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Issues: Whether washing and beneficiation of coal carried out by the assessee constituted mining activity and was therefore not taxable as Business Auxiliary Service for the period prior to 1-6-2007.
Analysis: The assessee's principal activity was washing, cleaning, screening and sizing of raw coal so that it could be used in power plants and for other consumers. The statutory definitions relating to coal mining were examined and it was noted that coal washery operations are treated as part of a mine in the relevant coal and mining enactments. The nature of the activity, the terms of the contract, and the commercial object of supplying beneficiated coal showed that the dominant character of the work was beneficiation of coal, which is an integral part of mining activity. Since service tax on mining-related services was introduced only from 1-6-2007, the activity could not be brought to tax under Business Auxiliary Service for the earlier period. In view of this conclusion, the alternative arguments on valuation and other heads were not examined.
Conclusion: The assessee's coal washing and beneficiation activity was held to be mining activity and not taxable as Business Auxiliary Service for the relevant pre-1-6-2007 period.
Ratio Decidendi: Where coal washing or beneficiation is statutorily and commercially integral to mining, it is to be treated as mining activity and cannot be taxed under an unrelated service head for the period before mining services were specifically made taxable.
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