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TMI Blog2019 (3) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... greement was for 'Hiring of Heavy Earth Moving Equipment' while the second was for 'Transportation of Limestone'. The terms and conditions of the contract were set out in the agreements. 3. For the first contract, the appellant was required to deploy three Excavators, and one Dozer. The output level was indicated in clause 3.0 and the hiring charges were specified in clause 4.0. Under clause 5.1, the Diesel was to be issued by the Company as free issue. The same are reproduced below: "3.0 OUTPUT LEVEL 3.1 Excavators The equipment will be operated in such a manner that the daily average output of the equipment within the stipulated running hours will be as follows: Limestone- 2300 MT in two shifts operation per day in six days a week Grizzly Reject - As per quantity fed to Grizzly. Development (RM REJECT) ROM Reject - 400 MT or as per requirement. 4. HIRING CHARGES 4.1 Excavators The hiring charges shall be paid @ Rs. 815 / per running hour for equipment having bucket capacity of 1.7 to 2.1 cum and min. output of 165 MT/hr. 5. ISSUE OF DISEAL 5.1 Diesel will be issued by the Company as Free Issue." 4. For the Dozer, the hiring charges was contained in clause 4.2 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of free diesel provided by the service recipient for calculation of Service Tax for the period prior to 16 May 2008, but had included it after 16 May 2008. 8. The said show cause notice came to be decided by the Commissioner by order dated 12 October, 2012. The Commissioner elaborately referred to the two agreements dated 1 July, 2004 and the definition of 'site formation' under section 65 (97a) of the Act and made observations in paragraph 36 of the Order which are reproduced:- "36. It is clear from the definitions narrated above that supply of tangible goods services are service provided to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances, In the instant case, I find that the activities are not merely providing or supply of equipment but actually the noticee were under obligation to perform a wide spectrum of specialized activities as perform detailed below. The activities to be carried out by the noticee extended much beyond merely placing equipment at the disposal of service receiver. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a within the mining area (iv) Pay loader: for collection of lime stone and loading the same to tippers within the mining area (v) Water tanker - to sprinkle water on mining haulage within the mining area; that the assessee were operating in the eastern region of their captive lime stone mines; that the measurement of the said work done was verified by shift incharge of M/s. ACL." (emphasis supplied) 10. The findings arrived at by the Commissioner are contained in paragraphs 38 and 39 of the Order and are reproduced below: "38. I find from the above activities that the noticee had by deploying the Excavator, Tipper and Dozer had excavated the lime stone/ reject from mining area after blasting was done by M/s. ACL, shifted the excavated lime stone/ reject from mining area to crusher area and reject area within the mining area, leveled the reject yard and the mining face area within the mining area. Thus the entire gamut of activities was removing the lime stone from the surface areas which were blasted by M/s. ACL. The removal was basically by way of excavation for which they had employed excavators. They were to ensure the quality of excavation and further made responsible for tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced below: "42. It is evident from the above that the main activities undertaken against this agreement were collection of material, transportation and delivery of the same to the crusher hopper and to carry out daily transportation of minimum prescribed quantity. The noticee were also required to remove the Iron pieces, shovel teeth, broken drill bits immediately to avoid any major breakdown in the operation. The transportation cost per ton was inclusive of labour element to the extent of 10% per ton of lime stone delivered. The noticee were required to ensure placement of adequate vehicles to carry out daily transportation of minimum 2500 MT of lime stone per day or such quantity as required by the company from time to time. Wherever dozer were required to level the road, were to be provided by contractor. The Haul road was also required to be kept clean and wet condition during operation. I further find that Shri Pradeep Jain, Dy General Manager (Finance & Accounts) of M/s. ACL in his statement dated 5.4.11 admitted that Excavator were used to excavate the lime stone / reject from mining area after blasting by M/s. ACL. Tipper were used for shifting of excavated lime stone / r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following order: (i) I confirm under section 73(1) of the Finance Act, 1994 demand of service tax amounting to Rs. 2,97,82,694/- (Two Crore ninety seven lakhs eighty two thousand six hundred and ninety four only) (including Education and S &H Education Cess) and order it to be recovered from M/s. Jain Carrying Corporation, Jain House, Rani Bazar, Bikaner along with interest in terms of Section 75 of the said Act. (ii) I also impose a penalty of Rs. 2,97,82,694/- (Two Crore ninety seven lakhs