2025 (4) TMI 770 - AT - Service Tax

Classification of service - services of screening and grading of iron ore provided by the appellant - Business Auxiliary Service (BAS) or Mining Services - suppression of facts or not - extended period of limitation - HELD THAT - In view of Board clarification vide letter dated 28.02.2007 the services undertaken by the appellant are rightly classifiable under mining services . Moreover as rightly claimed by the appellant and relied upon by him with regard to definition of mining operations as per the MMDRA Act 1957 and the decision by the Supreme Court in the case of Bharat Cocking Coal Vs. State of Bihar 1990 (8) TMI 394 - SUPREME COURT wherein it is held that any ancillary process carried down for the preparation of minerals is a mining activity and hence rightly classifiable under the newly introduced service mining services. The Tribunal in the case of 2008 (5) TMI 248 - CESTAT BANGALORE in similar set of facts observed that Once it is established that the activity of the appellant is mining it cannot be taxed under the Business Auxiliary Service for the period prior to 1-6-2007. Even when we examine the definition of business auxiliary service it is seen that production which does not amount to manufacture comes under business auxiliary service. Conclusion - The services rendered by the appellant is nothing but a mining service and rightly classifiable under mining services with effect from 01.06.2007. It is also a fact that Revenue has being collecting the service tax under this category from 01.06.2007 onwards. Appeal allowed.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

Whether the services of screening and grading of iron ore provided by the appellant fall under 'Business Auxiliary Service' (BAS) as classified by the Revenue or under 'Mining Services' as claimed by the appellant.
Whether the appellant is liable for service tax under the category of BAS prior to the introduction of 'Mining Services' on 01.06.2007.
Whether there was suppression of facts by the appellant justifying the invocation of extended period for demand and imposition of penalties.

ISSUE-WISE DETAILED ANALYSIS

1. Classification of Services: Business Auxiliary Service vs. Mining Services

Relevant Legal Framework and Precedents: The Finance Act, 1994, under Section 65(19), defines BAS to include 'production or processing of goods for, or on behalf of, the client'. 'Mining Services' was introduced under Section 65(105)(zzzy) as services provided in relation to mining of mineral, oil, or gas. The appellant relied on precedents such as The Orissa Mining Corporation Ltd. vs. Jt. Secretary and Bharat Coking Coal Ltd. vs. State of Bihar to argue that screening and grading of iron ore are part of mining activities.
Court's Interpretation and Reasoning: The Tribunal considered the CBEC Circular No. 334/1/2007-TRU, which clarified that services related to mining were comprehensively covered under the new 'Mining Services' category. It emphasized that the introduction of a new service category implies that such services were not covered under existing categories like BAS.
Application of Law to Facts: The Tribunal found that the appellant's activities of screening and grading iron ore are integral to mining operations, thus classifiable under 'Mining Services' from 01.06.2007. Prior to this date, such activities could not be taxed under BAS as they were not considered part of it.
Treatment of Competing Arguments: The Tribunal dismissed the Revenue's argument that the services should be classified under BAS, emphasizing the comprehensive nature of the 'Mining Services' category introduced in 2007.

2. Liability for Service Tax Prior to 01.06.2007

Relevant Legal Framework and Precedents: The Tribunal referred to various decisions, including Aryan Energy (P) Ltd. vs. CCE and Global Coal & Mining Pvt. Ltd. vs. Commissioner of Service Tax, which held that activities related to mining could not be classified under BAS prior to the introduction of 'Mining Services'.
Court's Interpretation and Reasoning: The Tribunal noted that the definition of BAS did not change with the introduction of 'Mining Services', indicating these services were not part of BAS before 01.06.2007.
Conclusions: The Tribunal concluded that the appellant was not liable for service tax under BAS for the period before 01.06.2007.

3. Suppression of Facts and Penalties

Relevant Legal Framework and Precedents: The Revenue argued that the appellant's failure to register and file returns constituted suppression of facts, justifying the imposition of penalties under Sections 77 and 78 of the Finance Act, 1994.
Court's Interpretation and Reasoning: The Tribunal found that the issue arose from audit observations and there was no clear classification prior to the introduction of 'Mining Services'. Therefore, the Tribunal determined that there was no suppression of facts.
Conclusions: The Tribunal held that since the demand was not sustainable, the question of penalties did not arise.

SIGNIFICANT HOLDINGS

The Tribunal held that the services of screening and grading of iron ore by the appellant are classifiable under 'Mining Services' from 01.06.2007, not under 'Business Auxiliary Service'.
The Tribunal emphasized that the introduction of a new service category implies that such services were not covered under existing categories, following the principle established by the Bombay High Court in Indian National Shipowners' Association vs. Union of India.
The Tribunal concluded that there was no suppression of facts by the appellant, and thus, penalties were not justified.
The appeal was allowed, and the demand for service tax under BAS for the period prior to 01.06.2007 was not justified.

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