2022 (3) TMI 511 - AT - Service Tax

Appellant's Overburden Removal Service Classified as 'Mining Service' and Exempt from Tax

The Tribunal concluded that the service of overburden removal by the appellant was related to mining activities and should be classified under 'Mining ... Classification of services - Site formation and Clearance, Excavation and Earthmoving and Demolition Service or Mining service - service of removal of overburden in relation to mining of lignite - HELD THAT:- From the certificate issued by the Gujarat Minerals Development Corporation Ltd., who is the recipient of service in this case, makes it clear that the work of overburden/interburden removal is a part of mining during the course of mining therefore. The service is pre-dominantly related to mining. It is found that even if, the contention of the revenue that the activities of the appellant taken independently is of ‘Site Formation and Clearance, Excavation and Earth Moving and Demolition but at the same time, all these activities undertaken by the appellant is for the purpose of mining only. In this position, it is found that if at all, there is a doubt about the particular service to be classified under one or more category the principle laid down for classification of taxable service under Section 65A need to be applied. From the provision for classification of taxable service, it is provided that if taxable service is prima facie classified under two or more sub-clauses of clauses under Section 65, classification shall be effected on the basis of sub-clauses which provides the most specific description as compared to sub-clauses providing more general description - In the facts of the present case, it is undoubtedly clear that between appellant and the service recipient M/s. GMDC even though the nature of activity independently is of excavation and removal of soil but the objective of this activity is for mining only. In case of any mining activity, the activity of removal of over burden is inevitable. It is also pertinent to note that the appellant, on the same service, paid service tax under the category of ‘Mining Service’ with effect from 1.6.2007 and it is admitted fact that the revenue had accepted the classification of the same service under ‘Mining Service’. It also strengthens the case of the appellant that the service provided by them is of ‘Mining Service’ and does not fall under the category of ‘Site Formation and Clearance, Excavation and Earth Moving and Demolition Services’ - the service per-se is a Mining Service. The appellant have provided the Mining Service which was not liable to service tax during the relevant period in this case. Therefore, the impugned order is not sustainable hence the same is set aside - Appeal allowed - decided in favor of appellant. Issues Involved:1. Classification of the service provided by the appellant.2. Applicability of service tax on the activity performed by the appellant.3. Interpretation of contract terms and their impact on service classification.4. Reference to previous judgments and their relevance to the current case.5. Alternative classification of the service under supply of tangible goods for use.Detailed Analysis:1. Classification of the Service Provided by the Appellant:The primary issue was whether the service in question should be classified under 'Site Formation and Clearance, Excavation and Earthmoving and Demolition Service' as contended by the revenue or under 'Mining Service' as contended by the appellant. The appellant argued that the activities carried out under Tender No. LP-2/04-05 involved overburden removal during lignite mining, which should be classified as 'Mining Services'. The service was taxable only from 01.06.2007, and the appellant had already paid service tax under this category from that date. The revenue, however, classified the service under 'Site Formation and Clearance, Excavation and Earthmoving and Demolition Service', demanding service tax for the period from 16-6-2005 to 31-5-2007.2. Applicability of Service Tax on the Activity Performed by the Appellant:The appellant argued that since 'Mining Service' was introduced into the service tax net from 01.06.2007, any activity related to mining performed before this date should not be taxable under any other category. This principle was supported by the case of Indian National Ship Owners Association. The appellant also referenced a certificate from M/s Gujarat Minerals Development Corporation (GMDC) stating that the work involved overburden removal as part of the mining process, reinforcing their argument that the service should be classified under 'Mining Service'.3. Interpretation of Contract Terms and Their Impact on Service Classification:The Tribunal examined the contract terms, which indicated that the appellant's work involved removal of overburden to facilitate lignite mining. The contract detailed the types of strata involved and specified that the work should ensure continuous production of lignite. The Tribunal concluded that the removal of overburden was an integral part of the mining process, thereby classifying the service under 'Mining Service'.4. Reference to Previous Judgments and Their Relevance to the Current Case:The appellant cited several judgments supporting their classification under 'Mining Service', including:- PRAHLAD RAI & CO. 2018(17)GSTL 272(TRI. DEL)- SADBHAV ENGINEERING LTD. 2016(43)STR288(TRI. AHMD)- VIJAY LEASING CO. 2011(22)STR 553 (TRI. BANG)- M. RAMAKRISHNA REDDY 2009(13)STR 661 (TRI.- BANG)- ARAVIL CONSTRUCTION CO. PVT. LTD. 2017 (6) GSTPL 347 (TRI. DEL)- TEKNOMIN CONSTRUCTION LTD. 2017(4) GSTPL 65 (TRI.- DEL)- QUIPPO OIL & GAS INFRASTRUCTURE 2020-TIOL-1599-CESTAT- DELThe Tribunal found these judgments relevant and noted that similar activities were previously classified as 'Mining Service'. The Tribunal also referenced its own decision in ASSOCIATED SOAPSTONE DISTRIBUTING CO. P. LTD. vs. CCE, which supported the appellant's classification.5. Alternative Classification of the Service under Supply of Tangible Goods for Use:The appellant argued that if the service was not classified under 'Mining Service', it could alternatively be classified under 'Supply of Tangible Goods for Use', as they provided excavation machinery on hire. However, since the Tribunal concluded that the service was indeed 'Mining Service', this alternative classification was not further addressed.Conclusion:The Tribunal concluded that the appellant's service of overburden removal was exclusively related to mining activities and should be classified under 'Mining Service'. Consequently, the service was not liable to service tax during the relevant period. The impugned order was set aside, and the appeal was allowed with consequential relief.