Classification of transportation of iron ore from the mine head to Railway siding.

PJ/CASE LAW/2014-15/2489

Case:-GOUTHAM KHONA, PROPRIETOR Vs COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX

Citation:-2014-TIOL-2435-CESTAT-BANG

Brief facts:-From all the 5 appellants, service tax has been demanded under the category of ‘Mining of Mineral Oil or Gas Service' for the period from October 2007 to March 2011. The issue involved is the same in all the appellants' case. Therefore all the appeals are taken together and a common order is being passed. In all these cases, the appellants were paying service tax under the category of GTA services up to 31.03.2008. Thereafter since the service receiver became a partnership firm, the appellants informed the department that the service tax will be paid by service receiver due to change in constitution of the service receiver. Simultaneously appellants stopped paying service tax and the service receiver also submitted a letter undertaking to pay service tax on the services received from all the 5 appellants. The registration certificate issued to the service providers were also cancelled by the department. The appellants are involved in transportation of iron ore from the mine head to pit head and to the Railway siding. There is no dispute that the appellants are engaged in providing transportation facility of iron ore from mine head to pit head and to the Railway siding. The appellants also have admitted that there is no written agreement and the transportation is undertaken on the basis of oral understanding. They have also stated that the payments were made by cheque only. From the records it also emerges that during the investigation the appellants stated that they honestly believed that service tax is payable under the GTA service category only and the activity undertaken by them is nothing but transportation.
Appellant’s contention:-The clarification is quite clear and in our opinion, when transportation activity is undertaken within the mine or from the mine outside the mine are to be classified under cargo handling service or goods transport by road pending upon the method adopted. However the Commissioner has interpreted it differently. He has observed in the order-in-original in paragraph 19.1.6 that the activities are undertaken from mine head to pit head and after 01.06.2007 the same is covered under mining activities. The only ground taken seems to be that the transportation is within the mining area. However learned counsel vehemently contested this and stated that the appellants were engaged in transportation of iron ore from mine head/pit head to the Railway sidings and the activity undertaken by them cannot be said to be within the mines. In any case the circular issued by the Board can lead to understanding and an interpretation that even for transportation within the mine or transportation from the mine to the railway sidings, mining service may not be the correct classification. It is well settled that if an assessee chooses to interpret a circular or a circular in his favour when two interpretations are possible, he cannot be found fault with. In any case in such a case extended period may not be invokable.

Respondent’s contention:-The respondent reiterated the findings of the lower authorities.

Reasoning of judgement:- Even though it was vehemently contested and argued in detail, yet we find that the decision of the Tribunal in the case of Jai Jawan Coal Carriers Pvt. Ltd. vs. CST, New Delhi - 2014-TIOL-727-CESTAT-DEL. would show that the activities undertaken by the appellants cannot be classified under mining service. We find that the above decision is a Final Order and prima facie applicable to facts of this case. On this ground also it can be said that appellants have made out a prima facie case in their favour.
We have to consider that he appellants were paying service tax under the category of GTA service and such tax was paid till 2011 without any failure. When the service receiver became a partnership firm, the appellants promptly informed that the receiver started paying the tax and intimated the fact to the department. The actions of the service providers as well as the service receivers in this case in our opinion reflects the fact that they had a bona fide belief that they were implementing the statute correctly. On this ground, appellants can be said to have made out a prima facie case on limitation.
The above discussions would show that whether it is on limitation or on merits, appellants have been able to make out a prima facie case in their favour. In view of the above, the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeals.

Decision:-Stay application is allowed.

Comment:-The analogy of the case is that transportation facility of iron ore from mine head to pit head and to the Railway siding would prima facie be covered under transport of goods service or cargo handling service. Moreover, as all the facts were intimated to the revenue department, there was a strong case on limitation also. Therefore, the stay application was allowed both on merits as well as limitation.

Prepared by:- Somya Jain

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PJ/CASE LAW/2014-15/2489

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