Customs, Excise & Service Tax 

Appellate Tribunal West Zonal

Bench At Ahmedabad

 

REGIONAL BENCH- COURT NO. 3

Service Tax Appeal No. 12108 of 2013 –DB

(Arising out of OIO-14-STC-DEMAND-COMMR-I-2013 dated 28/03/2013 passed by Commissioner of Central Excise, Customs and Service Tax-VADODARA-I)

Welspun Projects Ltd

VERSUS 

C.C.E. & S.T.-Vadodara-i

 

APPEARANCE:

Shri. Hardik Modh, Advocate for the Appellant

Shri V.G. Iyengar, Superintendent (AR) for the Respondent

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON’BLE MEMBER (TECHNICAL), MR. C.L. MAHAR

 

Final Order No.A/ 11202 /2023

 

DATE OF HEARING: 13.02.2023 DATE OF DECISION:07.06.2023

 

RAMESH NAIR

Brief facts of the case are that during the course of audit, on going through the records of the appellant and details of projects undertaken by the appellant during the financial year 2007-08 it was observed by revenue that appellant had under taken the work of Site grading, Roads, Boundary wall, Drains and associated works of Crude Oil Terminal of M/s Bina Refinery Project at Vadinar in the state of Gujarat. On the scrutiny of the documents, it appears that appellant have provided the service relating to Site Formation/ gradation and during the year 2007-08 received an amount of Rs. 4,31,80,708/- in respect of the above contract and accordingly service tax amounting to Rs. 53,37,135/- was payable under the category of “Site Formation and Clearance, Excavation and Earthmoving and Demolition Service” on such services appellant had short paid/ not paid the Service tax

 

of Rs. 53,37,135/-. Accordingly, show cause notice dated. 19.10.2012 was issued to the appellant proposing service tax demand and penalties under Section 76,77 and 78 of the Act. The adjudicating authority namely the Commissioner of Service Tax Vadodara –I, confirmed the entire demand of the service tax raised and also imposed penalty vide impugned Order-in- Original dated 28-03-2013. Being aggrieved by the said Order-in-Original, the appellant filed the present appeal before us.

 

 

2. Shri Hardik Modh, Learned Counsel appearing on behalf of the appellant submits that the Ld. Commissioner erred in classifying the service in dispute under the category of “site formation and clearance, excavation, earth moving and demolition service” and demanding service tax and imposing penalties. The Ld. Commissioner ought to have appreciated that the service in dispute was classifiable under the category of “Industrial or Commercial Construction Services” and therefore appellant had rightly paid service tax on abated value.
   • He also submits that Section 65A of the Act deals with classification of taxable services. Section 65A provides that when taxable service is classifiable under two or more categories, the service should be classified where most specific description is given for the service. It also provides that in case of composite services consisting of combination of different services which cannot be classified in this manner, should be classified as if they consisted of service which give their essential characters in so far as this criteria is applicable. In the present matter, it is revealed from the description of service that most specific service category is “Industrial or commercial construction Services.” Description provide site grading, roads, boundary walls, drains and associated works for crude oil terminal. The Appellant undertook the activity of construction of road, boundary walls, drainage line and associated works and therefore, the service in dispute oughtto have classified under “Industrial and Commercial Construction

 

Services”. Revenue ought to have appreciated that site grading work was incidental to construction service. The contracts specifically provided site grading for the reasons that road, boundary wall and drainage line should be constructed after completion of site grading work. The sole criteria was for construction of roads, boundary walls and installation of drainage line. On perusal of schedules of the contracts, it is revealed that the contract is for construction. The Appellant had rightly classified the services in dispute under the category of “Industrial or Commercial construction services” and paid service tax.

