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Supply of machinery such as JCB, tractors and tankers for which consideration at hourly rate is received, is taxable under Supply of Tangible Goods Service: CESTAT, New Delhi

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL

WEST BLOCK NO 2, R K PURAM, NEW DELHI – 110066

Appeal No. ST/56077/2013-(DB)

Arising out of Order-in-Appeal No. 27-28-RDN-ST-JPR-II-2013, Dated: 01.02.2013

Passed by Commissioner of Central Excise-JAIPUR-II Appeal

Date of Hearing: 23.01.2019

Date of Decision: 23.01.2019

RANE KHAN CONTRACTOR

Vs

COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX

JAIPUR-II

Appellant Rep by: Shri O P Agarwal, Adv.

Respondent Rep by: Shri Sanjay Jain, DR

CORAM: Anil Choudhary, Member (J)

Bijay Kumar, Member (T)

ST – The issue in this appeal is whether service tax have rightly demanded from assessee under the category of “site formation and clearance service” – It is an admitted fact that the assessee has supplied machinery tractors and JCB to their principal for which they have been paid on hourly rate including operator cost, excluding fuel – Such services are squarely covered under the scope of “supply of tangible goods service” as defined under Section (65)(105) (zzzzj), it is found from the copy of work order issued by principal/ Enercon to assessee wherein for construction or for erection of WEG for wind power project, in the price category it is provided that the assessee shall paid at hourly rate for various machinery like JCB, tractor and tanker – Thus, evidently the service category involved is SOTG, and not site formation and clearance service as held by the court below – SOTG service came into effect from 16th March, 2008, that is after the period of dispute – The impugned order is set aside: CESTAT

Appeal allowed

FINAL ORDER NO. 50119/2019

Per: Anil Choudhary:

Heard the parties

2. The issue in this appeal is whether service tax have rightly demanded from the appellant under the category of “site formation and clearance service”.

3. From the impugned order at para 6.1, Ld. Commissioner (Appeal) has held as follows;

6.1 The appellant has contended that they had supplied tractors excavator including operator and the charges were based on hourly basis. Such tractors and excavator were used for excavations work. Therefore, the appellant had supplied tangible goods without giving legal right of possession and effective control. As classified by the Board vide circular dated no. 334/1/2008-TRU dated 29.02.2008, such type of supply of tangible goods is taxable under category of supply of tangible goods under Section 65(105) (zzzzj) of the Finance Act, 1994, and that such services become taxable only w.e.f. 16.05.2008. In this regard, I find that the appellant was entrusted the work of excavation of soil/soft rock for construction of foundation for Tower. The preparation of site for such construction of foundation for a Tower is clearly covered under the Site Formation & Clearance Service defined under Section 65(105) (zzzza) of the Finance Act, 1994. As such the above contention of the appellant is not tenable and it is not material as to how the charges of rendering such services are calculated. The consumption of value of said service on the basis of hourly working of tractors and excavator cannot decide the nature of service rendered. The activity actually performed by the appellant was preparation of site for construction of foundation for erecting the Tower. The appellant has nowhere denied that they had performed the work of excavation and preparation of site for construction of foundation for a tower. They had simply contended that they had supplied the Excavators and Tractors with operators whereas the appellant was engaged by M/s L & T for preparation of site for undertaking the work of foundation construction for a Windmill Tower. I thus do not find any infirmity in the findings of the adjudicating authority that the service as discussed above is covered under Site Formation and Clearance Service taxable under Section 65(105)(zzza) of the Finance Act, 1994 and not under supply of tangible goods service defined under Section 65(105) (zzzzj). The appellant has also contended that in any case benefit of Notification No. 17/2205 ST dated 07.06.2005 is available to them. I find no force in the contention of the appellant in as much as that the site preparation was related to foundation construction for a Windmill Tower and not related to construction of Road and other work specified in the said Notification.

4. Having considered the rival contention and perusal of the appeal records, We find that it is an admitted fact that the appellant has supplied machinery tractors and JCB, etc., to their principal for which they have been paid on hourly rate including operator cost, excluding fuel. We find that such services are squarely covered under the scope of “supply of tangible goods service” as defined under Section (65)(105) (zzzzj), we also find from the copy of work order issued by the principal/ Enercon to the appellant, dated 12th May 2006, wherein for construction or for erection of WEG for wind power project, in the price category it is provided that the appellant shall paid at hourly rate for various machinery like JCB, tractor, tanker, etc. Thus, evidently the service category involved is SOTG, and not site formation and clearance service, as held by the court below.

4. Further we are aware that SOTG service came into effect from 16th March, 2008, that is after the period of dispute.

5. Thus, we set aside the impugned order and allow the appeal. The appellant is entitled to consequential benefit.

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