The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the service tax demand on excavation of lignite and overburden removal of materials and classified the service under the category of ‘Mining Service’.
Dholu KCL JPF Joint Venture Company, the appellant assessee was a joint venture firm engaged in providing Mining Services and registered with service tax department under the category of Mining Service and the assessee had entered into a contract with Gujarat Industries Power Company Limited (‘GIPCL’) for hiring equipment with operators, maintenance staff, and facilities for excavation work.
The assessee appealed against the order passed by the adjudicating authority for confirming the service tax demand of amount of Rs. 49,54,78,789/- received by the assessee from GIPCL for Site formation and Clearance, Excavation, and Earth moving, and Demolition service.
Jigar Shah and Amber Kumrawat, the counsels for the assessee contended that removal of overburden/ inter-burden material was an integral process and part of the excavation of lignite and it was not a case where for extraction of minerals, site formation activities are carried out separately at the ground area like removal of the overburden material and then extracting of the minerals.
Also submitted was that overburden material was available in the mining area at various levels of mining of lignite. Thus it has been emphasized that the removal of over burden and interburden was undertaken throughout the mining process which was concerning the mining of lignite.
Prabhat K. Rameshwaram, the counsel for the department relied on the decisions made by the lower authorities and contended that for extraction of lignite, the assessee was supposed to remove the overburden of sand, murram, various clay levels, etc and the department entertained a view that the assessee is engaged in site formation and clearance of the mining area and the amount received by them should have been subjected to service tax.
The Bench observed that in the case of Associated Soapstone Distributing Co Pvt. Limited vs. CCE, the court held that there was only one contract assigning the scope of work as excavation and removal of overburden, waste, and mining ore, the same being a composite contract and it cannot be classified as site formation, clearance, excavation, earthmoving and demolition service and mining work separately.
The two-member bench comprising Ramesh Nair (Judicial) and C L Mahar (Technical) held that as per the nature of the service in the present case, the removal of overburden which was exclusively meant for mining of lignite shall fall under the category of mining service and quashed the service tax demand while allowing the appeal filed by the assessee.
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