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2014 (12) TMI 378 - AT - Service TaxWaiver of pre deposit - Mining of mineral, oil or gas service - Imposition of interest and penalty - Held that - Activity undertaken by the appellants is mining of iron ore and there is no dispute on that aspect. Iron ore is also an item for which a separate heading is available in the schedule of Tariff. It is also covered by Chapter 26. Therefore the same activity of mining of iron ore can be liable to service tax as well as excise duty. When it comes to Central Excise duty, excise duty will be leviable on the total transaction value and on the entire quantity of iron ore extracted. When it comes to service tax, the amount paid as consideration for the iron ore extraction would be the amount leviable to service tax. The nature of taxes is entirely different; taxable events are different. The mines were owned by individuals who are partners of Sree Gavisiddeshwara Minerals. The right to extract/mine the ore and sell was given to Sree Gavisiddeshwara Minerals. Sree Gavisiddeshwara Minerals and all the partners constituting the partnership firm entered into a contract with the appellant and entrusted the work of mining of ore for a consideration of 64% of the ore that is extracted. In such a situation, when two parties viz. Sree Gavisiddeshwara Minerals and the appellant have treated themselves as two separate entities, obviously the appellant becomes the service provider and the others who owned 36% become the service receivers. In fact in this case, the iron ore mined is initially handed over to Sree Gavisiddeshwara Minerals, who in turn allocated 64% to the appellant and distributed the balance 36% to the other partners. Therefore the appellant, a limited company, has provided a service of mining of ore to Sree Gavisiddeshwara Minerals, a partnership firm. Therefore we consider that prima facie, the appellant may not have a case - Partial stay granted.
Issues:
1. Taxability of mining operations as a service under 'mining of mineral, oil or gas service'. 2. Classification of activity as manufacture of excisable goods under Central Excise Tariff Act. 3. Determination of service provider-receiver relationship in a partnership firm context for levy of service tax. Analysis: 1. The judgment addresses the taxability of mining operations undertaken by an appellant as a service falling under 'mining of mineral, oil or gas service'. The appellant, a partner in a firm with a mining license, entered into an agreement for mining operations. The tribunal confirmed a demand for service tax of Rs. 12,38,99,236 along with interest and penalty. The appellant argued that the activity should be classified as the manufacture of excisable goods under the Central Excise Tariff Act, exempting it from service tax. The tribunal differentiated this case from previous decisions on cargo handling services, emphasizing the unique nature of the mining activity. 2. The appellant contended that the activity constituted the manufacture of iron ore, exempt from excise duty, thus precluding the levy of service tax. Citing Chapter 26 of the Central Excise Tariff Act, the appellant argued for the exemption based on the nature of the extracted mineral. The tribunal noted that while iron ore was exempt from excise duty, the activity of mining could still attract service tax. It highlighted the distinction in taxable events and the nature of taxes, asserting that both excise duty and service tax could be applicable to the same activity. 3. The judgment delves into the service provider-receiver relationship within a partnership firm concerning the mining operations. The tribunal analyzed the contractual arrangements between the appellant and the firm, emphasizing the separate identities maintained during transactions. It concluded that the appellant, by providing mining services to the firm, established a service provider-receiver relationship. Despite arguments against the partnership firm's individual identity, the tribunal upheld the prima facie case for service tax levy. Considering the complexity of the interpretation and the extended period involved, the tribunal required a pre-deposit from the appellant, balancing the interests of all parties involved.
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