No Service Tax on Blasting & Quarrying for Road Works: CESTAT says Registration not required when No Tax Payable [Read Order]

Blasting, quarrying and allied activities conducted for road construction are not liable to Service Tax, held by the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ), New Delhi bench. Where no tax is payable due to exemption, the appellant/assessee cannot be compelled to obtain service tax registration or file returns, said the tribunal.

The appeal was filed by M/s Balaji Traders against an Order-in-Original dated 15.05.2019 passed by the Commissioner, CGST & Central Excise. The department, through the order, confirmed a service tax demand of ₹2,68,19,780 along with interest and penalties.

As per the submissions of the appellant, it was engaged in road construction work, particularly the Granular Subbase (GSB) portion, and its activities included mining/quarrying and blasting of boulders using explosives, drilling and controlled blasting at quarry sites, and later loading and transporting the excavated boulders/earth to the road construction site through dumpers.

The tax department initiated investigation through the GST Intelligence on 19.10.2016, alleging that the assessee had failed to obtain registration, failed to file periodic returns and suppressed taxable activities.

Later, a Show Cause Notice dated 31.07.2018 was issued demanding service tax for the above period.

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The adjudicating body upheld the continuation of proceedings even after the Finance Act, 1994 was repealed by confirming the demand and stating the saving clause of Section 174(2)(e) of the CGST Act, 2017.

Before the Tribunal, the assessee’s counsel, Adv. Krishan Garg submitted that drilling and blasting activities are classifiable under works contract service. Since the services were provided for construction of roads, they were exempt under Notification No. 25/2012-ST dated 20.06.2012.

The assessee produced earlier decisions of the Tribunal’s where similar blasting-related services were held to be exempt and not taxable.

The Revenue, however said that the assessee’s activities were only preparatory in nature and did not qualify as works contract since there was no transfer of property in goods. It was also alleged that the assessee had suppressed its activities by not registering or filing returns.

The CESTAT observed that the issue was no longer res integra and stood squarely covered by its earlier ruling in Navdeep Traders.

The bench of Binu Tamta (Judicial member) and Hemambika R. Pariya (Technical member), noted the decision in the matter of M/s Navdeep Traders. In this particular case, the tribunal held that “..... appellant was not required to pay any tax, therefore, was neither required to get himself registered or was not required to file return in form ST-3.”

The bench also observed that "In the light of 46th amendment, any service in the nature of works which involves utilization of goods is classifiable only as works contract service and that the transfer of goods in such contract has to be considered as the deemed sale.”

Accordingly, the Tribunal set aside a service tax demand of ₹2.68 crore raised against the assessee for the period October 2012 to March 2017. The appeal was allowed accordingly.

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