Custom, Excise & Service Tax Tribunal
M/S. Emars Mining Construction Private ... vs Commissioner Of Service Tax Kol on 15 January, 2020
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.2
Service Tax Appeal No.194 of 2012
(Arising out of Order-in-Original No.70/Commr/ST/Kol/2011-12 dated 31.01.2012
passed by Commissioner of Service Tax, Kolkata.)
M/s. Emars Mining Construction Private Limited
(2C & 2D, Green Acres, 2, Nazir Ali Lane,
Kolkata-700019.)
...Appellant
VERSUS
Commissioner of Service Tax, Kolkata
.....Respondent
(Kendriya Utpad Shulk Bhavan, 3rd Floor, 180, Santipally, Rajdanga Main Road, Kolkata-700107.) APPEARANCE Dr.Samir Chakraborty, Senior Advocate & Shri Ajoy Sanoria, Chartered Accountant for the Appellant (s) Shri S.S.Chattopadhyay, Authorized Representative for the Respondent (s) CORAM: HON'BLE SHRI P.K.CHOUDHARY, MEMBER(JUDICIAL) HON'BLE SHRI P.ANJANI KUMAR, MEMBER(TECHNICAL) FINAL ORDER NO. 75057/2020 DATE OF HEARING : 14 January 2020 DATE OF DECISION : 15 January 2020 P.ANJANI KUMAR :
Briefly stated the facts of the case are that the appellant, M/s.Emars Mining Construction Pvt.Ltd., are engaged in providing 2 Service Tax Appeal No.194 of 2012 services inter alia in raising, extracting and transportation of iron ore for Mrs.Mala Roy, lease holder of Jalahori Iron & Manganese Mines in Orissa. The appellants were being paid a fixed rate per ton of the iron ore. On scrutiny of the ST-3 returns and other documents, the department has observed that the appellants have short paid Service Tax on 'Transport of Goods by Road', 'Mining Service', 'Site Formation and Clearance, Excavation and Earthmoving and Demolition Service' during the period 2005-06 to 2009-10. Accordingly a show cause notice dated 19.10.2010 was issued to the appellants demanding Service Tax of Rs.9,12,40,927/-; Education Cess of Rs.18,24,821/- and Higher Education Cess of Rs.5,01,545/- under the proviso to Section 73(1) of the Finance Act, 1994 while proposing to impose penalty under Section 78 of the Finance Act. The show cause notice was adjudicated by the Commissioner vide Order-in-Original No.70/Commr/ST/Kol/2011-12 dated 31.01.2012 wherein Service Tax of Rs.2,90,48,791/- was confirmed with equal penalty and interest. Hence this appeal.
2. Learned Sr.Counsel for the appellant submits that the original agreement was dated 24.03.2005 and similar agreements were entered in respect of subsequent financial years 2006-07 to 2009-10; during 2005-06 and during 2006-07, the appellant did not charge or collect any consideration towards raising/shifting of iron ore and started charging the same from financial year 2007-08 onwards. Learned Sr.Counsel submits that that substantial portion of the activities comprised in transportation of iron ore therefore the appellant entered into the supplementary agreement from 2007-08 whereby the consideration receivable by the appellant was split into mining charges(40%) and transportation charges (60%). The learned Sr.Counsel submits that Service Tax on mining activities were levied w.e.f. June 1, 2007 and the appellant has started paying Service Tax under the category of 'Mining Services' in respect of 40% of the consideration they received. In respect of balance 60% of the consideration the lease holder paid Service Tax as per the terms of the agreement. The learned Commissioner has dropped the demand in 3 Service Tax Appeal No.194 of 2012 respect of 'GTA Services' and in respect of 'Cargo Handling Service' and 'Site Formation and Clearance Service' he dropped the demand pertaining to financial years 2005-06 and 2006-07 for the reason that it was not recovered from the lease holder. However, the learned Commissioner confirmed the demand in respect of both the services for the period April and May 2007. The learned Commissioner also confirmed the entire demand in respect of 'Mining Services' allowing the credit of Service Tax paid by the lease holder on GTA in respect of 60% of the consideration.
