Intra-mining coal transport and free diesel supply are outside service tax valuation under mining services.

Transporting excavated coal from the pit-head to the dump yard within the mining area is not taxable as mining service, because such intra-mining movement is more appropriately treated as transport of goods by road; on that basis, the service tax demand could not be sustained. Free-of-cost diesel supplied by the client is not part of the service provider's consideration and cannot be included in taxable value under Section 67 of the Finance Act, 1994, since only the gross amount charged is taxable. The demands on both counts were held unsustainable.

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Issues: (i) Whether transporting or shifting excavated coal from the pit-head to the dump yard within the mining area is taxable under the category of mining services; (ii) Whether the value of diesel supplied free of cost by the client is includible in the taxable value for service tax.

Issue (i): Whether transporting or shifting excavated coal from the pit-head to the dump yard within the mining area is taxable under the category of mining services.

Analysis: The activity of transporting coal within the mining area was held by the Supreme Court to fall outside mining services. The relevant distinction was that such transport activity is more appropriately classifiable as transport of goods by road and not as mining service. Following that binding ratio, the service tax demand under mining services could not be sustained.

Conclusion: The issue is decided in favour of the assessee and against the Revenue.

Issue (ii): Whether the value of diesel supplied free of cost by the client is includible in the taxable value for service tax.

Analysis: Free of cost material supplied by the recipient of service does not form part of the consideration for the service provider. Applying Section 67 of the Finance Act, 1994 and the settled principle that only the gross amount charged for the service is taxable, the value of diesel supplied by the client could not be added to the taxable value.

Conclusion: The issue is decided in favour of the assessee and against the Revenue.

Final Conclusion: The service tax demands on both counts were held unsustainable, and the appeals were allowed.

Ratio Decidendi: Activities of intra-mining transport of excavated material are not taxable as mining services, and free of cost supplies by the service recipient do not enter the taxable value under Section 67 of the Finance Act, 1994.

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