2018 (11) TMI 226 - AT - Service Tax

Business Auxiliary Service - Works contract - Revenue s case is that in the contracts, the transportation charges and other charges are shown separately. Therefore, the appellants are providing separate services, which are chargeable to service tax - Held that - The activities carried out in terms of Work Order dated 24.09.2003 as well as 13.04.2005 are similar and involved raising of mined ore from the mining area and loading and transporting of the same upto the Dock Yard. From the perusal of the Work Order and the description of work, it is evident that the activities are essentially for mining of iron ore and certain ancillary services in relation to the mining. Mining has been incorporated as a separate service only w.e.f. 01.06.2007 when the separate category has been created under Section 65 (105)(zzza) - The demand raised against the services are for a period prior to 01.06.2007 and hence, the demand for service tax cannot be sustained. The activities covered under Work Order dated 24.02.2005 are entirely of a different type. The description of Work Order as mentioned is for hiring of Heavy Earth Moving Machinery for development of iron mines as per the scope of the work and other terms and conditions. A perusal of relevant Work Order reveals that the scope of work is not only hiring of heavy machinery - The job undertaken by the appellant as per Contract is Site Formation, which included specific loading and Dumping. As such, Contract is not for mining - demand upheld under Site Formation Service. Penalty will apply proportionately. Appeal allowed in part.

Summary

Issues:
Challenge to service tax demand under different categories for mining activities and ancillary services.

Analysis:
1. The appeal contested the Order-in-Original against two show-cause notices for service tax demand covering the period from 2002 to 2007 related to contracts with a steel company for mining activities in Jharkhand and Orissa.

2. The demand for service tax was confirmed under Business Auxiliary Service and Site Formation & Demolition Services for different work orders. The appellant argued that pre-2007, mining activities were not separately taxable, citing relevant case laws.

3. The appellant contended that the activities under certain work orders were mining-related and ancillary, not separately taxable before 2007. The Tribunal agreed, setting aside the demand for those work orders.

4. However, for a different work order involving heavy machinery hiring and site formation activities, the demand for service tax was upheld as distinct from mining activities, as per the contract terms and adjudicating authority's findings.

5. Ultimately, the Tribunal partially allowed the appeal, setting aside the demand for certain work orders but upholding it for the work order involving site formation services. Penalties were to apply proportionately in line with the judgment.