TMI Blog2019 (7) TMI 1701X X X X Extracts X X X X X X X X Extracts X X X X ..... admits that with effect from 1 June, 2007, the activity carried out by the appellant is covered under the category of service in relation to mining. This activity could not, therefore, have been categorized under BAS prior to 1 June, 2007 - the demand of Service Tax in the impugned order under BAS from 16 June, 2005 to 30 May, 2007 is not justified. It has been considered necessary to examine the aforesaid approach of the Principal Commissioner as Orders of the Adjudicating Authorities or the first Appellate Authority are coming before the Tribunal in which the binding decisions of the Tribunal are being ignored and a contrary view is taken either for the reason stated in the aforesaid Order of the Principal Commissioner or for the reason that the Department has not accepted the decision of the Tribunal as it had filed an appeal before the High Court or the Supreme Court. Whether the reimbursements received by the appellant from the customers towards transportation charges, railway freight can be included in the taxable value? - HELD THAT:- Section 67 of the Act was considered and explained by the Supreme Court in Union of India and Others v. Intercontinental Consultants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized Representative, for the Respondent. ORDER This appeal has been filed for setting aside the order dated 29 May, 2015 passed by the Principal Commissioner, Central Excise, Delhi [The Principal Commissioner] by which not only the demand of Service Tax has been confirmed but penalty and interest have also been directed to be paid. 2. The appellant entered into an agreement with Karnataka Power Corporation Ltd. [KPCL] for washing of coal transported from mines to the washing facilities situated in the mining area. This is basically known as beneficiation of coal. The appellant paid Service Tax on this activity w.e.f. 1 June, 2007 as the appellant believed that it was providing a service in relation to mining under Section 65(105)(zzzy) of the Finance Act, 1994 [The Act]. The appellant did not pay Service Tax on reimbursements such as transportation as it felt that this did not form part of the value of taxable services provided by the appellant. 3. A show cause notice dated 20 October, 2010 was, however, issued to the appellant mentioning therein that the appellant, in terms of the agreement with KPCL, while undertaking the work of washing/beneficiation of coal, wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Service Tax, New Delhi - 2012 (9) TMI 205-CESTAT, New Delhi = 2013 (29) S.T.R. 74 (Tribunal) and M/s. Spectrum Coal and Power Ltd. v. Commissioner of Central Excise, Raipur - 2012-TIOL-1125-CESTAT-DEL = 2012 (28) S.T.R. 510 (Tribunal). It was also stated that cost of transportation of coal from mines to washery cannot be included in the value of taxable services as they were reimbursements and in support of this contention reliance was placed on the decision of the Delhi High Court in Inter Continental Consultations and Technicians Pvt. Ltd. v. Union of India - 2013 (29) S.T.R. 9. 5. The Adjudicating Authority, however, did not accept the submissions made by the appellant. After noticing that the Appellant was engaged in the washing of coal purchased by KPCL from M/s. Singareni Collieries Company Ltd. in raw form, the Principal Commissioner observed that this activity was a service to KPCL covered under BAS since it would be an activity of processing of goods for or on behalf of the client w.e.f. 16 June, 2005, but the appellant did not pay any Service Tax for this activity from 16 June, 2005 to May, 2007. The submission of the appellant that washing of coal is a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Principal Commissioner, however, observed that against the decision of the Tribunal in Aryan Coal, the Department had filed an appeal in the Delhi High Court [CEAC 26/2013] which was dismissed on 12 February, 2014 as non-maintainable and though the Department had filed a Civil Appeal [Civil Appeal D 37840 of 2014] in the Supreme Court which was dismissed on 13 May, 2015 on the ground of delay, but the question of law was kept open. It would be appropriate, at this stage, to reproduce the observations made by the Principal Commissioner on the aforesaid judgment of the Supreme Court and they are as follows :- After this, the department had filed a Civil Appeal D 37840 of 2014 before the Supreme Court of India against the said judgment of the Tribunal. The Apex Court had taken up the matter for hearing on 13-5-2015 and disposed of the said Appeal by making the order in one line that The appeal is dismissed on the ground of delay. However, the question of law is kept open. The order of the Apex Court is a non-speaking one which can only be termed as a decision and not a judgment as has been deliberated by Board s Circular No. 494/60/99-CX, dated 12-11-1999 and 897/17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined by the Law Ministry and it was inter alia observed :- The Hon ble Apex Court has not indicated any reason for dismissal of the Civil Appeal and, therefore, apparently there are no grounds for review of the order by the Apex Court. The impugned order of the Apex Court does not imply that the order of the CEGAT stands merged with the order of the Supreme Court. In the case of Indian Oil Corpn. Ltd. v. State of Bihar - AIR 1986 SC 1780, the Apex Court has held that when Special Leave Petition is summarily rejected, it occasions no merger of the order of the Lower Court in the order of the Supreme Court. These views have been reiterated by the Apex Court in the case of Udai Pratap Singh v. State of Bihar - 1994 Suppl. (3) SCC 451 