In a recent ruling, the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) of Kolkata, the tribunal clarified that the operation and maintenance of external coal handling systems, such as aerial ropeways, are exempt from service tax for the period prior to July 1, 2012. This decision, delivered by the Eastern Zonal Bench in Kolkata, provides relief to companies involved in infrastructure and service contracts concerning coal transportation.
The case involved the appellant/assessee, M/s Damodar Ropeways & Infra Limited, who had been issued a show-cause notice demanding service tax for various services, including the operation and maintenance of a 9.8 km long bi-cable aerial ropeway system at the Heavy Water Plant in Manuguru, Khammam, Andhra Pradesh. The appellant-company was audited for the period 2008-2012, which led to demands for service tax on several contracts, including coal handling, ropeway operations, and maintenance of government projects.
Aggrieved by the demands, the assessee took matters to the CESTAT.
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The primary matter here was the classification of services related to the external coal handling system. Before the tribunal, the counsel for appellant argued that their operations mainly involved the transportation of coal and were thus outside the purview of service tax. The appellant’s counsel further contended that the contract, awarded by the Department of Atomic Energy, stipulated that only a small portion of the total operations—13.33%—pertained to maintenance, on which they had duly discharged service tax liability.
The bench of Mr Ashok Jindal and Mr Anpazhakan after reviewing the contentions, agreed with the appellant’s submissions, holding that the operation of the coal handling system, which involved the transportation of coal, could not be classified as an infrastructural support service liable for service tax. The ruling relied heavily on a Central Board of Excise and Customs ( CBEC ) circular issued in 2007, which explicitly exempted transportation of coal via mechanical systems, such as ropeways, from service tax. Thus, the tribunal set aside the service tax demands for CCC the period before July 1, 2012.
It was observed that the appellant had already started paying service tax from July 1, 2012, following the changes in the service tax regime. However, the tribunal also directed the adjudicating authority to verify the payment of ₹42.95 lakhs made by the appellant-company for the post-July 2012 period, thus ensuring that the appellant had fulfilled its tax obligations for that time frame.
In result, the ruling was in favour of the appellant.
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