2020 (1) TMI 640 - AT - Service Tax

Appellant's Service Tax appeal partially allowed; Tribunal confirms demands, imposes penalties.

The appellant was found to have short paid Service Tax on various services from 2005-06 to 2009-10, leading to a demand for Service Tax, Education Cess, ... Classification of services - activity for the lease holder in excavation raising and transport of ore - mining services and GTA services - composite services or not - short payment of service tax - case of appellant is that the activity undertaken by the appellant is correctly classifiable under ‘GTA Services’ and Service Tax on the same has already been paid only to the extent of 60% of the consideration received and Service Tax was also paid by them under ‘Mining Services’ for the 40% of the remuneration they have received - demand under the head Cargo Handling services. HELD THAT:- The essence of the contract is that the contractor i.e. the appellant shall extract iron ore from the said mine and shall deliver it exclusively to the leaseholder. In consideration thereof the leaseholder shall pay to the contractor in the manner decided. The rates are fixed for different types of iron ore i.e. iron ore R.O.M., iron ore fines, iron ore 10-40 R.O.M.; and iron ore 20-40 (R.O.M.). Also, the Supplementary Agreement has been expanded to bifurcate the expenses relating to mining and transportation in the ratio 40:60 while making payments. The contracts and supplement over the years were in identical manner - Thus it is apparent that the contracts undertaken by the appellant are composite contracts involving excavation and transportation of iron ore. The terms of the contract in the instant case being categorical and the division of the amount payable in a ratio appears to be only for the convenience of the parties involved and therefore it cannot be concluded that the services rendered by the appellants are under two different heads. Such an artificial bifurcation is not acceptable. This Bench of the Tribunal in the case of M/S. HAZARIBAGH MINING & ENGINEERS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX, BBSR-I [2016 (12) TMI 1131 - CESTAT, KOLKATA] having gone through the scope of the contract therein have concluded that the work undertaken by the appellants therein amounted to ‘Mining Services’ - In the instant case also the learned Sr.Counsel for the appellant other than merely showing that there is a division of payment could not produce any documentary proof so as to conclude that the contract is vivisectable. Therefore, the learned Commissioner has correctly concluded that the activities undertaken by the appellants is ‘Mining Service’ w.e.f. 01.06.2007 and is chargeable to Service Tax accordingly. Demand of ₹ 18,35,945/- under ‘Cargo Handling Services’ for the period April 2007 to May 2007 - HELD THAT:- There are a catena of judgements indicating that such service cannot be treated as ‘Cargo Handling Service’ therefore to that extent the arguments of the appellants are acceptable. The demand is confirmed to the extent of ₹ 2,59,88,882/- under the taxable head ‘Mining and Mineral, Oil, Gas Service’ for the period 01.06.2007 to 31.03.2010 and ₹ 12,23,964/- on ‘Site Formation and Clearance Service’ for the period April 2007 to May 2007 - Penalty under section 78 is restricted to 25% of the above confirmed amounts - Appeal allowed in part. Issues:1. Short payment of Service Tax on various services from 2005-06 to 2009-10.2. Classification of services provided by the appellant as 'Mining Services' or 'GTA Services'.3. Confirmation of demand under 'Cargo Handling Service' for a specific period.Issue 1: Short payment of Service TaxThe appellant, engaged in providing services related to iron ore, was found to have short paid Service Tax on services like 'Transport of Goods by Road', 'Mining Service', and others for the period 2005-06 to 2009-10. A show cause notice was issued, leading to a demand for Service Tax, Education Cess, and Higher Education Cess. The Commissioner confirmed a significant portion of the demand, resulting in the appellant filing an appeal.Issue 2: Classification of servicesThe appellant argued that their activities involved a mix of mining and transportation services, with a split in consideration between the two aspects. They contended that Service Tax was paid correctly under 'Mining Services' and 'GTA Services'. The Commissioner confirmed the demand for 'Mining Services' but dropped certain aspects related to other services. The Tribunal analyzed the contractual terms and concluded that the appellant's services were composite in nature, involving both excavation and transportation, rejecting the argument for separate classification.Issue 3: Confirmation of demand under 'Cargo Handling Service'Regarding the demand under 'Cargo Handling Service' for a specific period, the Tribunal found that the case law cited by the Commissioner supported the rejection of this demand. The Tribunal partially allowed the appeal, confirming the demand under 'Mining Services' and 'Site Formation and Clearance Service' for specific periods, while restricting the penalty to 25% of the confirmed amounts.This detailed analysis of the judgment highlights the issues involved, the arguments presented by the parties, the legal interpretations made by the Tribunal, and the final decision rendered in the case.