The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that ‘Mining services’ are liable for service tax only with effect from 01/06/2017 and set aside the demand of service tax by invoking an extended period.
M/s G. S. Atwal & Co. Engineers Pvt. Ltd., the appellant provided ‘Mining Services’ to the service recipients during the period 16.08.2002 to 31.10.2006, but did not pay service tax on such activities and also did not take any service tax registration till 01.06.2007. The appellant received a Show Cause Notice demanding service tax for the period 16.08.2002 to 31.10.2006.
The Notice was adjudicated vide Order-in-Original No wherein the demand of service tax with Education Cess amounting to Rs.33,10,00,270/- was confirmed under the three different heads as demanded in the Show Cause Notice.
It was the well-settled position in law that when a particular levy was introduced for certain activities with effect from a particular date, it was evident that such activities were not taxable to service tax prior to that date. Mining services were brought under service tax with effect from 01/06/2017. Hence, for the period prior to 01/06/2007, the said activities cannot be bifurcated under different heads for the purpose of demanding service tax.
The Appellant stated that the contracts were not restricted to site formation, Cargo Handling and Business Auxiliary Service, but also included a host of other activities associated with mining activities viz. removal of overburden, extraction and segregation of coal/ores.
The service tax in respect of mining activities was levied for the first time with effect from 01.06.2007. They were under the bonafide belief that registration need not be taken in respect of ‘Mining services’ as the said services were not taxable prior to 01.06.2007.
The Department has artificially bifurcated the services under the categories of Cargo Handling Services, Site Formation Services and Business Auxiliary Services and demanded service tax.
The CBEC has issued Circular F. No. 232/2/2006Cx.4 dated 12.11.2007, which categorically states that no service tax leviable on mining activities prior to 01.06.2007. However, the adjudicating authority failed to appreciate the clarification and went ahead to confirm the demand made in the Notice.
A two-member bench Mr Ashok Jindal, Member (Judicial) and Mr K Anpazhakan, Member (Technical) that there is no evidence brought on record to establish that the Appellant has intentionally evaded service tax. Since ‘mining services’ were liable for service tax only with effect from 01/06/2017, demand for service tax by invoking extended periods is not sustainable. Accordingly, the demands confirmed in the impugned orders are liable to be set aside on the ground of limitation also.
Further held that when the demand itself is not sustainable on merit as well as on limitation, the question of imposing a penalty does not arise. While allowing appeal set aside the impugned order.
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