2024 (1) TMI 888 - AT - Service Tax

Recovery of short paid service tax alongwith interest and penalties - failure to include transportation charges in the assessable value - Department formed an opinion that the transportation charges are to be covered under mining services - whether the whole activity of the appellant or the services rendered by the appellant are mining service only or are two different services? - HELD THAT - The contracts are not composite in nature and the services provided by the appellants are not composite in nature. There are separate arrangement/contract for the activity which can be called as the Mining Services and the activity which is Transportation Services. Also as apparent from the Section 66F as reproduced above, it is clear that when two separate activities are being provided even though under the single instrument or contract, those have to be treated as two separate activities and thus should be taxed separately. In the decision titled as Jain carrying Corporation Vs. Commissioner of Central Excise, Jaipur, 2015 (11) TMI 98 - SC ORDER , wherein it was held that if separate rates are provided for separate activities under a common agreement/instrument, the activities should be classified under their respective categories. Though the department has also relied upon several decisions but most of them pertains to the comprehensive/composite contract. As already discussed above, it is not the fact for the contracts in question. The adjudicating authority while declining the transportation activity as a GTA service has held that since there is no consignment note, the same cannot be held to be the GTA service. No doubt in terms of Rule 4B of Service Tax Rule, 1994, issuance of consignment note to the recipient of service is mandatory. But in the present case, apparently and admittedly, there were issued transit slips having all such details as were to be mentioned in the consignment note. Hence just because the receipts/notes had a different nomenclature, it cannot be held that there was no consignment note. There are no reason to conform the order under challenge. Same is therefore set aside - appeal allowed.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Tax liability and applicability of service tax on transportation charges.
3. Invocation of the extended period for demand and imposition of penalties.

Summary:

1. Classification of Services Provided by the Appellant:
The appellant is engaged in providing Mining Services and transportation of mined goods. The contracts executed with various principals had separate rates for mining and transportation services. The appellant argued that the mining activity ceases once the mineral is excavated, and the subsequent transportation is a separate service under "Goods Transport Agency" (GTA). The department contended that the entire activity, including transportation, should be classified under mining services, making the appellant liable for service tax on the total amount received.

2. Tax Liability and Applicability of Service Tax on Transportation Charges:
The Tribunal observed that the contracts were not composite in nature and had separate arrangements for mining and transportation services. According to Section 66F of the Finance Act, 1994, when two separate activities are provided under a single contract, they should be taxed separately. The Tribunal referred to the Supreme Court's decision in State of Madras Vs. Gannon Dunkerley & Co. and other relevant cases, concluding that transportation is a distinct activity and should be taxed under GTA services. The department's circular and Supreme Court's judgment in Commissioner of Central Excise and Service Tax, Raipur Vs. Singh Transporters supported this view. The Tribunal also noted that transit slips issued by the appellant served the same purpose as consignment notes, making the transportation service taxable under GTA.

3. Invocation of Extended Period for Demand and Imposition of Penalties:
The appellant argued that the extended period was wrongly invoked as there was no misrepresentation or suppression of facts. The Tribunal agreed, noting that the appellant had regularly filed returns and their records were audited by the department. Previous decisions in the appellant's favor also supported this view. The Tribunal found no reason to uphold the order under challenge and set it aside, allowing the appeal.

Conclusion:
The Tribunal concluded that the services provided by the appellant should be classified separately as mining and transportation services, with the latter taxable under GTA. The extended period for demand and penalties was not justified. The order under challenge was set aside, and the appeal was allowed.