TaxTMI 
TaxTMI 
2025 (8) TMI 1064
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.... 1994. The issues in both these appeals being common, they were taken up for hearing together and are being disposed of by this common order. 2. The brief facts are that the appellant herein has two Proprietary concerns, namely S.V.K. Agency & S.V.K. Engineering Contractors, engaged in providing taxable services under the category of 'site formation clearance, excavation on earth moving and demolishing services', 'supply of tangible goods service' and 'cleaning services. Based on intelligence gathered by the officers of the Survey, Intelligence, Verification Unit, Headquarters, Tirunelveli which revealed that the appellant had neither taken service tax registration nor paid service tax, the officers of the departments called for details of the services provided by the appellant. In response, the appellant provided various documents and a statement was also recorded from the authorised representative of the appellant. The department also collected documents from the customers of the appellant. Pursuant to their investigation, the department issued a Show Cause Notice (SCN) dated 18.10.2013, for the period from 2008-2009 to 2011-2012 alleging that the appellant had provided servic....
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....Shri G. Natarajan, Advocate, appearing and arguing for the appellant, submitted as under: i) As regards the demand of Service tax for the period upto 30.06.2012 under site formation service, it is submitted that the Hon'ble Supreme Court in CCE & ST vs L&T Ltd., 2015 (39) STR 913 SC, has held that composite activities, involving transfer of property in goods, can be subjected to levy of service tax only under works contract service as defined in clause (zzzza) of the sub section (105) of the Section 65 of the Finance Act, 1994 and not under any other category of service. The Hon'ble Apex Court has held that Union Government did not have the right to levy taxes on transfer of property in goods, which falls within the State Government's domain, under S.No.54 of list II of seventh schedule to the constitution and in the absence of any statutory mechanism to determine the value of services in works contract, only pure service contract can be subjected to levy of service tax, prior to this date. That this decision has been followed by the Hon'ble Tribunal in the following decisions wherein it has been held that the demand of service tax on composite contracts under any other ca....
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....ame reasons penalty imposed under Section 78 is unsustainable. vi) the penalty imposed under Section 78 in respect of the period 2012-2013 is unsustainable as the issue was already within the knowledge of the department when the first Show cause Notice was issued and the other penalties are also not sustainable. Subsequent to the hearing the Ld. Counsel also filed the citation SEM Construction vs CCS & ST, Rajkot, 2021 (44) G.S.T.L. 385 (Tri.-Ahmd.) 4. Shri M. Selvakumar, Ld. Authorised Representative, appeared for the Respondent and reiterated the findings in the impugned Order-in-Original. He submits that with effect from 01.07.2012, works contract as defined under Section 65B (54) of the Finance Act, 1994, included only certain services such as construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property. Ld. A.R submits that the definition therefore covers only such contracts which involve transfer of property in goods and for carrying out the activities specified in c....
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....in Section 65(97a), which stipulated that, "site formation and clearance, excavation and earthmoving and demolition" includes, - (i) drilling, boring and core extraction services for construction, geophysical, geological or similar purposes; or (ii) soil stabilization; or (iii) horizontal drilling for the passage of cables or drain pipes; or (iv) land reclamation work; or (v) contaminated top soil stripping work; or (vi) demolition and wrecking of building, structure or road, but does not include such services provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovating or restoring of water sources or water bodies; 9. In respect of the aforesaid service, Section65(105)(zzza) stipulated that "taxable service" means any service provided or to be provided to any person, by any other person, in relation to site formation and clearance, excavation and earthmoving and demolition and such other similar activities. 10. Taxable service in respect of "supply of tangible goods" was stipulated under Section 65(105)(zzzzj) with effect from 16-05-2008 as "taxable service" means any....
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....lex or a part thereof; or (d) completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or (e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects; 14. Pertinently, with effect from 01-07-2012, the provisions of Section 65 of the said Act ceased to apply by virtue of Notification 20/2012-ST dated 05-06-2012 and thus the definitions of services as provided in the said Section 65 including what constituted taxable service as defined in various sub clauses of Section 65(105) ceased to be applicable. 15. Furthermore, Section 65B inserted in the Finance Act, 1994 with effect from 01-07-2012 provides the definition of "service" in Section 65B(44) as "Service" means any activity carried out by a person for another for consideration, and includes a declared service. The said section 65B(44) also stipulates what the definition of "service" shall not include, and under sub-clause(ii) to clause (a) of Section 65B(44) stipulates that Service shall not include such transfer, delivery or supply of any goods which is deemed to be a sale within the me....
