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2014 (3) TMI 79 - AT - Service TaxClassification of service - cargo handling or site formation and clearance, excavation and earth moving service or mining service - job was clearing the site for mining, excavation of top soil and its dumping at a specified place, removal of the over burden and raising of saleable lignite from Matasukh Mines - period before 16/06/05 and from 16/06/05 to 31/05/07 - Held that - except for mention of loading of the mined lignite of the desired quantity into the trucks in Clause 4.2.1 (c) of the agreement, there is absolutely no mention of any handling or transportation of coal by the appellant within the mining area. As held by the Tribunal in the case of Sainik Mining & Allied Services Ltd. vs. CCE, CUS & ST, BBSR (2007 (11) TMI 90 - CESTAT, KOLKATA), cargo in commercial parlance means the goods which are to be carried as freight in ships, planes, rail or trucks and cargo handling service is handling of such goods meant for transportation and it is on this basis that the Tribunal in this case held that handling and movement of coal within the mining area is not taxable as cargo handling service under Section 65 (105) (Zr). - service tax demand for the period prior to 16/6/05 is not sustainable at all As regards the service tax demand for the period from 16/6/05 to 31/5/07 - the entire contract has to be treated as a mining contract and not a contract for site formation, clearance, excavation and earth moving. Therefore, for this period also, the appellant s activity cannot be subjected to service tax under Section 65 (105) (ZZZa). We find that same view has been taken by the Tribunal in an identical issue involved in the case of M. Ramakrishna Reddy vs. CCE & CUS, Tirupathi 2008 (10) TMI 115 - CESTAT, BANGALORE Moreover, when w.e.f. 01/6/07 the activity of the appellant has been accepted by the Department as mining service, for the period prior to 01/6/07, the same activity cannot be classified as site formation and clearance, excavation and earth moving or as cargo handling service. The service tax demand for the period prior to 01/6/07 and also the penalty under Section 78 to that extent set aside. - Demand for the normal period of limitation and penalty u/s 76 confirmed - Decided partly in favor of assessee.
Issues Involved:
1. Classification of services provided by the appellant. 2. Taxability of services under different periods. 3. Invocation of extended limitation period. 4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. Detailed Analysis: 1. Classification of Services Provided by the Appellant: The appellant, a partnership firm engaged in mining and related services, entered into an agreement with RSMML for mining lignite. The Department classified their services under different heads for different periods: - Cargo Handling Service under Section 65(105)(Zr) till 15/06/05. - Site Formation and Clearance, Excavation and Earth Moving Service under Section 65(105)(ZZZa) from 16/06/05 to 31/05/07. - Mining Service under Section 65(105)(ZZZy) from 01/06/07 onwards. 2. Taxability of Services Under Different Periods: - Till 15/06/05: The Department classified the appellant's activity as Cargo Handling Service. However, the Tribunal found that the contract was primarily for mining, and the loading of mined lignite into trucks was a peripheral activity. Citing the Tribunal's decision in Sainik Mining & Allied Services Ltd. and the Orissa High Court's judgment in Coal Carriers, it was held that handling and movement within the mining area is not Cargo Handling Service. Therefore, the service tax demand for this period was not sustainable. - From 16/06/05 to 31/05/07: The Department classified the activity under Site Formation and Clearance, Excavation and Earth Moving Service. The Tribunal noted that site formation and excavation were incidental to the mining activity and not separately paid for. Referring to the Tribunal's decision in M. Ramakrishna Reddy, it was held that the entire contract should be treated as a mining contract and not for site formation. Thus, service tax demand for this period was also not sustainable. - From 01/06/07 onwards: The appellant's activity was accepted as Mining Service under Section 65(105)(ZZZy). The Tribunal upheld the service tax demand for this period as the classification was appropriate and undisputed. 3. Invocation of Extended Limitation Period: The appellant argued against the invocation of the extended limitation period for the demand from 01/06/07 to 31/03/08. The Tribunal found that the show cause notice issued on 29/09/08 was within the normal limitation period for both the six-monthly periods ending 30/09/07 and 31/03/08. 4. Imposition of Penalties under Sections 76, 77, and 78: The appellant did not take service tax registration even after the mining service became taxable from 01/06/07. The Tribunal held that the appellant, being knowledgeable, had no bonafide reasons for non-compliance. Consequently, penalties under Sections 76, 77, and 78 were upheld for the period from 01/06/07 to 31/03/08. However, penalties for the period prior to 01/06/07 were set aside. Conclusion: The appeal was partly allowed. The service tax demand and penalties for the period prior to 01/06/07 were set aside, while the demand and penalties for the period from 01/06/07 to 31/03/08 were upheld.
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