2024 (12) TMI 12 - AT - Service Tax

Classification of services - Services falling within the definition of mining services or Site formation and clearance excavation and earthmoving and demolition - scope of section 65(105)(zzzy) of the Finance Act 1994 which was introduced on 01.06.2007 - HELD THAT - The activities undertaken by the appellant amounted to mining activity ipso facto. Following the decision of Doypack Systems P Ltd 1988 (2) TMI 61 - SUPREME COURT we also find that the activity relates to the mining of lignite which is mining of mineral. Accordingly the services provided by the appellant are falling in the scope of clause (zzzy) of sub-section (105) of section 65 of the Act. Since we have already explained the necessity to read the contract in its entirety and finding the mining service to be more specific appropriate and applicable category we do not delve upon the classification of such services as transportation of goods. The services provided by the appellant under the said contract were not preparatory work to mining activities but they were carried out to win the minerals and constituted mining activities per se we hold that the views expressed by Commissioner of Central GST (A) in para 8 of the impugned order are incorrect and contrary to the statutory provisions. We also carefully referred to the circulars cited in impugned order however in view of discussion and plain reading of law as it stood at the relevant time we do not find any merit in the decision taken in the impugned and thus we hold that the services provided by the appellant under the said contract are in the nature of mining services so defined in clause (zzzy) of sub-section (105) of section 65 of the Act and not falling within the meaning of Site formation and clearance excavation and earthmoving and demolition defined in clause (97a) of section 65 of the Act. We also hold by following the principles laid down by the Apex Court that the said services cannot be subjected to tax prior to 01.06.2007 and accordingly the appellant merits refund of amounts paid by them. Facts relating to the contract number 53223 dated 07.12.2004 are not verifiable since the appellant have neither supplied the copy of the contract nor the relevant invoices. All the issues involved in the present case are significantly and dominantly factual issues in nature and therefore careful examination of the facts emanating from contemporaneous evidences is indispensable before reaching to any conclusion otherwise that will be complete miscarriage of justice to the other side. Thus in absence of relevant materials we do not wish to interfere in the impugned order to the extent that related to the services provided by the appellant under contract number 53223. Refund of service tax - Since we have held that the services are classifiable under clause (zzzy) i.e. mining services brought to taxability w.e.f. 01.06.2007 the amount denoted as D above i.e. Rs. 2, 04, 87, 723 is not eligible whereas the amount denoted as C above i.e. Rs. 4, 60, 77, 978 is found eligible in facts as well as law. Thus we hold that the appellant is eligible for refund. Unjust enrichment - We find from the facts and submissions made by the appellant more particularly the invoices attached to the refund applications and certificate from the chartered accountant that the incidence of such tax was borne by them and therefore bar of unjust enrichment was not applicable. We also find that said documentary evidences were furnished by the appellant to the lower authorities and against which no plausible explanations or contemporaneous evidences have been brought on record by the revenue to inflict bar of unjust enrichment. Therefore we hold that the appellant has crossed the bar of unjust enrichment since the burden of tax was borne by themselves. Interest on refund prayed by the appellant - As we find that the adjudicating authority in order-in-original ordered to deny the interest on refund to the appellant. As held by us above the Appellant is eligible for refund of Rs. 4, 60, 77, 978 and since the interest is consequential in terms of Section 11BB of the Central Excise Act 1944 we hold that the Appellant is eligible for interest on delayed payment of interest in terms of Section 11BB of the Central Excise Act 1944 which is made applicable to service tax provisions vide Section 83 of the Finance Act 1994 by following the decision of Supreme Court in case of Ranbaxy Laboratories Ltd v. UOI 2011 (10) TMI 16 - SUPREME COURT held the liability of the revenue to pay interest u/s 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund u/s 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made. Thus the appellant is entitled for interest from the expiry of 3 months from the date of original application filed for claim of refunds before the jurisdictional authority till the date of sanction. Thus finding from the facts and records that services provided by the appellant under contract are not preparatory work but they are mining activities per se services provided prior to 01.06.2007 were not taxable and thus the impugned order is modified to that extent and the appellant is allowed refund with consequential relief of interest as per above. The appeal filed by the Appellants is partly allowed in the above terms.

Summary

Issues Involved:

1. Classification of services provided by the appellant: Whether they fall under "mining services" or "site formation and clearance, excavation and earthmoving and demolition" services.
2. Eligibility for refund of service tax paid under the earlier category prior to 01.06.2007.
3. Applicability of unjust enrichment in the context of refund claims.
4. Entitlement to interest on the refund amount.

Detailed Analysis:

1. Classification of Services:

The primary issue in this case was whether the services provided by the appellant could be classified under "mining services" as per section 65(105)(zzzy) of the Finance Act, 1994, which was introduced on 01.06.2007, or if they were taxable under "site formation and clearance, excavation and earthmoving and demolition" services prior to this date. The appellant had contracts with Neyvelli Lignite Corporation Ltd., which involved activities such as excavation, transportation, and removal of overburden materials. The Tribunal analyzed the contract's scope and determined that the predominant activity was transportation, which constituted 65% of the total contract price. The Tribunal found that the contract was a composite turnkey project, not divisible for taxation purposes. It was concluded that the services were indeed mining activities, as they involved winning minerals from the mine, thus falling under "mining services" and not the earlier category.

2. Eligibility for Refund:

The Tribunal examined whether the appellant was liable to pay service tax under the earlier category before 01.06.2007. It was determined that since "mining services" were introduced as a taxable category only from 01.06.2007, the services provided by the appellant were not taxable prior to this date. The Tribunal referred to established legal principles that new taxable categories cannot be applied retroactively. Therefore, the appellant was eligible for a refund of the service tax paid under the earlier category for services provided before 01.06.2007.

3. Unjust Enrichment:

The appellant claimed that the incidence of service tax was borne by them, and thus, the bar of unjust enrichment was not applicable. The Tribunal found that the appellant had provided sufficient documentary evidence, including invoices and a chartered accountant's certificate, to demonstrate that the tax burden was not passed on to any other party. The revenue did not provide any contrary evidence. Consequently, the Tribunal held that the appellant had crossed the bar of unjust enrichment, making them eligible for the refund.

4. Interest on Refund:

The appellant also sought interest on the delayed refund. The Tribunal referred to Section 11BB of the Central Excise Act, 1944, applicable to service tax provisions via Section 83 of the Finance Act, 1994. The Tribunal, following the Supreme Court's decision in Ranbaxy Laboratories Ltd v. UOI, held that the appellant was entitled to interest from the date of expiry of three months from the date of the original refund application until the date of sanction. Therefore, the appellant was granted interest on the refund amount.

Conclusion:

The Tribunal partially allowed the appeal, granting a refund of Rs. 4,60,77,978 with consequential interest, while modifying the impugned order to reflect that the services provided were mining activities, not taxable before 01.06.2007. The appeal was partly allowed in these terms.