Transport of Minerals Inside Mines Is Not ‘Mining Service’: CESTAT Rejects Service Tax Demand [Read Order]

TheCustoms, Excise and Service Tax Appellate Tribunal, Kolkata (CESTAT), has held that transportation of excavated minerals within a mining area cannot be taxed under the category of “Mining Service”, ruling that such movement is a post-mining transportation activity and therefore does not attract service tax under Section 65(105)(zzzy) of the Finance Act, 1994.

Mahavir Logistics Pvt. Ltd. challenged the Order-in-Original that confirmed service tax of ₹1,34,07,613 on the allegation that the transportation of iron ore and overburden within and outside the Karampada iron ore mines constituted Mining Service. The case arose after the department treated routine mineral movement operations as taxable mining activities, leading the Commissioner to confirm the demand along with interest and penalty.

Represented by Advocate Ajay Sanwaria and Advocate Sukalpa Seal, the appellant submitted that its role was restricted to transportation of excavated minerals from one point to another, both inside and outside the mine. It argued that transportation of minerals is a post-mining logistical activity and cannot be equated with mining, extraction, processing, or any activity that falls within the ambit of Mining Service under Section 65(105)(zzzy) of the Finance Act, 1994.

The appellant relied on CBEC Circular No. 232/2/2006-CX-4, dated 12.11.2007, which clarified that transportation of coal or minerals from the pithead to any other location is a post-mining activity and is taxable, if at all, only under the category of Goods Transport by Road Service. Reliance was placed on the Supreme Court judgment in Commissioner of Central Excise and Service Tax, Raipur v. Singh Transporters (2017), which held that transportation of minerals from the pithead to railway sidings is not Mining Service.

The Bench comprising Judicial Member R. Muralidhar and Technical Member K. Anpazhakan held that the appellant was not engaged in any activity related to mining, extraction, drilling, or processing. The sole function performed was transportation, and no part of the work order indicated involvement in mineral extraction or mining operations.

Referring to the CBEC Circular No. 232/2/2006-CX-4, dated 12.11.2007, the Bench observed that the classification of post-mining transport as a taxable service under Goods Transport by Road and not Mining Service is settled law. The Tribunal relied on the Supreme Court ruling in Singh Transporters (supra), reiterating that movement of minerals inside a mine is a transportation activity and cannot be brought within Section 65(105)(zzzy).

Therefore, the CESTAT held that the demand raised under the category of Mining Service was unsustainable in law. As the classification itself failed, the related interest and penalty were also set aside. The appeal on this issue was accordingly allowed with consequential relief.

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