The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that explosive material for blasting sites falls under “works contract” services and set aside the service tax demand.
The department filed the appeal under review order No.32 dated 25.09.2019 to challenge the order in Appeal No.497 dated 22.05.2019. M/s. Navdeep Traders, the respondent-assessee is engaged in providing blasting services for the extraction of sandstone etc. by using explosive material procured by them under license from LE-3 issued under Explosive Rules, 2008 by transporting the same to the place of their customers.
The Department received intelligence that the respondent–assessee was neither registered under the service tax regime nor was paying the service tax even though the nature of service being rendered by them is not covered under the negative list introduced w.e.f. 01.07.2012. The department noticed that the respondent-assessee was not discharging the tax liability, but rather was found evading the payment of service tax.
The department also observed that the assessee was having an explosive license for procuring explosives from the seller, storing the same and subsequently using these explosives, through mine’s blasters, at the site of the customer, for the excavation of sandstone. It was found that explosive material was issued from respondent’s magazines under Form RE-13 (pass for use of explosives) as per the requirement/consumption for blasting at the customer’s site.
It was stated by the respondent-assessee that they issued bills to the customers charging for the explosive material and blasting services separately and they pay the applicable Value Added Tax (VAT) on the explosive material. The partners simultaneously admitted that they cannot sell the explosives in the open market. Hence, they do not have any transaction of direct sale except issuing the explosives to the mine’s blasters.
The activities of excavation, Site clearance/ demolition etc. were alleged to be taxable and the demand for tax of Rs.70,98,005/- proposed was confirmed by the Original Adjudicating Authority. On appeal, the Commissioner(Appeals) set aside the demand.
It was alleged that the appellant department that the services provided about the mining of minerals, oil and gas qualify to be called “service” within the meaning of section 65B (44) as was inserted vide Finance Act, 2012 w.e.f. 01.07.2012.
All services were made taxable if not covered under the negative list or do not fall under any of the exemption notifications. It was argued that Commissioner (Appeals) has wrongly held the impugned services of blasting the site as the ‘works contract’ services while setting aside the demand as was confirmed by the original adjudicating authority.
It was observed that as per the 46th amendment, any service like works which involves the utilization of goods is classifiable only as works contract service and the transfer of goods in such contract must be considered as the deemed sale.
A two-member bench comprising Dr Rachna Gupta,(Judicial) and Mrs Hemambika R Priya,(Technical) observed that though the assessee was not selling the explosive to the mine blaster and was issuing the same for the execution of mining works there is no simultaneous denial to the fact that the assessee was issuing bills to the customer in which they were charging for the explosive material and blasting service separately and that the assessee was paying applicable VAT on the explosive material
It was evident that the provision of Rajasthan VAT Act, 2003, RVAT Rules, 2006, the decision of Apex Court & Gujarat AAR, the services rendered by the appellant are correctly classifiable under works contract services, VAT was correctly paid & since the value of services during any FY was less than threshold exemption limit hence was exempted under notification No.33/2012-ST dated 20.06.2012. The CESTAT held the Order of Commissioner (Appeals) and dismissed the appeal of the department.
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