By TIOL News Service

MUMBAI, OCT 19, 2016: AGAINST an o-in-a, both the assessee and the Revenue are in appeal.

Demands of Service Tax have been made against the appellant in respect of services allegedly rendered to M/s Nasik Thermal Power Station under the categories of 'cleaning activity service' [Rs.1,30,295/-], 'transportation of goods by road service'[Rs.3,43,463/-] & 'site formation and clearance, excavation and earthmoving and demolition service' [Rs.33,40,763/-].

The adjudicating authority confirmed the demand raised on all the three counts and the assessee accepted and paid the tax demands of Rs.1,30,295/- &Rs.3,43,463/-.

The Commissioner (A) set aside the demand of Rs.33,40,763/- and the penalty and interest attributable to the same.

Revenue is in appeal against the dropped demand and the assessee has also filed an appeal before the CESTAT for failure of the lower authority to give them the option of paying penalty at 25% of the tax demand.

In the matter of the appeal filed by the assessee, the Bench extracted the second proviso to section 78 of the FA, 1994 and observed -

"…, notwithstanding the mandate to impose penalty equal to the tax confirmed, the assessee is eligible for the privilege suomotu upon compliance with condition that payment is effected within the stipulated period. Neither is a separate inclusion warranted or necessary. Consequently, we are unable to appreciate the contention of the appellant-assessee that they had been denied access to this privilege. We find no merit in that appeal and dismiss it without further elaboration."

As for the Revenue appeal, the Bench noted that the disposal of 'fly ash' emerging from thermal power plants is a statutory requirement under the environmental laws; that evacuation involves transfer by the pipeline in slurry form and allowing the ash to be deposited in the designated area with the water to be drained out thereafter; that thermal power plant of Maharashtra State Power Generation Co Ltd at Nashik had an 'ash bund' with a height of 575.75 m which it was considered necessary to raise to 581.5 m for increase of storage capacity.

The CESTAT further observed -

+ Undoubtedly, the existing 'ash bund' was set up on site that must have been subject to activity that is taxable but, here, we are concerned with the enhancement of height of that storage facility. This is construction which, even if not conforming to the description of that taxable service is, nevertheless, a civil work.

+ We have no doubt that the contract was for enhancement of storage facility but our attention has not been drawn to any statutory provision or settled law that a taxable service perceivable within the contract for delivery of a structure cannot be isolated for fitment within a tax entry in Finance Act,1994. …We concur with the first appellate authority that laying of embankment and related construction do not conform to the definition of the service.

+ We are unable to fault the finding of the first appellate authority that the site being handed over to the assessee for raising of the height of the 'ash bund' which is the subject matter of the contract, the clearance and excavation work is in relation to that activity and hence rendered to themselves. Had that portion of the work been executed by another person, the tax liability would devolve on that person for having rendered service to the assessee and not upon the assessee.

+ Revenue, in its appeal, appears to have confused the construction work for site formation and excavation and has confounded it further by presuming that even such work as is covered by the definition has been rendered to the power plant by being the project proprietor. Persons, in the context of levy of service tax, have to be identified in accordance with the specific service rendered.

Holding that there is no merit in the Revenue appeal, the same was dismissed.

(See 2016-TIOL-2726-CESTAT-MUM)