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.... component. It was further submitted that the latter, i.e., the indivisible composite contracts, would come under works contract and are classified as 'other works contract' under the Tamilnadu VAT Act. It was also stated that some of their service receivers have issued T form for works contract tax deduction at source. Relying on Circular No.334/01/2007-Leter D.O.F No. TRU dated 28-02-2007, it was contended that the intention of the legislature is not to tax all the works contract service but only the few works contract services specified in the definition. Reliance was placed on the M.F. (D.R) Letter F.No. B1/16/2007-TRU dated 22.05.2007-2007(6)STR(C124) to contend that contracts which are treated as works contract for the purpose of levy of VAT/sales tax shall also be treated as works contract for the purpose of levy of service tax. Reliance was also placed on the Circular No.123/5/2010 (ST) to contend that it is the nature of the contract rather than the nature of activities undertaken that distinguishes it from the previously stated activities (specified in the circular). The appellant also placed reliance on the CBEC Instruction Letter 334/1/2008-TRU dated 29-08-2008 while cl....
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....molition Services' as demanded in the SCN, service tax shall only be on the value of service involved in the contract and not on the entire value of the contract. It was contended that service tax if liable to be paid on such contracts require re quantification. For this, the value of material involved in such contract should be excluded from the value of the contract to arrive at the value of the taxable service. Reliance was placed on the decisions in BSNL v Union of India, 2006 and Imagic Creative P Ltd v. CCT, judgement dated 09-01-2008-SC, Daspalla Hotels Ltd v CCE, Vishakhapatnam, 2009 (7) TMI 551, CCE v Balaji Tirupati Enterprises, 2013 (32) STR 530 (All). The appellant also contended that notification No.12/2003-ST dated 26-06-2003 exempts value of material sold or supplied during the provision of service on production of documentary evidence and have made submissions inter-alia on the manner in which such value of material ought to be determined. 21. Thereafter, the appellant has proceeded to detail submissions with respect to the contract with NLC Tamilnadu Power Limited vide agreement No.CEO/NTPL/GM/CIVIL/004/2011-12 dated 04-07-2011 for site grading and filling of ce....
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....14 of table 3 by classifying them under "site formation and clearance, excavation and earthmoving services" is incorrect as these activities will not come under the scope of the aforesaid service. As regards scope defined in Sl.No.1 of table 1, serial no.1,4 of table 2, serial no.1,2,3,6 and 11 of table 3 are of composite one for supply of material and provision of service and the consideration is lumpsum and hence the service provided are works contract services. That the adjudicating authority has demanded service tax on this amount classifying it under "site formation and clearance, excavation and earthmoving services" which is inappropriate as the classification should be based on the nature of activity without considering the nature of contract. It was further contended that even if these contracts are taxable as provided in SCN under the aforementioned site formation and clearance, excavation and earthmoving services, service tax shall be liable to be paid only on value of such services and not on entire value of contract. The appellant acknowledged that the services provided under the scope defined in Sl.No.2 of table 2, and serial no.7,8,9,10 and 13 of table 3 are in the na....
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....y and hence the service tax should be re-quantified. However,it is contended that the scope of sl.no.2 and 3 being a composite contract involving supply of wet ash and provision of stated services for a lumpsum consideration is a works contract and thus not taxable under the category of "site formation services, excavation, earthmoving services" as proposed. However, even if the services are taxable under the aforesaid service of site formation, the value of material deemed to be supplied in the execution of the contract as per the option exercised by the appellant is 70% and thus the service value shall be remaining 30% of the contract value and hence these require re-quantification of service tax. 28. It is then submitted that the appellant has provided supply of equipments on hire to Larsen and Toubro Limited in the Financial Year 2009-10 and charged Rs.3,36,023/- which has been classified under supply of tangible goods service and demanded service tax. However, since service tax is not charged or received from the service receiver the service tax is to be recomputed on consideration deeming it as cum-duty. 29. The appellant has contended that during the FY 2011-12 the app....
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.... also contain inter-alia, sale of water which is exempted under TNVAT Act and thus the central government cannot levy tax on the exempted commodity. It was contended that the works contract service with the scope as shown cannot be taxed under works contract category as only six works contract services were included in the definition. It was also contended that the service cannot be taxed under any service category other than works contract service if finance act includes such works contract under service tax levy. It was also stated that since the tax has been demanded under site formation and clearance, earthmoving, excavation and demolition services the demand is untenable. It was further contended that even if they were to be taxed under site formation and clearance, earthmoving, excavation and demolition services, the value of material deemed to be supplied in the execution of the contract as per the option exercised by the appellant is 70% and thus the service value shall be remaining 30% of the contract value and hence these require re-quantification of service tax. 32. The appellant has further stated that it had entered into agreement with Shapoorji Pallonji & Co Ltd vi....