wherein it has been held that dismissal of SLP by non-speaking order does not imply approval of the impugned judgment. The file was also placed before the Learned Attorney General for India and he observed as given below : In my opinion, there are no grounds for review. The issue involved in CA No. 6645/99 which was dismissed by the Supreme Court by its order dated 13-5-1999, may be agitated in other cases . The above noted learned opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s irrelevant since the judgment of Tribunal is in jeopardy and the question of law is still open. (emphasis supplied) 10. The Principal Commissioner, therefore, held as follows :- (i) Service Tax amounting to ₹ 7,27,31,082/- (Seven Crores Twenty seven Lacs thirty one thousand eighty two only including Education Cess Secondary Higher Education Cess) is recoverable from the party under Section 73(1) of the Finance Act, 1994. An amount of ₹ 22,312/- already deposited stands appropriated towards payment of Service Tax; (ii) Interest on the Service Tax recoverable as above is liable to be paid by them under Section 75 of the Act ibid. (iii) Penalty in terms of Section 76 of the Finance Act, 1994, is imposable on them. (iv) Penalty in terms of Section 77 of the Finance Act, 1994 is imposable upon them for failure to observe the statutory responsibilities. (v) Penalty in terms of Section 78 of the Finance Act, 1994, is imposable on them. 11. Shri B.L. Narasimhan, Learned Counsel for the appellant submitted that the activities of the appellant cannot be classified under BAS prior to 1 June, 2007 as the activity, being a service in rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n charges received for the said activity under the category of mining services w.e.f. 1 June, 2007, when this service was for the first time subjected to levy of Service Tax. The impugned order has confirmed the demand of Service Tax from 16 June, 2005 upto 31 May, 2007 under BAS. The period from 1 June, 2007 to 31 March, 2009 was included in the show cause notice though the appellant had deposited Service Tax under mining related service, only for the reason that it was alleged the appellant had not paid Service Tax on reimbursements received from customers during the period. According to the appellant, this amount was not included in the value of services as reimbursements do not form part of value of taxable services. 15. The first issue that needs to be decided is as to whether the activity of beneficiation of coal carried out by the appellant would fall under BAS. According to the appellant, the said activity will be covered under the scope of mining related services under Section 65(105)(zzzy) of the Act w.e.f. 1 June, 2007. The contention is that on introduction of such a service from 1 June, 2007, there was no amendment in the definition of BAS under Section 65(19) read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coke or for the washing of coal. When the ash content of the coal is very high, the quality is poor. The Mines and Minerals (Development and Regulation) Act, 1957 in the Second Schedule gives the different gradations of coal. Among the gradation, washery grade is clearly indicated. From all this, it is clear that washing of coal is also a part of mining activity. 15. ------------- 16. Once it is established that the activity of the appellant is mining, it cannot be taxed under the Business Auxiliary Service for the period prior to 1-6-2007. Even when we examine the definition of business auxiliary service, it is seen that production which does not amount to manufacture comes under business auxiliary service. The beneficiation of coal does not amount to production of coal because beneficiation is a process, which enhances the quality of the coal. However, in the definition of business auxiliary service, an amendment was carried out to include process also w.e.f. 16-6-2005. The appellant has made an alternative submission that if the activity carried out by them is not considered as mining activity the demand can be sustained only from 16-6-2005 to 31-8-2005 only. There are suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion is accepted that would mean that the activities of the members of the 1st petitioner are covered by entry (zzzy) and entry (zzzzj). Such a result is difficult to comprehend because entry (zzzzj) is not a specie of what is covered by entry (zzzy). Introduction of new entry and inclusion of certain services in that entry would presuppose that there was no earlier entry covering the said services. Therefore, prior to introduction of entry (zzzzj), the services rendered by the members of the 1st petitioner were not taxable. Creation of new entry is not by way of amending the earlier entry. It is not a carve out of the earlier entry. Therefore, the services rendered by the members of the 1st petitioner cannot be brought to tax under that entry. (emphasis supplied) 19. Reference can also be made to the decision of the Tribunal in M/s. Malviya National Institute of Technology v. Commissioner, Service Tax, Jaipur - 2019 (6) TMI 127-CESTAT NEW DELHI = 2019 (28) G.S.T.L. 472 (Tribunal) wherein it was observed that :- 14. ------The definition of CE services as it stood prior to 16 July, 2001 was not amended when a new service namely, STC was inserted on 16 July, 2001. It c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal, on which reliance was placed by the appellant, were not followed by the Principal Commissioner. After noticing the decision of the Tribunal in Aryan Energy and the fact that the position of law was reiterated by the Tribunal in Spectrum Coal and Aryan Coal, the Principal Commissioner ignored the binding decisions for the reason that the Department had filed an appeal against the decision of the Tribunal in Aryan Coal before the Delhi High Court and though the appeal filed by the Department was dismissed by the Delhi High Court on 25 February, 2014, but the Civil Appeal filed by the Department was dismissed by the Supreme Court on 13 May, 2015 on the ground of delay leaving open the question of law. The Principal Commissioner observed that the one line order of the Supreme Court is a non-speaking one which can only be termed as a decision and not a judgment and that the judgment of the Tribunal is not final and also not approved by the Supreme Court because it is specifically stated by the Court that the question of law is kept open . 