 

 

• He further submits that revenue ought to have appreciated thatservice in dispute cannot be classified under the taxable category of “site formation and clearance, excavation and earth moving and demolition because the following services are included under the above category:

 

1. Drilling,boring and core extraction services for construction, geophysical, geological or similar purposes, or
2. SoilStabilization, or

 

• Horizontaldrilling for the passage of cables or drain pipes, or

 

1. Landreclamation work, or

 

1. Contaminatedtop soil stripping work, or

 

1. Demolitionand wrecking of building, structure or road,

• In the present case, the contract was not only for site grading, but it includes construction of road, boundary wall drains and associated works for crude oil terminal at Vadinar. The construction of road, boundary walls and installation of drainages are not covered under the category of site formation. Site grading work undertook by the Appellant was forconstruction of road, boundary wall and installation of drainage line. Since site grading work undertaken by the appellant precedent to the work of

 

construction, it does not mean that the entire contract can be classified under the category of site formation.

 

• He also submits that revenue ought to have appreciated that the definition of “Commercial or Industrial Construction Service” defined under Section 65(35b) of the Act covers construction of building or civil structureor construction of pipelines or conduits and therefore, the revenue erred in classifying the service in dispute under the category of “site formation”. The revenue erred in holding on the basis of agreement, final invoice and service tax paid by the Appellant that service in dispute was classifiable under the category of site formation. Agreement specifically provided for service of construction and running invoices issued by the Appellants clearly show that services in question were in nature of construction service.

 

 

• In support of arguments he also placed reliance on the Board Circular No. 334/4/2006-TRU dated 28.02.2006 and following judgments:-

 

• SEM Construction Vs. Commissioner of Central Excise & S.T., Rajkot – 2021(44)GSTL 385 (Tri. Ahmd.)
• BavikaConstructions Ltd. Vs. Commissioner of C.Ex. & S.T., Goa
• Ramkrishana Reddy Vs. Commissioner of Ce. Ex. &Cus., Tirupati– 2009 (13)STR 661 (Tri. Bang.)
• CMS (India) Operations & Maintenance (P) Ltd. Vs. CCE, Puducheery – 2017(3) GSTL 164 (Tri. Chennai)
• Commissioner Meghmani Dyes & Intermediates Ltd. -2013(288) ELT 514 (Guj.)
• ChirpalPolyfilms  Vs. Commissioner of C.Ex. & ST
• Adani Enterprises Vs. Commissioner of S.T. Ahmedabad – 2022(63) GSTL 465 (Tri. Ahmd)

 

• RavalTrading Company  Commissioner of Service tax- 2016(42) STR 210 (Guj.)
• Commissioner SEM Construction -2021(50)GSTL J74(SC)

 

 

• He further submits that revenue erred in invoking large period of limitation for issuance of show cause notice. The appellant declared all the relevant information as required under the contract for the purpose of dischargingliability of Service tax and filing Service tax return under the  In such situation, invoking larger period by holding that the Appellant had not declared true nature of services is contrary to the facts and proviso to Section 73 of the Act. The revenue have to appreciate that the bid was a public documents and the Appellant applied and were awarded the contract of construction. Since it was a public document, the revenue could not take shelter for invocation of large period that the Appellant did not declare the correct nature of service to the department. The revenue failed to appreciate that it is not the case that service tax was not paid on the transactions in dispute. The Appellant classified their service under the category of construction service and paid service tax. They filed returns along with the requisite documents as required under the law periodically. In such facts, burden was upon the department to prove that the Appellant has wrongly classified service within normal period of limitation.