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....ation, earthmoving and demolition services". That the activity of the appellant for this work order would not fall under the said classification and hence service tax is not liable to be paid on these activities. 35. The appellant goes onto submit that they have provided various services to IND-Bharat Power Gen Com Ltd, and the service provided in the invoice no.004 dated 05-04-2011 is "site formation & Clearance, excavation and earthmoving services". However the service tax has been demanded without giving cum duty benefit and has to be recomputed if liable to be paid by taking the consideration as cum-duty since service tax was not charged and collected from service receiver in addition to service consideration. That the demand on invoice No.298, 049 and 272 under "supply of tangible goods services" which is at variance with the scope of service rendered as per the said invoices and hence service tax is not liable to be paid on these services. 36. The appellant concedes that equipments have been provided on hire to the parties mentioned in the table at para 47 and that the said services are supply of tangible good services. But since service tax is not charged and collected....
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....ived the appellant's contentions. It was held that, as is evident from the definition, works contract included only certain services erection, commissioning, installation etc or such similar activities in relation to movable or immovable property; that each State Government has defined works contract differently but that does not mean that the appellant is not leviable to service tax at all and as the services rendered by the appellant conform to the definition of services under the category of Site Formation and Clearance, Excavation and Earthmoving and Demolition Services as per Section 65A(1) of the Act, the appellant is liable for service tax for the period from 2008-09 to 2012-13 (upto 30.06.2012) under the said services. It was further held that after introduction of the negative list service regime, w.e.f 01-07-2012, the services rendered by the appellant continues to be taxable under Section 66B and therefore all the contentions of the appellant about classification of the appellant's services under works contract instead of Site Formation and Clearance, excavation and earthmoving and demolition services, are not acceptable. It was further held that applying the principle l....
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....from the very language of Section 65(105) which defines "taxable service" as "any service provided". All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract." (emphasis supplied) 47. It is also seen that subsequently, the Honourable Supreme Court in a case reported as Total Environment Bui....
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....l be such amount, as with the addition of tax payable, is equal to the gross amount charged. However, when the documents evidence that consideration paid has been stated as exclusive of service tax, and that service tax when paid is reimbursable, such benefit can be extended if the appellant demonstrates that in fact it been paid. 50. On the aspect of invoking of the extended period of limitation, it is noticed that the adjudicating authority has inter-alia held that the work orders placed by the service receivers have specific clauses about the service tax liability. It was also found that the letters sent by service providers to the appellant accepting the tender placed by the appellant that service tax if any would be reimbursed at actual basis on production of a copy of service tax registration certificate and furnishing details in the invoice. Some other service receivers have fixed the rate of the contract inclusive of service taxes. It was also noticed that the appellant had claimed service tax from his clients in certain instances. We find that the amounts transacted by the appellant in the course of providing services are running into crores during the relevant period. ....
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....s the levy itself. 52. Furthermore, in the grounds of appeal the appellant has raised a specific ground that the service tax liability of the appellant has to be examined individually based on each activities undertaken by them, with reference to the work order wherever available, description of activity as per invoice and other relevant facts. It is the categorical submission that though the appellant had produced voluminous documents, viz., copies of work orders, copies of invoices etc, before the Commissioner as part of their reply, those documents were not at all considered or referred to in the impugned order and to this extent, the order is completely non speaking. We concur. On a perusal of the appellant's submissions we notice that the appellant, has raised elaborate submissions which would require an indepth examination by the adjudicating authority as to how the contracts have to be considered, whether they are required to be vivisected as contended by the appellant and if so when they can be vivisected, and if not, why they have to be considered as a whole; whether the circulars cited by the appellant have been looked into and found applicable or not, whether the serv....
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....to any conclusion whether the evidence on these aspects are correct or not. Such an examination would be better left to the adjudicating authority who is equipped to look into the documents, records, other evidences and any other relevant aspect. This verification of the documents and evidences submitted has to be done by the adjudicating authority before recording a finding of fact on the dispute as well as the contentions raised, and only thereafter would the stage of determining the entitlement to the benefit of notification and/or applying judicial precedents to the matter arise. 55. We are of the view that the interest of justice will be served if the matter is remitted back for decision afresh, subject to our limited observations on the position in law and findings stated above that ought to serve as sufficient guardrails. Accordingly based on our discussions supra, we modify the impugned order to the extent of upholding the invocation of the extended period of demand and setting aside of the penalty to the extent stated above; and without disturbing the demand confirmed to the extent they have been acknowledged by the appellant, save for the re-computation sought, set asi....