eighty two thousand six hundred and ninety four only) on M/s. Jain Carrying Corporation, Jain House, Rani Bazar, Bikaner under Section 78 of the said Finance Act, 1994. However, benefit of reduced penalty of 25% as per proviso to Section 78 ibid, is available to the noticees subject to the condition that Service Tax demand Rs. 2,97,82,694/- and the interest payable thereon (on Rs. 2,97,82,694/- ) under section 75, is paid within thirty days from the date of communication of this order and further subject to the condition that the benefit of reduced penalty (25% of Rs. 2,97,82,694/- ) shall be available if the amount of penalty so determined has also been paid within the period of thirty days ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rformed by the appellant would fall under the category of 'Site formation'. 17. Section 65 (105) of the Act defines 'taxable services' to mean any service provided or to be provided in regard to matters enumerated. In the instant case, we are concerned with section 65 (105)(zzza) which was inserted by Finance Act, 2005 with effect from 16 June, 2005 and is reproduced below: "65 (105) (zzza) to any person, by any other person, in relation to site formation and clearance, excavation and earth moving and demolition and such other similar activities." Section 65 (97 a), which was also inserted by Finance Act, 2005 with effect from 16 June 2005, defines the 'Site Formation and clearance, excavation and earth moving and demolition service' as under: "65(97a) 'Site Formation and clearance, excavation and earth moving 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, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 17/2005-ST dated 7.6.2005 exempts this service provided in the course of construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, major and minor ports." (emphasis supplied) 19. The contention of the learned counsel for the appellant is that 'site formation' is an activity carried out prior to the actual mining as is clear from paragraph 6.2 of the letter dated 27 July, 2005. It is his contention that in such circumstances, when the activity performed by the appellant was not prior to the actual mining, service tax cannot be levied on it. Learned Counsel also placed the definition of 'core' to contend that what is sought to be taxed under this category is the activity carried out prior to mining for it is to gather information on strata age, composition and porosity and the presence of hydrocarbons or water along the length of the barehole. 20. On a reading of section 65 (105) (zzza) and the definition of 'site formation' contained under section 65 (97a) and the budget letter dated 27 July, 2005, there is no manner of doubt that the service referred to is prior to the actual activity of mining. Drilling, boring and core extraction services for co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to transportation of goods by road which is a single composite service. GTA also issues consignment note. The composite service may include various intermediate and ancillary services provided in relation to the principal service of the road transport of goods. Such intermediate and ancillary services may include services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc., which are provided in the course of transportation by road. These services are not provided as independent activities but are the means for successful provision of the principal service, namely, the transportation of goods by road. The contention that a single composite service should not be broken into its components and classified as separate services is a well-accepted principle of classification. As clarified earlier vide F.No. 334/4/2006-TRU, dated 28-2-2006 (para 3.2 and 3.3) [2006 (4) S.T.R. C30] and F. No. 334/1/2008-TRU, dated 29-2-2008 (para 3.2 and 3.3) [2008 (9) S.T.R. C61], a composite service, even if it consists of more than one service, should be treated as a single service based on the main or principal service and accordingly classified. While taking a view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded by the learned Counsel for the appellant that if the transportation is within the mining area, the service cannot fall under the category of 'Cargo Handling Service' and in support of his submission, learned Counsel placed reliance on a decision of the Supreme Court in Commissioner of Central Excise & Service Tax, Raipur vs. Singh Transporters reported in [2017 (7) TMI 494 - Supreme Court]. It has been held by the Supreme Court that transportation of coal from the pit-heads to the railway sidings within the mining area is more appropriately classified under the heading 'Transportation of Goods by road service'. 27. Learned Counsel also submitted that the finding recorded by the Commissioner that the cost of free supply of diesel to the appellant, will form part of the consideration, since the cost of diesel was incurred on behalf of the appellant, deserves to be set aside as the cost of diesel cannot be included in the consideration, in view of the decision of the Supreme Court in Commissioner of Service Tax vs. Bhayana Builders (P) Ltd. reported in [2018 (2) TMI 1325 (SC)]. 28. In paragraph 13 of the aforesaid decision, the Supreme Court held that the value of goods / mate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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