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TaxTMI 
TaxTMI 
TaxTMI 
2023 (5) TMI 12
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....oduced w.e.f. 01.07.2012. Even the excavation and removal of overburden by way of blasting of explosives for preparation of agricultural land and digging of well have also been made taxable. Department noticed that the respondent - assessee was not discharging the tax liability, rather was found evading the payment of service tax. 3. Department also observed that the assessee was having an explosive license for procuring explosive from the seller, storing the same and for subsequently using these explosive, through mine's blasters, at the site of customer, for excavation of sand stone. It was found that explosive material was issued from respondent's magazines under Form RE-13 (pass for use of explosives) as per the requirement/consumption for blasting at customer's site. On being enquired, the partners of the respondent-assessee were examined, who stated that they issued bills to the customers charging for the explosive material and blasting services separately and they pay the applicable Value Added Tax (VAT) on the explosive material. The partners simultaneously admitted that they cannot sell the explosives in the open market. Hence, they do not have any transaction of direct s....
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....ks contract service just because service provider has paid VAT on goods consumed during provision of service. Ld. D.R. has relied upon the decision in the case of Idea Mobile Communication Ltd. vs. CCS Cochin reported as 2011 (23) STR 433 (S.C.). 8. Ld. D.R. also relied upon the decision in the case of M/s. Shikhavat Explosives vs. State of Rajasthan reported in 2004 (137) STC 326 (Raj.) as was decided on 21.01.2003 wherein it was held that when a job of blasting is undertaken, the use of explosives in such job can neither be termed as sale within the meaning of Rajasthan Sales Tax Act nor it could be subjected to be levy of tax. It is submitted that Commissioner (Appeal) has wrongly held the services to be classifiable under works contract. The order of Commissioner (Appeals) while dropping the demand is therefore, prayed to be set aside and appeal is prayed to be allowed. 9. While rebutting these submissions, ld. Counsel for the respondent assessee mentioned that the respondents have been paying VAT under Rajasthan VAT Act on the value of explosives used in the process. The said fact has nowhere been disputed. The Department is thus, trying to undo the assessment made by the Ra....
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....bills in question, that too, at a higher rate of 14.5% as compared to service tax rates applicable during the period of demand, the intent to evade duty on part of the assessee has wrongly been alleged. Hence the extended period for issuing the Show Cause Notice has wrongly been invoked. The demand has rightly been dropped even on the grounds of limitation. Impressing upon no infirmity in the order of Commissioner (Appeals), the appeal filed by the department is prayed to be dismissed. 12. Having heard the rival contentions, perusing the record and after going through the relevant case law relied upon by the parties, we hereby observe and hold as follows:- The original adjudicating authority has confirmed the proposal of the Show Cause Notice dated 26.04.2018 by holding that the activity of the respondent is blasting services against consideration, hence are taxable in terms of provisions of section 65 B (44) of Finance Act, 1994. The very basis of those findings is the respondent's own admission that they are not selling the explosives to their customers while blasting at the customers' site. Also for the reason that the explosives issued for blasting was fully consumed while pr....
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....son to whom such transfer, delivery or supply is made. The definition of "goods" in clause (12) is inclusive. It includes all materials, commodities and articles. The expression, "goods" has a broader meaning than merchandise. Chattels or movables are goods within the meaning of clause (12). Sub-clause (b) refers to transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. The expression "in some other form" in the bracket is of utmost significance as by this expression the ordinary understanding of the term "goods" has been enlarged by bringing within its fold goods in a form other than goods. Goods in some other form would thus mean goods which have ceased to be chattels or movables or merchandise and become attached or embedded to earth. In other words, goods which have by incorporation become part of immovable property are deemed as goods. The definition of "tax on the sale or purchase of goods" includes a tax on the transfer or property in the goods as goods or which have lost its form as goods and have acquired some other form involved in the execution of a works contract." 14. Hon'ble Court in the case of Kone Ele....
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....in structure and even though they lost their identity as goods. Hence it is liable to tax under Article 366 (29A) (b) of Constitution as was introduced vide 46th Amendment of 1982 Act. 16. We observe that the very basis of 46th Amendment was the decision of Hon'ble Supreme Court in Gannon Dunkerley's reported in AIR 1958, SC, 560 & (1983) 1 SCC 364 wherein the Constitution Bench had laid down "dominant intention test" to find out as to whether a particular contract involved transfer of property in goods. The Court was of the opinion that if the dominant intention of a contract was not to transfer the property in goods, but it was Works Contract, or for that matter, a contract in the nature of rendering of services, even if a part of it related to the transfer of goods, that would be immaterial and no sales tax on the said part could be levied, going by the principle of dominant intention behind such a contract, which was in the nature of Works Contract in the contract relating to construction of buildings. Thus, the Court also held that such a contract was indivisible. 17. However, the Supreme Court in the case of Builders Association of India vs. Union of India reported in ....
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....sive and elaborate discussion once again specifically negated the argument predicated on "dominant intention test" in the following words:- "64. Whether contract involved a dominant intention to transfer the property in goods, in our view, is not at all material. It is not necessary to ascertain what is the dominant intention of the contract. Even if the dominant intention of the contract is not to transfer the property in goods and rather it is the rendering of service or the ultimate transaction is transfer of immovable property, then also it is open to the States to levy sales tax on the materials used in such contract if it otherwise has elements of works contract. The view taken by a two-Judge Bench of this Court in Rainbow Colour Lab. (supra) that the division of the contract after Forty-sixth Amendment can be made only if the works contract involved a dominant intention to transfer the property in goods and not in contracts where the transfer of property takes place as an incident of contract of service is no longer good law, Rainbow Colour Lab. (supra) has been expressly overruled by a three-Judge Bench in Associated Cement. 65. Although, in Bharat Sanchar, the Court w....