The Calcutta High Court held that extended limitation cannot be invoked in absence of ‘omission & suppression of material facts’ to evade tax. Further held that Service Tax will not be levied on activities such as cutting or mineral extraction which are part of mining operations, if mining operations are itself not subjected to service tax on the date of levy.
G.S. Atwal & Co. Engineering Pvt Ltd, the assessee was a mining contractor involved in the mining operation as defined under the Mines and Minerals (Development and Regulation) Act, 1957 for extraction of minerals within the mining area. Upon the bonafide relief that service tax in respect of mining activities was levied for the first time with effect from 1st June, 2007, the assessee did not apply for registration before the 1st June, 2007.
The Department invoked the extended period of limitation and created an artificial bifurcation in the nature of services of the assessee under various categories, such as, cargo handling service, site formation and clearance service and business auxiliary services and therefore imposed service tax in respect of services rendered prior to 1st June, 2007.
On appeal, the Tribunal faulted the Department for creating an artificial bifurcation of the mining activity done by the assessee while noting that no such separate charges are payable to such service as per the work orders.
The Bench found that except for the use of the words “omission and failure”, “suppression of material facts”, “with an intent to evade payment of service tax”, the adjudicating authority has not brought out any facts to substantiate as to how there was an act of omission and failure on the part of the assessee to disclose the correct facts and that it was with an intent to evade payment of service tax. In the absence of these essential elements, it is a settled legal position that the extended period of limitation cannot be invoked, added the Bench.
Further, the Bench noted that the assessee has been paying service tax and there is no regard for the chargeability of the service tax prior to 1st June, 2007 that too, by artificially bifurcating the composite services rendered by the assessee, the extended period of limitation cannot be invoked.
The Division Bench of Chief Justice T.S Sivagnanam and Justice Hiranmay Bhattacharyya observed that Coal cutting or mineral extraction are essential integral processes and are part of mining operations. Mining activity has been made taxable by legislation under the Finance Act, 2007(w.e.f.1.06.2007). Before this date, such activities, being part of mining operations itself are not subject to service tax.
The Bench relied on the decision of the Supreme Court in the case of Union of India vs. Indian National Shipowners Association, wherein it was held that “in regard to the period relevant in the said case was from 01.06.2007 to 15.05.2008 and that the amendment was brought in subsequently but yet, by taking recourse to Section 65(105) entry No. zzzy, the members of the association are still liable to pay service tax”. The Court dismissed the appeal of the revenue.
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