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2015 (10) TMI 1581 - CESTAT BANGALORE

2015 (10) TMI 1581 - CESTAT BANGALORE - TMI - Liability of Service Tax for felling, conversion, debarking, collection, stacking, transportation and delivery of pulp wood from the captive plantation Revenue contends that same falls under Business Auxiliary Services Activity undertaken is of processing or manufacture? Malafide on part of assessee to supress facts of work orders Imposition of penalties pleaded by appellant to be set aside.

Held That:- it is not a simple case of c .....

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aside the impugned orders and remand the matters to the original adjudicating authority for the purpose of deciding on the said plea of the assessees

Extended period of limitation - Held that:- the Revenue, though in the context of dispute involving the Mysore Paper Mills, was aware of the fact of placing work orders upon various contractors, for extraction collection, debarking stacking of the pulp wood. From this it becomes clear that there was no malafide on the part of the contrac .....

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/2013-DB, ST/27032/2013-DB,ST/27033/2013-DB,ST/27034/2013-DB, ST/27035/2013-DB,ST/27037/2013-DB,ST/27036/2013-DB, ST/1576/2012-DB,ST/27038/2013-DB,ST/27039/2013-DB, ST/27040/2013-DB,ST/27041/2013-DB,ST/27942/2013-DB, ST/1581/2012-DB, ST/1590/2012-DB,ST/1593/2012-DB, ST/1594/2012-DB, ST/1595/2012-DB, ST/20984/2014-DB, ST/22190/2014-DB,ST/22191/2014-DB,ST/22192/2014-DB, ST/22226/2014-DB,ST/2407/2012-DB,ST/2412/2012-DB, ST/2415/2012-DB,ST/2423/2012-DB FOREST CONTRACTOR T PERUMAL FOREST CONTRACTOR A .....

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EXCISE, CUSTOMS AND SERVICE TAX, MYSORE, COMMISSIONER OF SERVICE TAX, BANGALORE, COMMISSIONER OF CENTRAL EXCISE, SERVICE TAX AND CUSTOMS, BANGALORE-II For the Appellant : Mr K Parameswaran, Adv For the Respondent : R Gurunathan, AR ORDER Per Archana Wadhwa All the appeals are being disposed of by a common order as the factsinvolved in each and every appeal are more or less identical.All the appellants are contractors of M/s Mysore Paper Mills Ltd. which is a State Govt owned undertaking, engage .....

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he appellants in the present appeals are all such contractors appointed by M/s Mysore Paper Mills Ltd for doing the above jobs which they have been doing right from 2002. 2. Revenue by entertaining a view that the activities undertaking by the appellants amounts to providing services under the category of business auxiliary services, raised demands of service tax against them by issue of various and separate show-cause notices to all of them invoking longer period of limitation. Appellants conte .....

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lso contested the demand on the point of limitation. It was further submitted by the appellants that the contract awarded to them involved two separate activities- one for felling, debarking and cutting of the trees and the other for transportation of the goods. As regards transportation of the goods from the forest area to the factory of M/s Mysore Paper Mills Ltd., M/s Mysore Paper Mills Ltd has already discharged their service tax liability as a recipient of the GTA services. Accordingly, the .....

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inal adjudicating authority who confirmed the demand as proposed in the notice and also imposed penalties upon the appellants. The said orders of the original adjudicating authority stand upheld by Commissioner (Appeals). Hence the preset appeals. 4. In some of cases, Commissioner (Appeals) allowed benefit of the transportation aspect by observing that M/s Mysore Paper Mills Ltd has already discharged the service tax liability in respect of the very same service. Revenue has not filed any appeal .....

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limitation and further submits that the definition of business auxiliary service itself excludes the activity if the same amounts to manufacture in terms of clause 2 of Section 2 (f) of the Central Excise Act. By drawing our attention to Chapter 44 of the Central Excise Tariff Act, he submits that inasmuch as there is a change in the name, character and use of the final product, which is different from the starting material, the activity may amount to manufacture, in which case it would be exemp .....

