2022 (12) TMI 309 - AT - Service Tax

Coal mining company wins appeal on taxability of pre-shipment activities; service tax not applicable if sales tax/VAT paid.

Western Coalfields Ltd Versus Commissioner of Central Excise, Customs & Service Tax

The appeals of a coal mining company regarding the taxability of activities conducted on coal before shipment to meet contract specifications were ... Taxability - activities undertaken on coal mined and before shipment to conform to size agreed upon in the contract of sale with their customers - overlapping for different areas of operation - section 65B(44) of Finance Act, 1994 - It is the main contention on behalf of appellant that the issue is covered by the decision of the Tribunal in COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX VERSUS MAHANADI COALFIELDS LTD. [2017 (8) TMI 1625 - CESTAT KOLKATA], where it was held that In the instant case undisputedly, the appellant has paid the sales tax/vat, when it is so then crushing charges are not leviable. Regarding the payment of sales tax/vat, the Ld. Counsel for the appellant has shown proof to the Ld. Counsel for the Department. HELD THAT:- On perusal of the facts leading to the dispute and the findings in the impugned order, we do find the circumstances to be identical. Appeal allowed. Issues:Taxability of activities undertaken by a coal mining company before shipment to conform to size agreed upon in the contract of sale.Analysis:In the twelve appeals of a coal mining company, the main issue is the taxability of activities carried out on coal mined by them before shipment to meet the size requirements specified in the sales contract. The tax authorities argue that processes like crushing to make coal usable as per contract terms constitute a taxable service under the Finance Act, 1994. The demands in question fall under both the 'negative list' era and taxable services, requiring scrutiny under relevant sections of the Act.The tax authorities assert that even though no separate consideration is allocated for these activities, their inclusion in the final sale price does not negate their taxability. The disputes cover various locations and time periods, each with specific demands, such as Umrer, Majri, Wani, Nagpur, Chandrapur, and Ballapur, totaling significant amounts.The appellant relies on a Tribunal decision involving a similar issue with Mahanadi Coalfields Ltd, where it was held that crushing/sizing coal for sale does not attract service tax if sales tax/VAT has already been paid on the transaction. Citing the Supreme Court's ruling that sales tax and service tax cannot apply to the same transaction, the appellant successfully argues that since sales tax/VAT was paid on crushing charges, no additional service tax is applicable.Several subsequent decisions have upheld the Tribunal's ruling, including cases involving South Eastern Coalfields Ltd and Northern Coalfields Ltd. These decisions support the position that if sales tax/VAT has been paid on the transaction, service tax on similar activities is not warranted. Based on the consistency of these decisions and the identical circumstances in the present case, the impugned orders are set aside, and the appeals are allowed.In conclusion, the Tribunal's judgment clarifies the taxability of activities related to coal mining operations before shipment and emphasizes that if sales tax/VAT has been paid on such activities, additional service tax may not be applicable, following established legal precedents and interpretations of relevant tax laws.