2017 (5) TMI 1255 - AT - Service Tax

Works Contract Service - Classification of services - transporting of cement grade limestone by semi-mechanised methods - classified under mining services or cargo handling services? - Held that - the scope of the work of the assessee is mainly sizing and sorting in the medium grade benches by controlling drilling and blasting of the mines - The work of transport of quarried stone is incidental to the job of sizing of blasted bolder by mechanical means in high grade bench sorting of the stone as per specification approved and directed by the Mines Manager. The activities would clearly indicate the Mining Service - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Interpretation of service tax liability under 'Mining Service' or 'Cargo Handling Service' for activities conducted under a specific agreement.

Analysis:
The case involved a dispute regarding the classification of services provided under an agreement between the assessee and a company. The revenue contended that the services fell under 'Cargo Handling Services,' while the assessee argued that they constituted 'Mining Service.' The Adjudicating Authority initially ruled in favor of the revenue, but the Commissioner (Appeals) upheld this decision. Subsequently, another adjudication order was issued confirming service tax demand under 'Cargo Handling Service' for a specific period, which was set aside by the Commissioner (Appeals). Both appeals were then consolidated for disposal.

Upon reviewing the agreement between the parties, it was observed that the scope of work primarily involved sizing and sorting in medium-grade benches through drilling and blasting. The agreement clearly outlined activities related to quarry operations, with the transportation of quarried stone being incidental to the main job of sizing and sorting. This led to the conclusion that the activities fell within the ambit of 'Mining Service.'

The introduction of Mining Service in the service tax net from a specified date was crucial. A circular by the Central Board of Excise & Customs clarified that activities integral to mining operations were not subject to service tax before the legislation came into effect. Additionally, a precedent case highlighted the distinction between composite contracts encompassing mining services and other services like site preparation or cargo handling. The Tribunal's decision emphasized that under a composite contract covering all mining-related activities, service tax as 'Mining Services' was applicable only from the date it was brought under taxation.

Referring to previous cases where appeals filed by the Revenue were dismissed, the Tribunal in the current case allowed the appeal by the assessee and dismissed the appeal by the Revenue. The judgment was based on a detailed analysis of the agreement's scope of work, legislative provisions, and relevant legal precedents.

In conclusion, the Tribunal's decision clarified the classification of services provided under the agreement, emphasizing the distinction between 'Mining Service' and 'Cargo Handling Service' based on the nature of activities conducted. The judgment underscored the importance of considering the contractual scope of work, legislative timelines, and precedents in determining service tax liability for specific operations.