2023 (7) TMI 769 - AT - Service Tax

Classification of services - loading and transporting of limestone rejects/high silica/Phyllite/B belt and dumping in specific dump yard/stockyards including dozing - loading of ROM, limestone, waste etc., with hydraulic excavators into tippers/dumpers and preparation of drilling block and cleaning of loading area after blasting for tipper movement - work of loading and transportation of limestone . To be classifiable as cargo handling service or mining activity? HELD THAT - In the facts of the present case there is no dispute that the Appellant have assisted or done the work of excavation of the mineral, thereafter have transported the same including loading and unloading to the prescribed crusher/hopper of the service receiver. It is found that at the initial stage of enquiry also when the authorised person, Mr. Rao (respondent) appeared before the Revenue and his statement was recorded, wherein he was asked upon with reference to the contracts, the works awarded to him for loading and transportation of limestone from mines to crusher, whereas he has stated that he was undertaking the work of excavation apart from loading and transportation. Clarifying, Mr. Rao stated that they have entered into contract with Metro Cement Ltd; that the excavated area will be measured by their surveyor in the presence of Assistant Mines Manager/Geologist. The billing is done based on the report given by them. Thus submitted that the work undertaken by them includes excavation also and further stated that without excavation, loading cannot be done - It is further found that the learned Commissioner have observed in the Impugned Order that the work order also do not indicate that the stockyard or crusher to which material is transported is within the mine area. The Appellant did not substantiate this contention that the crusher/hopper is within the mine area. They also did not assert that stockyards are within mining area. The primary activity done by the Appellant was mining and the activity of loading and unloading of mineral and dumping the same to the prescribed stockyards/crusher is incidental to mining. Further such activity has been defined and made taxable under the head Mining service with effect from 1st June, 2007 - the activities done by the Appellant are classifiable under the head Mining service which was not taxable prior to 1st June, 2007 - Appeal allowed.

Summary

Issues Involved:
1. Classification of Services: Whether the services rendered by the Appellant fall under 'Mining services' or 'Cargo Handling services'.
2. Tax Liability: Whether the Appellant is liable to pay service tax for the period April 2005 to May 2007.
3. Penalties and Interest: Imposition of penalties under sections 76, 77, and 78 of the Act.

Summary:

Classification of Services:
The primary issue in this appeal is the classification of the services rendered by the Appellant, which include excavation of limestone, loading, transportation to the crusher hopper, and unloading. The Revenue contended that these services fall under 'Cargo Handling services' as they involve post-mining activities. However, the Appellant argued that their services are part of mining operations and should be classified under 'Mining services'. The Tribunal referred to previous judgments, including Thriveni Earth Movers Private Limited vs. CCE, Salem, where similar activities were classified as mining services. The Tribunal concluded that the primary activity was mining, and the loading and unloading were incidental to mining operations.

Tax Liability:
The Tribunal noted that 'Mining services' were brought under the service tax net from 1st June 2007. Therefore, activities prior to this date were not taxable under this category. The Tribunal referred to the Board Circular dated 12th November 2007, which clarified that activities like handling and transportation of minerals within the mining area were not taxable as 'Cargo Handling services' if they were incidental to mining. The Tribunal held that the Appellant's activities were not taxable as 'Cargo Handling services' before 1st June 2007.

Penalties and Interest:
The Show Cause Notice (SCN) issued on 20th October 2010 proposed a demand of Rs. 1,42,88,356/- for the period April 2005 to May 2007, along with interest and penalties under sections 76, 77, and 78 of the Act. The Tribunal, however, set aside the Impugned Order, ruling that the activities were classifiable under 'Mining services', which were not taxable prior to 1st June 2007. Consequently, the penalties and interest imposed were also set aside.

Conclusion:
The Tribunal allowed the appeal, holding that the Appellant's activities were classifiable under 'Mining services' and were not taxable prior to 1st June 2007. The Impugned Order was set aside, and the Appellant was entitled to consequential benefits in accordance with the law.