By TIOL News Service

MUMBAI, JULY 22, 2013: THE appellants were undertaking service of site formation and clearance, excavation and earthmoving and demolition services and was registered with the department w.e.f. 23/07/2007. Acting on intelligence that the appellant was not discharging service tax liability, investigation was undertaken in August 2010 by conducting search of the premises of the appellant and also by recording statements of concerned officials who dealt with the matter. The investigation revealed that the appellant had undertaken the work of ‘removal of old dump/embankment (OBR) by hiring of equipment such as HEMM, Tippers, Dozers, Drills, Water Sprinklers, including excavators for loading and transportation, dumping, spreading, dozing, water sprinkling and grading at specified places at Gouri 1 and 2 areas of Gouri Mines in Ballarpur area and the appellant was paid a consideration @ 30.80 per cubic meter and the total value of the work was Rs. 16,26,85,600/-. Investigation revealed that the appellant had not filed any statutory ST-3 returns for the services rendered by them and also did not discharge the correct service tax liability. Thereafter, the appellant filed returns in ST-3 for the period October 2006 to September 2009 vide returns dated 26/08/2010 and also enclosed challans for the payment of dues and also challans of the CENVAT credit availed and utilised for the payment of service tax.

Investigation also revealed that during the period February, 2009, to June, 2010 the appellant received a consideration of Rs. 52,59,86,270/- including service tax. The value excluding service was Rs. 47,63,88,424/- and service tax liability on the said amount worked out to Rs.4,91,84,214/-. As against the said liability the appellant had paid a sum of Rs. 26,33,745/- through cash and an amount of Rs. 2,26,05,087/- was paid through CENVAT credit leaving a shortfall of Rs. 2,39,45,381/-. The verification of the particulars submitted by the appellant indicated that the appellant had availed CENVAT credit of excise duty paid on tippers under Chapter 87 of the Central Excise Tariff under the capital goods credit and the said amount was not eligible to be availed as credit under CENVAT Credit Rules 2004 since Chapter 87 stood excluded from the purview of capital goods during the relevant period.

On conclusion of the investigation, show cause notice dated 04/10/2011 was issued proposing to demand service tax amounting to Rs. 2,39,45,381/- and proposing to deny CENVAT credit of Rs. 2,26,05,087/- apart from interest and penalties.

The demands were confirmed along with interest and penalties were imposed on the appellant.

Before the CESTAT the appellant submitted -

+ Tippers are classifiable under Chapter 84 of the CETA, 1985 and not under Chapter 87 and, therefore, they would be eligible for availing CENVAT credit on the same. Reliance is placed on the decision in Commissioner of Central Excise, Vadodara vs. Dipco Metal Fabricators Pvt. Ltd. - (2006-TIOL-251-CESTAT-MUM) in support.

+ the services rendered are correctly classifiable as ‘Cargo Handling Service' and not the one proposed of "Site Formation and Clearance, Earth Moving and Demolition". In this connection, the decision in Gangadhar Bulk Movers Pvt. Ltd. vs. Commissioner of Central Excise, Nagpur - (2011-TIOL-2000-CESTAT-MUM) is relied upon. However, it is submitted that this point was not agitated before the adjudicating authority and, therefore, this may be taken as an additional ground of appeal.

+ that the demand is time barred and as they have paid a sum of Rs. 1.3. crore in cash, same should be considered as sufficient for hearing of the appeal. However, they are ready to make a further deposit of Rs.35 lakhs.

The Revenue representative submitted that the case concerns fraudulent availment of CENVAT credit and non-filing of statutory returns and hence extended period of limitation is applicable. Classification has been done correctly by the department based on the circular No. B1/6/2005-TRU dated 27/07/2005 read with circular NO. 232/2/2006-CX.4 dated 12/11/2007 and hence the alternate classification contended by the appellant is not sustainable; the appellant should be put to terms.

The Bench observed -

"5.1 As regards the alternate classification sought under the category of Cargo Handling service, this contention has not been raised before the adjudicating authority. Besides, overburden and wastage for removal cannot be considered as cargo. Cargo usually refers to goods or freight carried by a ship or vessel. Thus, prima facie this contention is not convincing.

5.2 As regards the claim of eligibility to CENVAT credit, from the records and the invoices submitted, it is evident that the excise duty on the said tippers had been discharged under Chapter 87 by the manufacturer of the vehicles. If that be so, the appellant cannot claim and seek to change the classification from Chapter 87 to Chapter 84 based on the Tribunal decision in the case of Dipco Metal Fabricators Pvt. Ltd. (supra). We have also perused the decision. In the said decision the only reason given for classification of the tippers under Chapter 84 is that, similarly placed manufacturers in the Mysore Commissionerate has classified the goods under Chapter 84 and therefore, the items should be classified under Chapter 84. We do not agree with the reasoning given in the said decision, inasmuch as classification of a product cannot be decided by reference to classification elsewhere but in accordance with the description given in the tariff, the section notes, chapter notes and Rules of Interpretation. The same issue has come up for consideration before the Bangalore Bench of this Tribunal in the case of Ganta Ramanaiah Naidu vs. Commissioner of Central Excise, Guntur - (2010-TIOL-213-CESTAT-BANG) wherein it was held that CENVAT credit on tippers, which are classified under Chapter 87 of the Central Excise Tariff, and on which excise duty has been discharged under that Chapter, cannot be taken as credit under the category of capital goods under Rule 2(a)(A)(i) of the CENVAT Credit Rules, 2004 as the said Rule permits credit to be taken only in respect of goods falling under Chapter 82, 84, 85 or 90 of the Central Excise Tariff Act. This decision of the Bangalore Bench of this Tribunal, which has examined the matter on merits, prevails over the decision in the case of Dipco Metal Fabricators Pvt. Ltd. Inasmuch as the appellant has availed CENVAT Credit wrongly the details of which has not been furnished to the department, we are of the prima facie, view that the appellant is not eligible for the CENVAT credit on goods classifiable under Chapter 87 and utilisation of such credit for payment of service tax is not permissible.

5.3 As regards the invocation of extended period of time, we find that even though the appellant had filed ST-3 returns belatedly after the commencement of investigation, they have not declared the correct amounts of consideration received by them from their service recipients. There is a huge variation in the amount of consideration received by the appellant as declared in the ST-3 returns and as certified by the recipient themselves. While the figures of actual receipt are Rs. 36,80,16,556/- vis-à-vis Rs. 23,83,30,290/- as declared in the ST-3 returns for the period 2008-09 to 2010-11 (upto June 2011). In view of the above position, it appears that he appellants has mis-declared the consideration received for the services rendered. Therefore, prima facie, we are of the view that the appellant has not made out a case for complete waiver of pre-deposit of the dues adjudged."

Noting that the appellant had not pleaded any financial hardships and the balance of convenience lay in favour of Revenue, the appellant was directed to make a pre-deposit of Rs.2.8 Crores and report compliance.

(See 2013-TIOL-1102-CESTAT-MUM)