2009 (3) TMI 141 - AT - Service Tax

Business Auxiliary Service - The present dispute relates to period 1-10-2003 to 9-9-2004 & and 10-9-2004 to 15-6-2005. For the earlier period, the department wants to charge the appellants under the category of cargo handling services and for the later period, the department wants to charge the appellants under the category of business auxiliary services as well as the cargo handling charges held that - some of the activities undertaken are for transportation of coal inside the mining area etc. and hence, the amount for the same cannot be charged to service tax under the category of cargo handling service. However, on the other hand, for the activity of loading and unloading of coal for movement outside the mining area, the service tax is payable under cargo handling service

Summary

Issues:
Interpretation of service tax liability for mining activities including coal extraction and transportation; Classification of services under cargo handling and business auxiliary services; Applicability of penalty and interest on service tax liability.

Analysis:
The case involved a dispute regarding the service tax liability of the appellants for their mining activities, including coal extraction and transportation services provided to M/s. Hindalco. The department sought to charge the appellants under cargo handling services for the period 1-10-2003 to 9-9-2004 and under business auxiliary services for the period 10-9-2004 to 15-6-2005. The appellants were already paying service tax for site formation services and mining services from specific dates.

The Tribunal analyzed the nature of the activities undertaken by the appellants and the relevant legal provisions. It was observed that since coal is an excisable product, the mining and production of coal would fall under the definition of 'manufacture' under the Central Excise Act, 1944. Therefore, the contention of the department to classify the activities under business auxiliary services was rejected for the later period.

Regarding the classification of services for the entire disputed period, the appellants conceded that part of their activities could be classified as cargo handling, specifically the loading and unloading of coal for transportation outside the mining area. The appellants agreed to pay service tax on cargo handling services at a rate of Rs. 15/- per metric ton, which was also considered as the cum-tax realization from their client.

The Tribunal acknowledged the lack of clarity in the classification of activities related to mining until a clarificatory circular was issued by the Board. Considering this, the penalties were waived under the provisions of Section 80 of the Finance Act, 1994. The Tribunal directed the adjustment of the predeposited amount by the appellants towards service tax on cargo handling charges, along with the payment of interest due on the same.

In conclusion, the Tribunal ruled in favor of the appellants for the period 1-10-2003 to 16-6-2005, clarifying the service tax liability for specific activities within the mining area and directing the appellants to pay the applicable taxes and interest while waiving penalties due to the lack of clarity in classification during the relevant period.