CESTAT, Mumbai Bench
Teroch Infrastructure (P.) Ltd. vs. Commissioner of Central Excise, Pune III
Section 65(36a)
Ramesh Nair, Judicial Member And Raju, Technical Member
Order No. A/89288/17/STB
Appeal No. ST/86620/2013
August  28, 2017
ORDER
Ramesh Nair, Judicial Member – The fact of the case is that the appellant is a sub- contractor carrying out the job of drilling and blasting at Mithi River. This is part of the overall contract awarded by Mumbai Metropolitan Regional Development Authority (MMRDA) to Reliance Michigan JV (RMJV) for widening and desilting of Mithi River. RMJV was given the work of drilling and blasting at Mithi River. The demand of service tax on the activity of the appellant i.e. drilling and blasting was confirmed under the head of dredging service under Section 65 (36A) which is taxable as per 65 (105)(zzzb). Being aggrieved by the Order-in-Original, the appellant filed appeal before the Commissioner (Appeals) who upheld the demand of service tax amounting to Rs. 12,75,866/- holding the service under dredging service and also upheld the interest and penalty under Section 78 corresponding to the aforesaid service tax demand. Being aggrieved by the impugned order, the appellant filed the present appeal.
2. Shri Bhavin S. Mehta, Id. Chartered Accountant appearing on behalf of the appellant submits that the appellant’s independent activity is only drilling and blasting at Mithi River. This activity alone does not fall under the service of dredging. He submits that the dredging service was provided by their main contractor to whom they have provided the service i.e. RMJV. The service of RMJV may or may not be taxable as dredging service but that is not relevant to decide stand alone service provided by the appellant. He refers to the definition of dredging service under clause 36A of Section 65. He further submits that it is evident from the confirmation letter dated 30.09.2013 provided by RMJV that the appellant has provided only service of drilling and blasting, the remaining service of excavation and removing silt was provided by some other sub-contractor M/s. S.K. Construction. In this fact the appellant’s service of drilling and blasting does not fall under the definition of dredging service. He further submits that the classification of service cannot be based on the overall service provided by the main contractor the classification should be determined on the basis of the service provided by sub-contractor and the nature of that service alone. This has been clarified by CBEC circular no. 147/16/2011/ST dated 21.10.2011.
3. He further submits that as per the master circular on service tax on 23.08.2007 it was clarified that in case of service provided by sub-contractor the sub-contractor need not take registration under service tax. In such cases the service tax is to be paid by the main service provider. He submits that this clarification was in force during the material period i.e. April 2006 to October 2006. Therefore the same is beyond the normal period of one year as provided under Section 73. He further submits that on the same set of services the demand was raised against RMJV wherein this Tribunal vide Order dated 16.04.2013 has given a finding that “the activity undertaken by the appellant was in public domain and it is a contract awarded by the Govt. of Maharashtra and, therefore, nobody can suppress the facts from public authorities. The charge against the appellant can at best be described as misinterpretation of law. But mis-interpretation is not mis-statement or suppression of facts.” He submits that as per the above finding in the present case also demand is clearly time barred. He further submits that as per the fact and circumstances the penalty under Section 78 of the Finance Act 1994 is not sustainable as held by the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa 1978 (2) ELT J 159.
4. Shri B. Kumar Iyer, Ld. Supdt. (AR) appearing on behalf of the revenue reiterates the finding of the impugned order. He further submits that as per the definition of “dredging service” the scope of service is very wide. The activity of the appellant i.e. drilling and blasting in Mithi River is part of the removal of silt sediment rock, sand. Therefore, it is covered under the dredging service. Accordingly, both lower authorities have correctly held the service classifiable under dredging service and the demand was rightly confirmed.
5. We have carefully considered the submission made by both sides.
6. We find that the issue to be decided by us is whether the service of drilling and blasting is a dredging service in terms of Section 65(36a), and whether the appellant being sub-contractor is liable to pay service tax in the event that the main contractor RMJV is discharging the service tax on the composite service provided to MMRDA. The service of dredging is defined under Section 65(36a), which reads as under:—
‘”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.’
7. From the above definition of “dredging” can be seen that the appellant’s activity i.e. drilling and blasting in Mithi River does not fit into any of the service which is provided in the inclusion clause of the dredging service, for the reason that the appellant is carrying out only drilling and blasting. Thereafter the removal of silt, rock, soil after blasting., is carried out by another sub-contractor M/s. S.K. Construction. It appears that in the definition mainly the activities which are in the inclusion of dredging service were provided. However, the definition of dredging is not appearing in the Finance Act 1994. Therefore, we take the Oxford dictionary meaning of “dredging” which is as under:—
“Verb:- Clear the bed of (a harbour, river, or other area of water) by scooping out mud, weeds, and rubbish with a dredge.
Noun – An apparatus for bringing up objects or mud from a river or seabed by scooping or dragging.”
8. From the Dictionary meaning of “dredging” it can be seen that the meaning is akin to the activity which is provided in the inclusion clause of the “dredging” as per Section 65(36a), therefore by taking both the definition of “dredging”, it is clear that the clearing of river bed by scooping or dragging is a service of dredging. In the present case, the activity is admittedly not similar to scooping or dragging of silt, mud etc. but it is limited to drilling and blasting. The subsequent service i.e. removal of silt, mud, rock etc. is carried out by M/s. S.K. Construction. The classification of service in the hands of the individual service provider to be decided on the basis of that activity alone carried out by the individual service provider and same cannot be linked with the subsequent service provided. In the present case the service provided by M/s. S.K. Construction and RMJV. The service of drilling and blasting alone does not fall under the dredging service.
9. As per our above discussion, we are of the considered view that the service of drilling and blasting provided by the appellant is not classifiable as dredging service therefore the demand raised under the dredging service will not be sustainable.
10. Since on merit itself the service is not taxable we are not addressing other issues such as liability of service provider as a sub-contractor, limitation etc. The impugned order is set aside. The appeal is allowed.
[Citation :Â 2017-Taxcaselaw-93-CESTAT-Mumbai-GST]