24. The Principal Commissioner further observed : I reach at the conclusion that the ratio of the case i.e. Aryan Coal Beneficiatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Principal Commissioner, in the present case, clearly crossed all limits of judicial discipline and propriety. 28. It has been considered necessary to examine the aforesaid approach of the Principal Commissioner as Orders of the Adjudicating Authorities or the first Appellate Authority are coming before the Tribunal in which the binding decisions of the Tribunal are being ignored and a contrary view is taken either for the reason stated in the aforesaid Order of the Principal Commissioner or for the reason that the Department has not accepted the decision of the Tribunal as it had filed an appeal before the High Court or the Supreme Court. 29. In this connection it will be appropriate to refer to the decision of the Supreme Court in Kamlakshi Finance Corporation Ltd. The Supreme Court noticed that the order passed by the Assistant Collector not only ignored the order of the Collector (Appeals) remanding the matter, but also distinguished the decision of the Tribunal by observing that the decision of the Tribunal had not been agreed to by the Department as an appeal had been filed in the Supreme Court. The assessee filed a writ petition in the Bombay High Court to challeng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled for duty exemption. The Tribunal decided the issue in the favour of assessee. The Civil Appeal filed by the Department in the Supreme Court was dismissed. Opinion was sought by the Department for filing a review petition. In response to it, it was stated that since the Supreme Court had not given any reason for dismissing the Civil Appeal, there was no ground for filing a review. It was also stated that mere dismissal of a Civil Appeal/Special Leave Petition by the Supreme Court does not mean that Supreme Court had approved the impugned order or that the order of the Tribunal merged with the order of the Supreme Court and in similar other cases, this matter could still be agitated. 32. This Circular does not give liberty to an officer of the Department exercising quasi judicial powers to ignore the binding decisions of the Tribunal or the High Court if the Civil Appeal filed by the Department to assail the decision of the Tribunal is dismissed by the Supreme Court. The Principal Commissioner was not justified in taking shelter of this Circular to ignore the binding decisions of the Tribunal, more particularly when the writ petition filed by the Department had been dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation. (vii) On an appeal having been preferred or a petition seeking leave to appeal having been converted into an appeal before the Supreme Court the jurisdiction of High Court to entertain a review petition is lost thereafter as provided by sub-rule (1) of Rule 1 of Order 47 CPC. (c) Once we hold that law laid down in Kunhayammed is to be followed, it will not make any difference whether the review petition was filed before the filing of special leave petition or was filed after the dismissal of special leave petition. Such a situation is covered in para 37 of Kunhayammed case. (emphasis supplied) 34. The second circular dated 3 September, 2009 also could not have been relied upon by the Principal Commissioner in the facts and circumstances of this case, as the judgment of the High Court was delivered under the erstwhile Central Excise Rule and the matter related to the existing Rule 14 of the Cenvat Credit Rules, 2004. 35. The second issue that arises for consideration is as to whether the reimbursements received by the appellant from the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of service rendered by the assessee and the quantification of the value of service can, therefore, never exceed the gross amount charged by the service provider for the service provided by him. On that analogy, the High Court opined that the scope of Rule 5 goes beyond the scope of Section 67 which was impermissible as rules could be framed only for carrying out the provisions of the Act. In taking this view, the High Court observed that the expenditure or cost incurred by the service provider for providing the taxable service can never be considered as the gross amount charged by the service provider for such service provided by him. 39. The Supreme Court noticed the various reimbursable claims which were included in the gross value. The Supreme Court noted that Rule 5 does bring within its sweep the expenses which are incurred while rendering the service and are reimbursed and, therefore, what was required to be decided was whether Section 67 of the Act permits subordinate legislation to be enacted as done by Rule 5. It needs to be noted that prior to 19 April, 2006, in the absence of a Rule, the valuation was required to be done as per the provisions of Section 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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