2024 (3) TMI 1106 - AT - Service Tax

Levy of service tax - Mining Services - execution of contracts for transportation of Coal/Over Burden within the mines and also outside the mines - demand under Business Auxiliary Service reported as Handling Charges - CENVAT Credit disallowed on Tippers (CH.87) used for providing Cargo Handling Service - denial of credit on M.S. Channel and M.S. Angle used for repairing Body/Dallas of the Tippers/Dumper has been disallowed on the ground that the same was not input for the repair of the Tippers/Dumpers - denial of credit availed on the strength of invoices which are in the names of third parties (contractors) - demand of CENVAT Credit against availment of CENVAT Credit prior to payment. Mining services - HELD THAT - The activity of transportation is most appropriately classifiable under Goods Transport Agency Services and the liability to pay Service Tax on the transportation service lies on the service receiver under the reverse charge mechanism. Accordingly the transport services provided by the Appellant cannot be classified under the category of Mining Services . It is observed that this view has been taken by the Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX RAIPUR VERSUS SINGH TRANSPORTERS 2017 (7) TMI 494 - SUPREME COURT . Relying on the said decision this tribunal has taken the same view in the case of M/S MAA KALIKA TRANSPORT PRIVATE LIMITED VERSUS COMMISSIONER OF CGST CENTRAL EXCISE ROURKELA ROURKELA 2023 (7) TMI 435 - CESTAT KOLKATA wherein it has been held that transportation of coal within the mines is liable for service tax under the category of Goods Transport Agency Services and therefore the liability to pay service tax under the reverse charge mechanism lies on the service receivers - the transportation service rendered by the Appellant within the mines and outside the mines are not chargeable to service tax under the category of Mining Services . Similarly the activities of Shifting and Feeding of Coal into the Hoppers has been carried out in the Power Plants and hence the same cannot be categorized as Mining Service . Accordingly the demand of service tax confirmed in the impugned order on this count is set aside. Demand of service tax on diesel supplied free of cost by the client under the category of Mining Service - HELD THAT - Under the composite contract dated 27/08/2010 awarded by Calcutta Industrial Supply Corporation (CISC) for mining it was agreed upon that the said client would supply the Diesel (HSD) free of cost for running of Tippers Excavators HEMM etc. for providing the Mining Services . It is observed that during the relevant period there is no provision in the valuation rules to include the value of free supply material in the assessable value for the purpose of levy of service tax. Accordingly we hold that the cost of HSD valued Rs.3, 97, 69, 281/- supplied free of cost by the client cannot be included in the assessable value during 2011-12 for the purpose of demanding service tax under the category of Mining Services . Accordingly the demand of service tax in the impugned order on this count is not sustainable - the demand of service tax of Rs.18, 76, 33, 250/- confirmed in the impugned order along with interest and penalty under the category of Mining Services is not sustainable and accordingly the same is set aside. Handling charges - HELD THAT - The discount amount received has been credited in the books of accounts under the head of Handling Charges. It is observed that the Department has considered these receipts as taxable value received and demanded service tax under the category of Business Auxiliary Service . A perusal of the journals invoices and CA Certificates submitted by the Appellant reveals that the Handling Charges of Rs.75, 60, 332/- received them was towards Discounts only and not for providing any taxable services. Merely because the amount is accounted for under the Account Head Handling Charges it would not make it taxable under category of Business Auxiliary Services . Accordingly the service tax confirmed in the impugned order on this count is not sustainable. CENVAT Credit of Rs.37, 13, 615/- disallowed on Tippers (CH.87) used for providing Cargo Handling Service - HELD THAT - The CENVAT Credit in the instant case was claimed in the year 2008 when the Appellant was not rendering Cargo handling service . The Appellant took registration of the vehicle under the Motor Vehicles Act on 12-10-2010. This date has no relevance for availing the credit on the Tippers as Capital goods . As the Tippers were not used for providing Cargo Handling Service for which they are eligible as Capital Goods at the time of receipt of the goods in the year 2008 we hold that the credit availed by the Appellant on this count has been rightly denied in the impugned order. The Appellant has not intimated the availment of capital goods credit on the Tippers. Hence extended period has been rightly invoked to disallow the credit. For the same reason the appellant is also liable for penalty. Accordingly the demand of service tax along with interest upheld. As the irregular credit availed by the Appellant has been established the Appellant is liable for interest and penalty under Rule 15(2) of the CENVAT Credit Rules 2004. Denial of CENVAT Credit of Rs.8, 64, 278/- on the 217 MT of M.S.Channel and M.S.Angle used for repairing Body/Dallas of the Tippers/Dumper - HELD THAT - During the period from April 2012 to November 2012 the Appellant purchased 217 MT of M.S. Channel and M.S.Angle and claimed that they have used the same for repairing Body/Dallas of the Tippers/Dumper which were in turn used for providing taxable services under the category of Cargo Handling Services . This fact needs to be verified. In the impugned order the adjudicating authority observed that a Dumping Truck normally weighs 4-6 MT. The claim of consuming 217 MT angle/Channel for repairing work in one year for making Body/Dallas appears nothing but a sham - the adjudicating authority has not given any finding as to whether the Tippers/Dumpers for which the 217 MT of MS Angle and MS Channel were said to have been used qualify as capital goods first. The Appellant has also not submitted any evidence to support their claim that the 217 MT of MS angle and MS Channel has been used in repairing the Tippers. Accordingly this matter needs to be remanded back to the adjudicating authority to examine the eligibility of this credit on the basis of the above observations. Denial of CENVAT Credit of Rs.6, 14, 095/- availed on the strength of invoices which are in the names of third parties (contractors) - HELD THAT - The Appellant had already reversed the CENVAT Credit of Rs.4, 81, 313/- and Rs.1, 32, 782/- vide Challan dated 27-04-2013 and Challan dated 29-07-2013 aggregating to Rs.6, 14, 095/- along with interest of Rs.1, 36, 728/-. However it is found that the Impugned Order has only considered the payment of Rs.4, 81, 313/- and appropriated the same. Since the Appellant has already reversed the entire credit of Rs.6, 14, 095/- the same is appropriated. Appeal disposed off.

