2010 (3) TMI 744 - AT - Service Tax

Waiver of pre-deposit - Mining of mineral, oil or gas service - The impugned activities of surveying, drilling, blasting excavation and raising iron ore, transporting them for the purpose of sorting into iron ore lumps and iron ore fines, crushing, grading, etc. are prima facie mining of mineral, oil or gas service brought under the service tax net from 1-6-2007 - The period of dispute in the instant case is from 1-4-2006 to 31-3-2007 - Therefore, prima facie the impugned activities cannot be taxed under any pre-existing entry - The appellants have rightly relied on decision of the Tribunal in Daelim Industrial Co. Ltd. v. CCE (2003 -TMI - 36 - CEGAT, NEW DELHI) wherein it was held by the Tribunal that a turnkey contract could not be vivisected and part of it subjected to service tax - The appellants have made out a prima facie case against the demand and penalties.- - Decided in favour of assessee.

Summary

Issues:
Waiver of pre-deposit and stay of recovery of liabilities adjudged against the appellant.

Analysis:
1. The impugned order confirmed various liabilities against the appellant, including service tax, interest, and penalties under different sections of the Finance Act, 1994. The appellant sought waiver of pre-deposit and stay of recovery of the dues.

2. The appellant's activities involved surveying, drilling, blasting, excavation, raising iron ore, processing, transportation, and sale of iron ore. The Show Cause Notice proposed classification of activities under 'site formation and clearance, excavation and earth moving and demolition service' and 'business auxiliary service'.

3. The Tribunal observed in a previous case that a works contract cannot be vivisected to charge tax on certain activities without determining the taxable value precisely for each service. The demand and penalties in the present case were deemed unsustainable. The appellant's engagement in production of iron ore for clients did not fall under 'Business Auxiliary Service' as it involved manufacturing activities.

4. The appellant's production of iron ore was found not liable to tax under 'Business Auxiliary Service' as per the definition and precedents cited. The Tribunal noted that the appellant's activities were akin to mining services, which were not taxable under any pre-existing entry during the disputed period.

5. Referring to a previous case, the Tribunal held that the essential character of the appellant's work was mining or winning of minerals, classifying it as 'mining service'. The Tribunal also cited a case where a turnkey contract could not be divided for service tax purposes. Consequently, the Tribunal ordered a complete waiver of pre-deposit and stay of recovery of the dues pending appeal decision.