3. Learned Sr.Counsel for the appellant submits that the issue relating to handling and transportation of coal from pit head to the mines premises was covered by the following decisions:-
(i) Karamjeet Singh & Co. Ltd. Vs. Commissioner of C.Ex. & Service Tax [2008 (17) GSTL 255 (T)]
(ii) Commissioner Vs. Karamjeet Singh & Company Limited [2018 (17) G.S.T.L. J 48 (S.C.)]
(ii) H.N.Coal Transport Pvt.Ltd. Vs. Commissioner of C.Ex. & S.T. [2019 (26) GSTL 214 (T)]
(iii) Commissioner of Central Excise & Service Tax, Raipur Vs. Singh Transporter [2017 (4) GSTL 3 (SC)] 3.1 Learned Sr.Counsel submits that as held in the above cases, the activity undertaken by the appellant is correctly classifiable under 'GTA Services' and Service Tax on the same has already been paid only to the extent of 60% of the consideration received and Service Tax was also paid by them under 'Mining Services' for the 40% of the remuneration they have received. He submits that in view of the case law cited above, Commissioner's order is not tenable.
4. With reference to the confirmation of demand of Rs.18,35,945/-
as 'Cargo Handling Service' for the period April 2007 to May 2007 was erroneous and not sustainable in view of the following decisions:-
(i) Shree Ganraj Coal Transport Private Limited Vs. CCE & ST [2018 (14) G.S.T.L. 394 (T)] Affirmed by the Supreme Court in Commissioner Vs. Shree Ganraj Coal Transport Private Limited [2018 (14) G.S.T.L. J122 (SC).
(ii) R.K.Transport Company Vs. Commissioner of Central Excise, Raipur [2012 (27) S.T.R. 496 (T)] 4 Service Tax Appeal No.194 of 2012 Affirmed by the Supreme Court in Commissioner Vs. R.K.Transport Company [2018 (16) G.S.T.L. J 78 (S.C.) Learned Sr.Counsel, however, fairly concedes the confirmation of Service Tax to the extent of Rs.12,23,964/- for the period April and May 2007 under 'Site Formation and Clearance Service'.
Learned Sr.Counsel also relied upon Hon'ble Apex Court's judgement in the case of Continental Foundation JT. Venture Vs. Commissioner of C.Ex., Chandigarh-I as reported in 2007 (216) E.L.T. 177 (S.C.).
5. The learned Authorized Representative for the department reiterates the findings of the Order-in-Original and submits that the case law submitted by the appellant is not applicable as the operations undertaken by the appellant is clearly falling under 'Mining Services' and it cannot be artificially split into 'Mining Services' and 'GTA Services' . He relies upon the case of Hazaribagh Mining & Engg. Pvt.Ltd. [2017 49) S.T.R. 289 (Tri.-Kol)].
6. Heard both sides and perused the records of the case.
7. We find that the appellants are undertaking the activity for the lease holder in excavation raising and transport of ore. The terms of Para 3 of the contract dated 10.04.2008 is follows :-
"3. The contractor shall extract Iron ore from the said mine and shall deliver the exclusively to the leaseholder. In consideration thereof the Leaseholder shall pay to the contractor in the following manner.
Iron Ore Rate per MT
Iron Ore R.O.M. Rs.500/-
Iron Ore Fines Rs.75/-
Iron Ore 10-40 (R.O.M.) Rs.465/-
Iron Ore 20-40 (R.O.M.) Rs.465/-
The R.O.M. (Crude ore) shall mean iron ore in run of mine from which can be profitably marked only after processing converting and sorting into the prescribed standards by the contractor.
The parties hereto further agree to review from time to time the extraction charges of crude ore considering the change in cost and for that purpose if necessary to sign addendum to this agreement."
7.1 This agreement was supplemented on 28th April 2008 wherein all other terms being unchanged. The following is inserted :-
"This agreement is in continuation of the original agreement made between the parties on 10th day of April 2008 for raising of iron ore 5 Service Tax Appeal No.194 of 2012 from the kine at Jalahuri wherein in the following price consideration was agreed upon by both the parties.
Rate per MT
Iron Ore R.O.M. Rs.500/-
Iron Ore Fiones Rs.75/-
Iron Ore 10-40 (R.O.M.) Rs.465/-
Iron Ore 20-40 (R.O.M.) Rs.465/-
The essence of the contract is that the Contractor has vast experience and possess technical know how and expertise including personnel, mining tools, machinery and other necessary equipment to undertake exploration, excavation, processing, transportation and marketing of iron ore from said Mine.