Summary

Issues Involved:
1. Demand of service tax under the category of 'Mining Services'.
2. Demand of service tax under 'Business Auxiliary Services'.
3. Disallowance of CENVAT Credit on Tippers.
4. Denial of CENVAT Credit on M.S. Channel and M.S. Angle.
5. Disallowance of CENVAT Credit on invoices in the names of third parties.

Summary:

1. Demand of Service Tax under 'Mining Services':
The Tribunal observed that the activities of the Appellant, such as transportation of coal within and outside the mining area, and shifting and feeding coal into power plant hoppers, cannot be classified under 'Mining Services' as defined u/s 65(105)(zzzy) of the Finance Act, 1994. These activities are more appropriately classifiable under 'Goods Transport Agency Services', where the liability to pay service tax lies on the service receiver under the reverse charge mechanism. The Tribunal relied on the Supreme Court's decision in CCE Vs. Singh Transporters and the Tribunal's decision in MaaKalika Transport Pvt. Ltd. Accordingly, the demand of Rs. 18,76,33,250/- along with interest and penalty under 'Mining Services' was set aside.

2. Demand of Service Tax under 'Business Auxiliary Services':
The Appellant had received Rs. 75,60,332/- as discounts from vendors, which was credited under "Handling Charges" in their books. The Department considered these receipts as taxable under 'Business Auxiliary Services'. However, the Tribunal found that these were merely discounts and not for providing any taxable services. Therefore, the demand of Rs. 8,53,102/- under 'Business Auxiliary Services' was set aside.

3. Disallowance of CENVAT Credit on Tippers:
The Appellant purchased Tippers in 2008 and used them for providing 'Cargo Handling Services' as per a work order dated 01-02-2010. The Tribunal held that Tippers are eligible as 'Capital Goods' only for certain services like 'Cargo Handling Services'. Since the Tippers were not used for providing such services at the time of purchase in 2008, the credit was rightly denied. The demand of Rs. 37,13,615/- along with interest and penalty was upheld.

4. Denial of CENVAT Credit on M.S. Channel and M.S. Angle:
The Appellant claimed CENVAT Credit of Rs. 8,64,278/- for M.S. Channel and M.S. Angle used for repairing Tippers/Dumpers. The Tribunal noted that the adjudicating authority did not verify whether these items qualified as capital goods and whether they were actually used for repairs. The matter was remanded back to the adjudicating authority for fresh examination.

5. Disallowance of CENVAT Credit on Invoices in the Names of Third Parties:
The Appellant had reversed the entire CENVAT Credit of Rs. 6,14,095/- along with interest. The Tribunal appropriated this amount as it was already reversed by the Appellant.

Order:
1. The demand of service tax of Rs. 18,76,33,250/- under 'Mining Services' is set aside.
2. The demand of Rs. 8,53,102/- under 'Business Auxiliary Services' is set aside.
3. The disallowance of CENVAT Credit of Rs. 37,13,615/- on Tippers is upheld along with interest and penalty.
4. The demand of recovery of irregular credit of Rs. 8,64,278/- is set aside and remanded for fresh examination.
5. The reversed CENVAT Credit of Rs. 6,14,095/- is appropriated.
6. The appeal is disposed of on these terms.