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id definition inasmuch as the appellant was admittedly converting the stand alone trees into billets ready for use in the pulp making, it has to be held that they have processed the goods for M/s Mysore Paper Mills Ltd. By drawing our attention to the tender notification (para 39), learned A.R. submits that it is not a simple case of felling and cutting of the trees but involved further conversion to pulp wood billets, which shall be done only by cross-cut saws to prevent wastage. Para 40 of the .....

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tivity would admittedly fall under the definition of business auxiliary service. As regards limitation, learned A. R. submits that the appellant never informed the department about the said activity and as such there is no occasion for the Revenue to take action against them. He also submits that the tender notification clearly lays down in para 84 that the service tax if any shall be borne by the company subject to the contractor complying with relevant provisions of service tax and rules there .....

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sioner (Appeals) has granted relief on the said issue stands accepted by the Revenue and do not stand appealed against. 7. After considering the submissions made by both sides we find that the definition of business auxiliary service underwent amendment with effect from 16.6.2004. As the period involved is subsequent to the said amendment, we have to take into consideration amended definition. The amended definition of the business auxiliary service reads as under:- (19) "business auxiliary .....

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r services intended for use by the client;] [(v) production or processing of goods for, or on behalf of, the client;] (vi) provision of service on behalf of the client; or (vii) a service or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision .....

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any person who, while acting on behalf of another person - (i) deals with goods or services or documents of title to such goods or services; or (ii) collects payment of sale price of such goods or services; or (iii) guarantees for collection or payment for such goods or services; or (iv) undertakes any activities relating to such sale or purchase of such goods or services; (b) "information technology service" means any service in relation to designing, developing or maintaining of comp .....

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ot. 8. We have already enumerated the services which the appellants are required to undertake in terms of the tender notification as also the contracts. We agree with the learned A.R. that it is not a simple case of cutting of trees and then transporting the cut and debarked wood to the premises of their client. The appellants are required to convert the cut wood into billets of specific sizes, which sizes are fit for use in the pulp plant. The Hon'ble Supreme Court in the case of M/s Sarasw .....

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wise by artificial or natural means and in its more complicated form involves progressive action in performing, producing or making something ....." As already observed by us that the appellants are required to deliver the wood to their client in the shape of billets of the specified dimensions, it has to be held that the cut wood has undergone changes. 9. Whether such changes amount to processing or amount to manufacture is another question required to be decided inasmuch as learned advoca .....

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24.02.2005 as also applicability of the small scale exemption Notification No. 8/2003 would be required to be examined as most of the contacts are falling within the exemption limit. However, he fairly agrees that the said issue was never raised before the lower authorities and was never discussed or deliberated upon by them. 10. We have already expressed our views that the activities undertaken by them in any case amounts to processing. However, such an activity may amount to manufacture also a .....

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lding that they have done processing of the goods for their clients. 11. Learned advocate has also challenged the impugned orders on the point of limitation. He agrees that in some cases, the demands are falling within the limitation period inasmuch as there were repeated show-cause notices to each and every contractor. The first show-cause notice was beyond the limitation period and thereafter periodical show-cause notices stand issued within the normal period. 12. As regards limitation, learne .....

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ce indicating any malafide or suppression or misstatement on the part of the assessee with an intent to evade payment of duty. He submits that the service tax being a new law at the relevant period was not clear and there was scope of entertaining a doubt about leviability of the same. In any case, he submits that the fact of such contracts having been awarded by M/s Mysore Paper Mills was in the knowledge of the Revenue. In support of the above contention he draws our attention to an order pass .....

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ortation of ACASIA/eucalyptus pulp wood. The assessee has discharged the service tax liability on the cost of transportation of the pulp and has now approached the department for refund of the service tax paid on the transportation of the pulp on the ground that the work order is a composite contract and since they are not goods transport agency they are not liable to pay the service tax on the transportation of pulp." 13. As such it is clear from above that the Revenue, though in the conte .....

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presumed that all of them colluded together to suppress the said fact of grant of work orders to them. Issuance of tender notifications and placement of work orders is a matter of record of M/s Mysore Paper Mills, in which case, it is difficult to accept that the same were suppressed by the present appellants. We further examine learned A.R.'s contention that in terms of the tender notifications it is clearly written that the service tax, if any, would be paid bythe company subject to the c .....

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