2015 (9) TMI 784 - AT - Service Tax

Nature of various activities done in Mining Area before 1.6.2007 - scope of Business Auxiliary Services - Cargo Handling services - Held that - ld. Commr. has observed that the appellant was required to produce desired size and quantity of iron ore as required to be rendered against the said work order. The said services i.e. production of 10-30 mm size iron ore by means of Mechanical screening at Belkudi-Baglbaru iron ore Mines were not considered by him as resulting into manufacture within the definition of Section 2(f) of Central Excise Act, 1944 and accordingly, it was held to come under the scope of Business Auxiliary Services, being the services of production or processing of the goods for and on behalf of the clients. We do not see any infirmity in the said observation and accordingly the same is also upheld. - Decided against the assessee. Regarding three work orders, the activities of shifting, loading, unloading of ores with the help of tippers, trucks, etc., into railway wagons are cargo handling service. - Decided against the assessee. Extended period of limitation and levy of penalty - Held that - since the issue is that of interpretation of law and conflicting views are expressed by different judicial fora, therefore, penal provisions are not warranted in the present case and it is a fit case for invoking Section 80 of the Finance Act, 1994. - extended period of limitation is neither invocable, nor penalty is imposable on the assessee/appellant. - Decided partly in favor of assessee.

Issues Involved:
1. Classification of services rendered under 'Business Auxiliary Service' vs. 'Mining Services'
2. Classification of services rendered under 'Cargo Handling Services'
3. Applicability of Service Tax for activities prior to 1-6-2007
4. Invocation of extended period of limitation and imposition of penalties

Detailed Analysis:

1. Classification of Services Rendered Under 'Business Auxiliary Service' vs. 'Mining Services':
The appellant argued that the services rendered under Work Order No. OMD/T-5/917, dated 18-3-2005, should be classified under 'Mining Services' and not 'Business Auxiliary Service' as they did not involve production or processing of goods. The Commissioner, however, classified these services under 'Business Auxiliary Service' as they involved production or processing of goods for the client. The Tribunal upheld the Commissioner's classification, agreeing that the activities fell under 'Business Auxiliary Service' as they involved production of iron ore of specific size through mechanical screening.

2. Classification of Services Rendered Under 'Cargo Handling Services':
For Work Orders Nos. OMD/T-5/1782, dated 26-5-2005, OMD/T-5/749, dated 25-2-2006, and OMD/T-5/1813, dated 13-5-2006, the appellant contended that their activities were limited to transportation of iron ore within the mining area and should not be classified as 'Cargo Handling Services'. The Commissioner, relying on the decision in Gajanand Agarwal v. CCE, Kolkata, classified these activities under 'Cargo Handling Services'. The Tribunal upheld this classification, citing similar cases (Gayatri Carriers Pvt. Ltd. and Jai Jawan Coal Carriers Pvt. Ltd.) where such activities were deemed as 'Cargo Handling Services'.

3. Applicability of Service Tax for Activities Prior to 1-6-2007:
The Commissioner observed that services under Work Orders No. OMD/T-5/152, dated 20-1-2003, and OMD/T-5/256, dated 27-1-2006, related to mining activities, which became taxable only from 1-6-2007. Thus, no Service Tax was leviable for the period prior to this date. The Tribunal upheld this observation, agreeing that the services were part of mining operations and not subject to Service Tax before 1-6-2007.

4. Invocation of Extended Period of Limitation and Imposition of Penalties:
The appellant argued that part of the demand was time-barred and that penalties were not warranted due to the interpretative nature of the issue and conflicting judicial views. The Tribunal found merit in this argument, referencing the case of Jai Jawan Coal Carriers Pvt. Ltd., which highlighted conflicting decisions on similar issues and bona fide belief on non-taxability. Consequently, the Tribunal ruled that the extended period of limitation was not invocable, and penalties should be waived. The matter was remanded to the adjudicating authority to ascertain the liability for the normal period.

Conclusion:
The Tribunal upheld the classification of services under 'Business Auxiliary Service' and 'Cargo Handling Services' as determined by the Commissioner. It also agreed that no Service Tax was applicable for mining-related activities prior to 1-6-2007. However, it ruled against invoking the extended period of limitation and imposed penalties, remanding the case for determining the liability for the normal period. The appellant's appeal was partly allowed, and the Revenue's appeal was rejected.

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