2020 (2) TMI 1067 - AT - Service Tax

Nature of activity - sale or service - Business Auxiliary Services or not - production of coal from its various mines and sells the same on payment of Sales Tax/ VAT. For providing such activities, the appellant receives consideration, in addition to base price in the name of sizing charges - HELD THAT - There is no service involved in the facts of the matter, being an activity before sale. Considering in the facts of matter, it is found that the appellant company offering the cut to size coal‟ to its customer, is like offering their coal in various forms and sizes. Hence, the cutting of coal to various sizes is not a service to the buyer, because buyer is being charged on per tonnage basis of coal including the sizing charge. Further, on this amount, appellant have paid excise duty, VAT, clean energy cess etc. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of "sizing charges" as taxable under "Business Auxiliary Service"

Analysis:
The case involved the appellant engaged in coal production and providing sizing activities for mined coal. The Department contended that such activities fell under the taxable category of "Business Auxiliary Service." After adjudication, demands were confirmed on the appellant. The Tribunal examined the facts and found that the activity of cutting coal into various sizes was not a service to the buyer, as the buyer was charged on a per tonnage basis, inclusive of sizing charges. The Tribunal referenced a previous decision where a similar situation was considered, and the appeal was allowed based on the principle that sales tax and service tax cannot be applied to the same transaction. Therefore, the Tribunal concluded that the sizing charges were not taxable under "Business Auxiliary Service."

The Tribunal noted that the appellant had paid sales tax/VAT on the total amount of sale, which included crushing charges and other fees. Citing a Supreme Court decision, the Tribunal emphasized that sales tax and service tax cannot be levied on the same transaction as they are exclusive of each other. Based on this reasoning, the Tribunal found no merit in the Department's orders and set them aside. Consequently, the appeals were allowed in favor of the appellants, granting them consequential benefits.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the sizing charges for cutting coal into various sizes were not taxable under "Business Auxiliary Service." The decision was based on the understanding that the activity was not a separate service but part of the coal sale transaction, where the buyer was charged based on tonnage, inclusive of sizing charges. The Tribunal's decision was also supported by the principle that sales tax and service tax cannot be imposed on the same transaction, as established by a previous Supreme Court ruling.