The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal( CESTAT ) has held that a composite contract of mining service cannot be vivised to demand service tax and sets aside Service Tax Demand
The Appellant, Shri Sanjay Kumar Binani is providing ‘Mining Services’ to their client MCCN. The client has issued a work order wherein excavation work in lime-stone mines, transportation of the same and all other related jobs are given to them on a composite contract basis. The department undertook a detailed investigation and issued a show cause notice for the period 11.08.2006 to 18.11.2009 on the ground that up to 30.06.2007, the appellant is required to pay Service Tax under different headings like ‘Cargo Handling Services’, ‘Site Formation Services’ and after 01.07.2007 under ‘Mining Services’.
The appellant after receipt of the show cause notice admitted that from 01.07.2007, they are liable to pay Service Tax under the heading of ‘Mining Service’ and calculated and paid Rs.18,10,214/- as Service Tax and Rs.36,203/- as Education Cess and Rs.18,101/- as SHE Cess. They also paid the interest of Rs.4,35,975/- towards the same. The adjudicating authority has confirmed the entire demand and also appropriated the Service Tax, Education Cess and SHE Cess along with interest paid to the appellant. On appeal, the Commissioner( Appeals ), upheld the Order-in-Original.
It was submitted that the work order awarded by the client is for various jobs, involved in the mining activities. He takes us through the work order and the payment terms wherein it is specified that they would pay Rs.91/- per cubic meter for over-burden cleared. Therefore, he submits that the department is in error in bifurcating the consideration amount into different categories of over-burden clearing, drilling and ‘Cargo Handling Services’ before 01.06.2007.
It was observed that in the case of M. Ramkrishna Reddy Vs. Commissioner of C.Ex. & Cus., Tirupathi, the Tribunal has held that when there is a composite contract, the same cannot be vivisected to confirm the demand of Service Tax.
A two-member bench comprising Shri R Muralidhar, Member( Judicial ) and Shri Rajeev Tandon, Member( Technical ) held that the Department’s case of breaking of Mining Service into several services is not legal, still, he has gone ahead and held that they are liable to pay Service Tax before 06.06.2007 under the category of ‘Cargo Handling Services’.
The CESTAT set aside the impugned order and allowed the appeal. Shri Alok Kumar Ghosh & Shri Nilesh Kumar Kundu, both Advocates appeared for the Appellant (s) and Shri J.Chattopadhyay, Authorized Representative appeared for the Revenue
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