By TIOL News Service

MUMBAI, DEC 02, 2013: A Service Tax demand of Rs.12,75,866/-, interest and penalty is confirmed against the applicant on the ground that they had undertaken activity of drilling and blasting which is classified under Dredging services under Sec. 65(36a) of the Finance Act.

Before the CESTAT the applicant submitted that they had only undertaken the activity of drilling and blasting as per the direction of the main contractor and this could not be construed as dredging activity. In their support they relied on a letter dated 25/03/2006 to submit that Reliance Michigan (JV) has awarded the work of drilling and blasting of the Mithi River Site.

The Revenue representative submitted that the applicants had not produced any work order explaining the scope of work even before the Commissioner (Appeals) nor with the present appeal. Relying on the definition of Dredging Service as provided under the FA, 1944 it is submitted that drilling and blasting are also a part of dredging and hence the demand is sustainable.

Dredging Service is defined in Sec. 65(36a) of the FA, 1994 as below -

"Dredging includes removal of material including, silt, sediments, rocks, sand, refuse, debris, plant or animal matter in any excavating, cleaning, deepening, widening or lengthening, either permanently or temporarily, of any river, port, harbour, backwater or estuary."

The Bench noted that on the last date of hearing the applicant was directed to produce the work order and in response to which the applicant submitted that there is no work order but the letter dated 25/03/2006 referred above.

The CESTAT, therefore, observed -

"7. We find that before the Commissioner (Appeals), the applicants had not produced any work order to show the scope of work. The only contention of the applicants is that the applicants had taken the process of drilling and blasting. Dredging service includes removal of material. As the drilling and blasting essentially result in removal of material, therefore, we find that, prima facie, the applicants had not made out a case for total waiver of the dues. However, taking into account the facts and circumstances of the case, we direct the applicants to deposit an amount of Rs. 4 lakhs (Rupees Four Lakhs only)..."

In passing : 'Mithi' is a river and not a storm water drain - See Reliance Michigan (JV) vs. CCE, Thane-II - (2013-TIOL-795-CESTAT-MUM).

(See 2013-TIOL-1792-CESTAT-MUM)