Activity of Collection, Cleaning, Segregation and Stacking of Blasted Raw Magnesite is ‘Mining Services’ under Finance Act: CESTAT [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that the activity of collection, cleaning, segregation and stacking of blasted raw magnesite is ‘Mining Services’ under Finance Act, 1994.

The appellant in the present matter is M/s. KRSS Manpower Service. A Show Cause Notice was issued seeking to classify the activity under ‘Business Auxiliary Service’ and demanding service tax of Rs.1,86,514/- with interest and also proposed to impose penalties. After due process of law, the original authority vide Order in Original confirmed the demand of service tax with interest and also imposed penalty of Rs.3,73,028/- under section 78 and Rs.5,000/- under Section 77 of the Finance Act.

The issue to be decided is whether the service of “segregation of magnesite” is classifiable under ‘business auxiliary service’ under section 65(105)(zzb) of the Finance Act, 1994 or under ‘mining service’ classifiable under section 65(105)(zzzy) of the Finance Act, 1994.

The counsel for the appellant submitted that the Tribunal vide Final Order No. 42314 and 42315/2017 dated 26.9.2017 held that the services rendered by the appellants who were also engaged in the business of segregating, lifting and stacking raw materials would fall under the category of ‘Mining Services’ and not under ‘Business Auxiliary Service’.

The Authorized Representative reiterated the findings of the impugned order.

 A Two-Member Bench comprising P. Dinesha, Member (Judicial) and M. Ajit Kumar, Member (Technical) observed that “we hold that the activity of collection, cleaning, segregation and stacking of blasted raw magnesite is classifiable under the category ‘Mining Services’ classifiable under section 65(105)(zzzy) of the Finance Act, 1994 and the demand is restricted to the period from 01/06/2007 onwards. We order that duty and interest may be worked out accordingly.”

“Mining activity has been made taxable by legislation with effect from 1.6.2007 only. Prior to this date, such activities, being part of mining operations, were not subjected to service tax. The period of demand in this case is from 6.10.2006 to 11.6.2007, therefore, no service tax is leviable on such activities for a major part of the impugned period” the Bench noted.

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