2017 (9) TMI 1326 - AT - Service Tax

Mining services - the appellant is described as Contractor for the mines owner and was required to undertake mining, crushing, screening and transportation of different materials from the mines making use of their technical, commercial and managerial expertise - Department was of the view that the activities carried out by the appellant for the mine owner are to be considered as taxable service classifiable under the category of mining of mineral, oil or gas falling under Sub-clause (zzzy) of Section 65 (105) - Held that - the nature of activity carried out by the appellant for the mine owner is covered by the definition of mining service under Section 65 (105) sub-clause (zzzy).It is further seen from the agreement that the appellant is required to employ workmen, providing tools etc. and required to undertake mining activity of individual mines - Sub-clause (zzzy) of Section 65 (105) of the Finance Act, 1944, defines the taxable service under the category of Mining of Mineral Oil and Gas service as the service to be provided to any person in relation to mining of mineral oil or gas. It is further seen that the mine owner (who can be considered as service receiver) pays consideration to the service provider. Consequently, the appellant will be liable to pay service tax on the value of taxable service received by them during the period - appeal dismissed - decided against appellant.

Issues:
1. Whether the activities carried out by the appellant for the mine owner are to be considered as taxable service under the category of mining of mineral, oil, or gas?
2. Whether the appellant is liable to pay service tax on the value of taxable service received during the period?
3. Whether the activities undertaken by the appellant can be considered as production/manufacture of excisable goods or as mining of iron ore?

Analysis:

Issue 1:
The appellant, a private Ltd. Co. engaged in mining of iron ore fines, entered into a contract with a mine owner for various activities related to mining. The Department considered these activities as taxable services falling under the category of mining of mineral, oil, or gas. The service tax demand was confirmed, and penalty imposed. The appellant contended that there was no service provider-receiver relationship with the mine owner and that the activities were related to the production of iron ore, not mining services. However, the Tribunal found that the agreement clearly outlined activities associated with mining, such as mine development, crushing, and screening, making the appellant liable to pay service tax as per Section 65(105) sub-clause (zzzy) of the Finance Act, 1994.

Issue 2:
The appellant argued that the activities were towards the production of iron ore, a view not supported by the Tribunal. Despite the iron ore being exempt from excise duty, the Tribunal held that the activities constituted mining of iron ore, not its manufacture. The appellant's claim was considered an afterthought, especially since no excise duty had been paid on the iron ore fines. Thus, the Tribunal upheld the lower authority's decision, confirming the appellant's liability to pay service tax on the value of taxable services received during the relevant period.

Issue 3:
The agreement between the appellant and the mine owner clearly outlined the responsibilities and obligations of the parties, establishing a service provider-receiver relationship. The Tribunal noted that the appellant was required to undertake all activities related to mining of iron ore, employ workmen, and pay necessary taxes and duties. The payment for the iron ore fines was to be received by the mine owner, who would then pay the appellant's dues. Considering these factors and the definition of taxable service under Section 65(105), the Tribunal concluded that the appellant was liable to pay service tax on the value of services provided, dismissing the appeal.

In conclusion, the Tribunal upheld the decision of the lower authority, confirming the appellant's liability to pay service tax on the activities carried out for the mine owner, which were deemed to fall under the category of mining services as per the agreement terms and relevant legal provisions.

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