 

 

3. Shri V.G. Iyengar learned Superintendent Authorised representative reiterates the findings of the impugned order.

 

4. We have considered the submissions made by both the sides and perused the records. In the present case, the issue to be decided is that the service in question is classifiable under the category of „Site Formation and clearance, Excavation and Earth Moving and Demolition service‟ as contendedby  the  revenue  or  under  the  category of  „Industrial  and

 

Commercial Construction service‟ as contended by the appellant. As per the facts of the case, the appellant have carried out the service in terms of bidding documents No. 1204/T-64/06-07/RAL/04 and No. 6743/T-174/05- 06/SKK/01.As per the said documents we noticed that during the disputed period appellant have undertaken the work of site grading, Roads, Boundary Wall, Drain and associated works of Crude Oil Terminal of M/s Bina Refinery Project at Vadinar in the state of Gujarat. As per Section 65(97a) of the Finance Act, 1994, the disputed service is defined as under :

“(97a) site formation and clearance, excavation and earthmoving and demolition includes,-

• Drilling,boring and core extraction services for construction, geophysical, geological or similar purposes; or
• Soilstabilization; or
• Horizontaldrilling for the passage of cables or drain pipes; or (iv)Land reclamation work; or
• Contaminatedtop soil stripping work; or
• Demolitionand 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.”

Further, under sub-clause (zzza) of Clause (105) of Section 65 of the Finance Act, 1994 “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, “

 

It would be seen from the main part of the definition that the said service includes drilling, boring and core extraction services for construction, geophysical, geological or similar purpose, Soil Stabilization, Horizontal drilling, Horizontal drilling for the passage of cables or drain pipes, Land reclamation work, Contaminated top soil stripping work and Demolition and wrecking of building, structure or road.

 

 

• Whereas from the documents submitted by the appellant we find the entire contract was for lum sum price for carrying out not only site grading but also construction of Roads, Boundary wall, Drains lines and associated works for crude oil terminal of Bina Refinery Project. We find that withoutthe site cleaning, road, boundary wall and drainage line cannot be

 

constructed. The contract specifically provide site grading for the reason that road, boundary wall and drainage line should be constructed after completion of site grading works. Clearly, the main object of contract was for construction of road, boundary walls and drainage line.

 

• We find that the appellant‟s activity is not covered by the definition of “site formation and clearance, excavation and earth moving and demolition service. The majority of work relates to civil work in the nature for construction of road, boundary wall and drainage lines. The essential character of this composite work is reflected as that of construction service. Thus,instead of “ site formation and clearance, excavation and earth moving and demolition service,” this service is appropriately classifiable under

„Commercial or Industrial Construction Services‟. The service tax demand from the appellant by treating their activity as taxable under section 65(97a) as “site formation and clearance, excavation and earth moving and demolition service” is not sustainable.

 

• We also find that in the present matter demand is also not sustainable on limitation. It is undisputed that the appellant had been rendering the services and has been paying service tax on disputed service under the head construction services and also filing ST-3 returns regularly with the departmental authorities. If a tax is chargeable, in order to recover the service tax not paid or short paid a notice has to be issued under Section 73 of the Act. This is the only remedy available to the Revenue. The notice can be issued within the normal period of limitation only unless the elements of fraudor collusion or wilful statement or suppression of facts or contravention of any provisions of the Act or Rules with an intent to evade payment of service tax is established. If any of these elements are established in any case, the demand can be raised within an extended period of limitation of 5 years. We are unable to find any proof of intent to evade either from the

 

show cause notice or from the impugned order. Mere omission or merely classifying its services under an incorrect head does not amount to fraud or collusion or wilful misstatement or suppression of facts. The intention has to be proved to invoke extended period of limitation. The appellant had been classifying its services under Commercial or Industrial construction service, paid the service tax and filed returns. Once the returns are filed, if Revenue was of the opinion that in the self-assessment of service tax the classification was not correct, it could have scrutinized the returns and issued notices within time. The show cause notice was issued on 19.10.2012 for the period 2007-08, which is clearly beyond the normal period of limitation. Therefore, the demand is time barred and, therefore, cannot sustain.

5. In view of the above discussion and finding, we find that the impugned order cannot be sustained. Hence, the impugned order is set aside. The appeal is allowed with consequential relief, if any, to the appellant

 

(Pronounced in the open court on 07.06.2023)

 

(RAMESH NAIR) MEMBER (JUDICIAL)

(C L MAHAR) MEMBER (TECHNICAL)