2017 (8) TMI 793 - AT - Service Tax

Classification of services - Mining service - appellants have provided composite service with main focus on mining of China Clay, from the mines of the client - whether the service is to be classified under Mining service or site formation or cargo handling for purpose of service tax? - Held that - it is clear that these contracts involve raising of China Clay from the mines along with various connected activities - Tribunal in similar issues, in the case of M/s Kanak Khaniz Udyog Versus CCE, Jaipur-II 2017 (3) TMI 1365 - CESTAT NEW DELHI , has held that Having examined the scope of work undertaken by the appellant as mentioned in the SCN, we find that the same is covered under the tax entry under Section 65(105)(zzzy) of the Finance Act, 1994. The clarification dated 28.02.2007 issued by CBEC states that mining service covers cite formation and clearance, excavation and earth moving and various outsourced activities provided for mining - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Service tax liability under 'cargo handling service' and 'site formation and clearance, excavation, earth moving, and demolition services' for the period April 2004 to March 2008.
2. Classification of mining activities for service tax purposes.
3. Interpretation of tax liability under different tax entries pre and post 01.06.2007.

Analysis:

Issue 1:
The appeal challenged the order of the Commissioner (Appeals) upholding the service tax demand of ?10,55,076 along with penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellants provided various services to M/s J K Cement Works, Gotan, leading to the initiation of proceedings against them through a show cause notice dated 18.03.2009. The original authority confirmed the service tax demand, which was upheld by the Commissioner (Appeals).

Issue 2:
The appellant argued that their services involved mining of China Clay, which is liable to service tax under mining service introduced from 01.06.2007. They contended that prior to this date, mining activities were not taxable under categories like 'site formation' or 'cargo handling.' The Tribunal, in a previous case, held that such activities are taxable only from 01.06.2007 onwards. The appellant had paid the service tax liability and interest before the notice was issued, and hence, they argued that the impugned order was not sustainable on merit.

Issue 3:
The Tribunal examined the work orders and found that the services provided by the appellants involved mining activities falling under the tax entry of Section 65(105)(zzzy) of the Finance Act, 1994. Citing previous Tribunal decisions, it was noted that activities like movement of minerals and site formation incidental to mining could not be taxed under categories like 'cargo handling service' or 'site formation and clearance' pre-01.06.2007. The Tribunal also considered a similar case involving another appellant with the same client, where the tax liability was decided in favor of the appellant based on similar grounds.

In conclusion, the Tribunal found that the impugned order was not sustainable, setting it aside and allowing the appeal based on the analysis of the mining activities and the relevant tax entries pre and post 01.06.2007.