2014 (9) TMI 971 - AT - Service Tax

Waiver of pre deposit - Site formation and clearances excavation and earth moving or the demolition service - Held that - The Service Tax demand is in respect of the service provided by the appellant in terms of three contracts entered into by them with M/s. Diamond Cement. The first contract of the appellant with M/s. Diamond Cement is for transportation of limestone from the screening plant at the mines to the factory premises of M/s. Diamond Cement. The limestone was to be loaded and transported by the appellant by using their own dump trucks and allied machinery and for these services the appellant were to be paid @ Rs. 53.55 per M.T. of limestone delivered and besides this were also to be provided the diesel free of charge @ Rs. 0.9 per litre per M.T. of limestone delivered. - Prima facie Activity of the appellant is GTA service and is not at all covered by the service of site formation and clearance covered under Section 65(105)(zzza) read with Section 65(97a) and therefore the Service Tax demand on the amount charged by the appellant for this service would not be sustainable. Activity of the appellant is basically giving various machinery and equipment to M/s. Diamond Cement on hire basis which is to be used by them for overburden removal and mining activities and as such this activity cannot be said to be the activity of site formation and clearance or mining. The supply of machinery and equipment on hire basis would be supply of tangible goods service which became taxable under Section 65(105)(zzzzj) which has been introduced in the Finance Act 1994 w.e.f. 16-5-2008. In any case the longer limitation period of 5 years under proviso to Section 73(1) of Finance Act 1994 is not invokable as the dispute in this case is of interpretation. - appellant have strong prima facie case in their favour and hence the requirement of pre-deposit of the Service Tax demand interest and penalty is waived for hearing of the appeal and recovery thereof is stayed. - Stay granted.

Summary

Issues:
1. Whether the appellant's activities with M/s. Diamond Cement constitute taxable services under the Finance Act, 1994.
2. Whether the demand for Service Tax, interest, and penalties raised against the appellant is sustainable.
3. Whether the appellant's appeal against the Commissioner's order has merit.

Issue 1: Taxability of Appellant's Activities
The appellant entered into three contracts with M/s. Diamond Cement, involving transportation of limestone and supply of mining machinery. The Department alleged that these services fell under "site formation and clearances, excavation, earth moving, and demolition services" and "mining service" for Service Tax purposes. The appellant argued that the transportation service was a Goods Transport Agency (GTA) service, making the service recipient liable for Service Tax. The Tribunal agreed, holding that the transportation service did not fall under site formation or clearance services. Similarly, the supply of mining machinery was considered a supply of tangible goods service, not taxable during the dispute period.

Issue 2: Sustainability of Service Tax Demand
A show cause notice was issued to the appellant for Service Tax demand, interest, and penalties. The Commissioner upheld the demand, but the appellant contended that the transportation service was a GTA service, and the supply of machinery was not taxable during the dispute period. The Tribunal found that the appellant had a strong prima facie case in their favor, waiving the pre-deposit requirement and staying the recovery of Service Tax, interest, and penalties.

Issue 3: Merit of the Appellant's Appeal
The appellant appealed against the Commissioner's order, arguing that the demand for Service Tax on transportation charges was unsustainable and that the supply of machinery was not taxable during the dispute period. The Tribunal agreed with the appellant, holding that the appellant had a strong case, and granted a stay on the recovery of Service Tax, interest, and penalties pending the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, finding that their activities did not constitute taxable services under the Finance Act, 1994. The demand for Service Tax, interest, and penalties was deemed unsustainable, and the appellant's appeal was considered to have merit, leading to a waiver of the pre-deposit requirement and a stay on recovery pending the appeal.