Service tax valuation of crushing charges: no prima facie proof that ground-loss recovery formed part of service consideration.

Service tax valuation for crushing operations turned on whether the value of self-generated iron ore fines, arising from ground loss, formed part of the service consideration. The contract fixed crushing charges per metric tonne and separately fixed permissible ground loss, but it did not indicate that the charges were linked to any reduction in loss or that any additional consideration arose from the alleged saving. In the absence of material showing that recovery of loss was part of the service remuneration, the applicant was found to have a strong arguable case against the demand. Waiver of pre-deposit was granted and recovery of the adjudicated dues was stayed pending appeal.

---

---

Issues: Whether the applicant was entitled to waiver of pre-deposit of the adjudicated service tax, interest and penalties pending disposal of the appeal.

Analysis: The dispute related to inclusion of the value of self-generated iron ore fines arising during crushing operations in the taxable value of service. The contract fixed the crushing charges on a per metric tonne basis and also fixed the permissible ground loss. On a prima facie reading, the contract did not show that the agreed crushing charges were linked to reduction in ground loss or that any additional consideration arose from the saving in loss. In the absence of material showing that the alleged recovery of loss formed part of the consideration for the service, the applicant disclosed a strong arguable case against the demand.

Conclusion: Waiver of pre-deposit was granted and recovery of the adjudicated dues was stayed till disposal of the appeal.

---