Separate taxation of transportation in a composite mining contract can support waiver of pre-deposit and stay of recovery.

A composite mining contract separately billing excavation/loading and transportation may be vivisected for service tax purposes where the contract and invoices identify the activities distinctly. On the facts described, tax had been discharged on the mining element and the transportation activity had been separately taxed, so the transportation component could not, prima facie, be clubbed with Mining Services. Relying on Tribunal precedent and the departmental circular on vivisection of contracts, the Tribunal held that the appellant had made out a prima facie case for waiver of pre-deposit and stayed recovery of the demanded amount pending disposal of the appeal.

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Issues: Whether, for purposes of waiver of pre-deposit, the transportation component separately billed under a composite mining contract could be treated as part of Mining Services, and whether the appellant had made out a prima facie case for stay of recovery.

Analysis: The contract covered excavation and loading of lignite as well as transportation and unloading activities, and the record indicated separate invoicing for excavation/loading and for transportation. Service tax had already been discharged on the excavation element under Mining Services, while the transportation activity had been separately taxed as applicable. The dispute, therefore, was whether the transportation component could be clubbed with Mining Services. The Tribunal treated the agreement between the parties as one where mining and transportation were separately identified for expense purposes, and found that such transportation could not, prima facie, be brought under the single heading of Mining Services. This view was supported by the cited Tribunal decision and by the departmental circular, which dealt with vivisection of contracts for taxation under different service heads.

Conclusion: The appellant established a prima facie case for waiver of pre-deposit, and recovery of the demanded amount was stayed pending disposal of the appeal.

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