39. Oxford Dictionary of English (Third Edition)s defines 'sewage' as 'waste water and excrement conveyed in severs'. 40. English Dictionary for Advanced Learners defines 'sewage' as 'sewage is waste matter such as faeces or dirty water from homes and factories, which flows away through sewers'. 41. To understand whether STP would also be covered under the scope of ETP, it is necessary to find out the meaning of the term 'effluent'. 42. Cambridge Dictionary defines 'effluent' as under: "liquid waste that is sent out from factories or places where sewage is dealt with, usually flowing into rivers, lakes, or the sea." 43. The Merriam-Webster Dictionary defines 'effluent' as follows: "effluent noun Definition of effluent (entry 2 of 2) : something that flows out: such as....