Whether the activity of providing land and approach roads to enable cement companies to install their machinery is liable for service tax under BSS?

PJ/Case Law/2013-14/1658

Case:- M/s PANIPAT THERMAL POWER STATION Vs C.C.E., ROHTAK

Citation:- 2013-TIOL-1008-CESTAT-DEL

Issue:- Whether the activity of providing land and approach roads to enable cement companies to install their machinery is liable for service tax under BSS?

Brief Facts:- The appellant are a thermal power station. In course of generation of power, a huge quantity of fly ash is generated. For removal of fly ash, the appellant entered into agreement with several cement manufacturing companies according to which, while the appellant were to provide land and approach roads to cement companies for their use, the cement companies were to install the machinery for evacuation of cement and the storage silos for its storage. The land was also used of parking of vehicles by the cement companies. In terms of the agreements, the appellant for lifting of fly ash were charging from the cement companies an amount as "administrative charges", which was actually the sale price. But in terms of the directions of the Ministry of Environment, the sales proceeds from disposal of fly ash were to be utilized for pollution control measures. The department was of the view that since the appellant have provided their approach road and their land to the cement companies, on which the cement companies have installed their machinery and storage silos, the appellant have provided business support service to the cement companies and on this basis two show cause notices were issued for charging of service tax on the amount being received by the appellant from the cement companies as administrative charge, alongwith interest and also imposition of penalty. The show cause notices were adjudicated by the Commissioner vide the impugned order by which the total service tax demands were confirmed against the appellant alongwith interest for the period from 1/5/06 to 28/2/11 and beside this, penalty of equal amount was imposed under Section 78 and penalty under Section 77. Against this order of the Commissioner, the present appeal alongwith stay application has been filed.

Appellant’s contention:- The appellant pleaded that the amount being charged by the them from cement companies was actually the sale price though it is being termed as administrative charge, that no business support service has been provided, as the appellant had merely provided their land and their approach road which was being used by the cement companies for installation of the machinery for evacuation of fly ash, storage silos, and parking of their vehicles, that permitting the use of their land and approach road by the cement manufacturing companies for lifting the fly ash cannot be treated as service, that w.e.f. 1/3/11, the central excise exemption in respect of fly ash was withdrawn and the fly ash became subject to excise duty @ 1% and since then the appellant have been paying Central Excise duty in respect of the same, that for the period w.e.f. 1/3/11 another show cause notice had been issued by the department to the appellant for charging of service tax, but the same was dropped by the Commissioner vide order-in-original dated 31/12/12, wherein the Commissioner held that the appellant's transaction with cement companies were of sales and not of service, that in view of this finding of the Commissioner even for the period prior to 1/3/11 the appellant's transaction with the cement companies cannot be called service, that in view of this, the impugned order is not sustainable, that the appellant have a strong prima facie case and, hence, the requirement of pre-deposit of service tax demand and interest may be waived for hearing of the appeal and recovery thereof may be stayed till the disposal of the appeal.

Respondent’s contention:- The Respondent opposed the stay application by reiterating the findings of the Commissioner in the impugned order and pointing to the commissioners findings the impugned order-in-original, he emphasized that since the appellant have not only been permitting the use of their land and approach roads but have also allowed the cement companies the use of other facilities also, they have provided business support service and, hence, the amount being charged by the appellant from cement companies as "administrative charges" would attract service tax under business support service. He, therefore, pleaded that this is not the case for waiver from the requirement of pre-deposit.

Reasoning of Judgment:- The Tribunal heard both the parties and finds that the appellant have provided their land, approach roads and also the use of their weighbridge, water etc. to enable the cement companies to install their machinery for evacuation of the fly ash from the thermal power plant and its storage. In prima facie view this activity of the appellant cannot be termed as business support service, more so when in respect of the period from 1/3/11 the Commissioner himself has held that this transaction is not a service transaction, but is sale of fly ash on which central excise duty was being paid. Same activity cannot be termed as sale as well as service. In view of this, we hold that the appellant have prima facie case in his favour. The requirement of pre-deposit of service tax demand, interest thereon and penalty is therefore waived for hearing of the appeal and recovery thereof is stayed till the disposal of the appeal.

Decision:-The stay application is allowed.

Comment:-The essence of this case is that if land and approach roads along with the use of weighbridge, water etc. is being provided to enable the cement companies to install their machinery for evacuation of the fly ash from the thermal power plant and its storage and when excise duty is being paid on the fly ash sold, the said activity cannot be primarily brought within the ambit of service tax under BSS. An activity cannot be termed as both sale and service at the same time.

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PJ/Case Law/2013-14/1658

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