Case Law Details
Pashupati Nath Tubewells Vs Commissioner of Central Excise (CESTAT Delhi)
CESTAT held that the agriculture/cultivation includes irrigation or watering of the plants, as due to lack of irrigation, it is very difficult to have any agriculture produce. Accordingly, it was held that the activities carried out by the appellant (Drilling of wells & Tubewells) is covered in the Negative List, which are exempt from Service tax.
FULL TEXT OF THE CESTAT DELHI ORDER
The issue involved in this appeal is whether the services provided by the appellant i.e. digging of bore well, whether the same is exempt under Section 66 D(d)(i).
2. The brief facts are that the appellants are engaged in providing the services of “Drilling of wells & Tubewells” and received Rs.2,90,31,649/- against providing of the aforesaid services, and not paid service tax amounting to Rs.39,15,178/- (inclusive of Cesses) during the period from October-2013 to March, 2017. The appellant were digging wells and bore wells for the use of farmers, which in turn was utilised by them for their agriculture operations, such as irrigation of crop and other allied activities. A show cause notice dated 22.04.2019 was issued to the appellant, wherein it has been alleged that they have suppressed the relevant facts and contravened the provisions of Section 68, 69 and 70 of the Finance Act, 1994 read with Rule 6, 4 and 7 of the Service Tax Rules, 1994, with intent to evade payment of Service Tax amounting to Rs.39,15,178/- (inclusive of Cesses). Penalty has also been proposed in the notices under Rule 7 C of Service Tax Rules, 1994 read with Section 70 of the Finance Act, 1994 and under Section 77 (1)(a) & 78 of the Finance Act, 1994. Considering the submissions of the respondent, the Adjudicating Authority vide order-in-original dropped the demand on the ground that the service of digging wells and bore-wells were directly provided to the farmers for their agriculture operations, which were exempted from Service Tax under Section 66D (d)(i) of the Finance Act, 1994.
3. Thereafter, being aggrieved, Revenue preferred appeal before the ld. Commissioner (Appeals) on the ground that the services of digging wells and bore wells are not covered under the definition of “Agriculture Operations” like cultivation, harvesting, etc. Further, it is urged that the activities, which have been kept out of the ambit of Service Tax, have been clearly highlighted (as directly related to the agricultural produce such a cultivation, harvesting, threshing, plant protection or seed testing, etc.) None of these activities encompass any activities relating to digging of borewells. It is further urged that Mega Exemption Notification No.25/2012 dated 20.06.2012, also grants exemption to certain services related to agriculture, which are not defined to be under to be under Negative List of services, i.e. Section 66(D)(d)(i) of the Act and hence were taxable. In the course of argument before the Commissioner (Appeals), the assessee had urged that cultivation includes activities like planting, irrigation, spraying of pesticides and similar operations. They had also relied upon the ruling in the case of CIT Vs. Raja Binoy Kumar Sahas Roy – 1957 32 ITR 466, wherein the Court had held that term “agriculture” refers to cultivation of lands in the wider sense as comprising within its scope, the basic as well as subsequent operations such as weeding, digging the soil around the growth, removal of undesirable under-growth, tending, pruning, cutting, harvesting and rendering the produce fit for the market.
4. Ld. Commissioner (Appeals) was pleased to observe that the appellant-asssessee have not sufficient proofs in support of their contentions. Further, observed that these affidavits (of farmers) were not supported by the payment receipts from these farmers, and certificates issued from their respective Gram Panchayat.
5. Thus, due to insufficiency of the documents, ld. Commissioner (Appeals) was pleased to reverse the order-in-original and allowed the appeal of the Revenue confirming the demand of tax along with penalty under Section 78, 77 (1)(a) as well as Section 70.
6. Being aggrieved , the appellant is before this Tribunal.
7. Ld. Counsel for the appellant/assessee urges that the ld. Commissioner has held that the activities of the digging of borewells in agriculture fields for the farmers is exempt, but the only thing is sufficiency of evidences. Ld. Counsel takes me to the various evidences, which were produced before the Court Below, and annexed in appeal filed before this Tribunal.
8. Departmental Representative relied on the impugned order.
9. Having considered the rival contentions, I find that the appellant had stated, at the first instance, during the course of inquiry, that Income Tax, TDS have not been deducted as the activities of digging of bore wells of the farmers do not attract deduction of tax at source. The appellant had also led evidences by filing the copies of the land records of service receivers as well as affidavits from the service receivers. Further, services were supported by the certificates issued by Sarpanch of the Village Panchayat, wherein the Sarpanch included the list of the names of the farmers/service receivers, who have received the services of digging of borewells and well, and the amount paid by each individual farmers. I find that such evidences led before the Court Below have not been found to be untrue. Thus, I hold that the Court Below have rejected the evidences arbitrarily and against the Scheme of the Finance Act read with the Rules thereunder.
10. The appellant have also produced copy of the clarificatory letter dated 4.3.2014 being F.No.354/35/2014-TRU issued by the then Finance Minister in reference to the representation, received from South Zone Agriculture Association with assessment with regard to the taxability on the activities of drilling of borewells for supply of water to the farmers. It was clarified that the said services are excluded from the tax liability since it is covered in the scope of the Negative List Entry under Section 66 D(d)(i) of the Finance Act, 1994.
11. In view of my findings and evidences on record and relying on the ruling of the Hon’ble Supreme Court in the case of Raja Binoy Kumar Sahas Roy (supra), I hold that the agriculture/cultivation includes irrigation or watering of the plants, as due to lack of irrigation, it is very difficult to have any agriculture produce. Accordingly, I hold that the activities carried out by the appellant is covered in the Negative List, which are exempt from tax. Accordingly, the impugned order-in-appeal is set aside and the order-in-original is restored. The appellant is entitled to consequential benefits in accordance with law. The appeal is allowed.
[order dictated & pronounced in open court]