It has now been agreed upon that out of the above agreed rate it has been felt necessary to bifurcate the expenses relating to mining and transportation as these are the main major heads of operating expenses. After through discussion it has now been agreed upon that the contractor however will have to restrict the mining and transportation billing to the ratio of 40:60 (Approx.) and henceforth the payments of the bills will be made according to this supplemental agreement.
In view of the above the implementation of service tax will be as under.
-For raising activities service tax shall be payable by the contractor
-For Transportation and other Logistics service tax shall be payable by the Leaseholder All other terms and condition will remain unchanged and binding upon both the parties."
8. On going through the terms of the contract, we find essence of the contract is that the contractor i.e. the appellant shall extract iron ore from the said mine and shall deliver it exclusively to the leaseholder. In consideration thereof the leaseholder shall pay to the contractor in the manner decided. We find that the rates are fixed for different types of iron ore i.e. iron ore R.O.M., iron ore fines, iron ore 10-40 R.O.M.; and iron ore 20-40 (R.O.M.). We also find that the Supplementary Agreement has been expanded to bifurcate the expenses relating to mining and transportation in the ratio 40:60 while making payments. The contracts and supplement over the years were in identical manner. Thus it is apparent that the contracts undertaken by the appellant are composite contracts involving excavation and transportation of iron ore. The case laws relied upon by the Sr.Counsel i.e. the cases Karamjeet Singh & Co. (supra), Singh Transporters (supra) appear to be for the cases where the appellants therein are engaged in the transportation of excavated 6 Service Tax Appeal No.194 of 2012 ore from the pit head to dump yard. Therefore it was held in such cases that the activity undertaken by the concerned parties would not fall under 'Mining Services'. However, as seen above, the activity undertaken by the appellants is composite activity. For the sake of interpretation and applicability of Service Tax the contract cannot be vivisected. Learned Sr.Counsel attempted to submit that as the payments are received separately for mining and transportation activities they need to be considered as different services. We are not inclined to subscribe to this view. The terms of the contract in the instant case being categorical and the division of the amount payable in a ratio appears to be only for the convenience of the parties involved and therefore it cannot be concluded that the services rendered by the appellants are under two different heads. Such an artificial bifurcation is not acceptable. We find that this Bench of the Tribunal in the case of Hazaribagh Mining & Engg. Pvt.Ltd. (supra) having gone through the scope of the contract therein have concluded that the work undertaken by the appellants therein amounted to 'Mining Services'. In the instant case also the learned Sr.Counsel for the appellant other than merely showing that there is a division of payment could not produce any documentary proof so as to conclude that the contract is vivisectable. Therefore we find that the learned Commissioner has correctly concluded that the activities undertaken by the appellants is 'Mining Service' w.e.f. 01.06.2007 and is chargeable to Service Tax accordingly. Learned Sr.Counsel at this juncture submits that the entire Service Tax amount has been paid by the appellants along with interest and 25% of the penalty.
9. Coming to the demand of Rs.18,35,945/- under 'Cargo Handling Services' for the period April 2007 to May 2007, we find that the case law submitted by the learned Commissioner for the appellant squarely covers the issue. We find that there are a catena of judgements indicating that such service cannot be treated as 'Cargo Handling Service' therefore to that extent the arguments of the appellants are acceptable.
10. In view of the above, the appeal is partially allowed in the following terms :-
(i) The demand is confirmed to the extent of Rs.2,59,88,882/-
under the taxable head 'Mining and Mineral, Oil, Gas Service' for the period 01.06.2007 to 31.03.2010 and Rs.12,23,964/- on 'Site 7 Service Tax Appeal No.194 of 2012 Formation and Clearance Service' for the period April 2007 to May 2007.
(ii) Penalty under section 78 is restricted to 25% of the above confirmed amounts.
(Order pronounced in the open court on 15 January 2020.) SD/ (P.K.CHOUDHARY) MEMBER (JUDICIAL) SD/ (P.ANJANI KUMAR) MEMBER (TECHNICAL) sm