Case Law Details
Devendra Nath Mahato & Sons Vs Commissioner of Central Excise & Service Tax (CESTAT Kolkata)
Service Tax Demand Quashed Because Coal Transport Activity Was Misclassified as Mining Service; No Service Tax on Coal Transportation Because Activity Fell Under Negative List Entry: CESTAT; Mining Service Classification Rejected Because Contract Was Limited to Transportation of Coal; Coal Movement Through Public Roads Not Mining Service, Service Tax Demand Set Aside.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata, allowed the appeal filed by a transporter engaged in transporting raw coal and washery rejects between mines operated by Bharat Coking Coal Limited and facilities of Tata Steel Limited. The dispute concerned the classification of the appellant’s activities for service tax purposes during the period from 2008-09 to 2012-13.
The appellant transported raw coal from mine pitheads to Jamadoba Coal Washery and transported washery rejects from different mines to the Ground Hopper of Tata Steel’s power plant. Following an investigation, the Department issued a show cause notice demanding service tax of ₹42.09 lakh, along with interest and penalties, by classifying the activities as “Mining Service.” The Department contended that since no consignment notes were issued, the services could not be classified as “Transport of Goods by Road Service.” It further argued that the work orders indicated activities connected with mining operations and therefore taxable under “Mining of Mineral, Oil or Gas Service.”
The adjudicating authority partially dropped the demand relating to the period before the death of the earlier proprietor but confirmed service tax of ₹25.39 lakh for the period from April 2009 to March 2013, together with interest and penalties. The Commissioner (Appeals) upheld the order, observing that the movement of coal and coal rejects constituted shifting within the mining area and was appropriately classifiable as “Mining Service.”
Before the Tribunal, the appellant argued that the contracts clearly related to transportation of goods by road. It submitted that coal was transported from mines to Tata Steel’s washery and power plant through public roads over a distance of approximately five kilometres. According to the appellant, the activity was not confined to shifting materials within a mining area and therefore could not be classified as “Mining Service.” The appellant also pointed out that the Department itself had acknowledged that no consignment notes were issued, thereby ruling out classification as Goods Transport Agency (GTA) service.
After examining the work orders, the Tribunal found that the appellant’s obligations were limited to transporting raw coal from mine pitheads to Tata Steel’s washery and transporting washery rejects from mines to the power plant. The Tribunal concluded that the appellant had performed transportation of goods by road and not mining-related activities.
The Tribunal further held that, although the activities constituted transportation of goods by road, no consignment notes were issued. Referring to judicial precedents, including the decision in Chartered Logistics Ltd. and its own decision in Tabassum Enterprises, the Tribunal observed that transportation services become taxable as GTA services only when the service provider issues a consignment note. Since no consignment notes were issued in the present case, the services fell within the Negative List under Section 66D(p)(i)(A) of the Finance Act, 1994 and did not attract service tax during the relevant period.
Accordingly, CESTAT held that the Department’s classification of the activity as “Mining Service” was unsustainable. The Tribunal set aside the service tax demand, interest, and penalties, and allowed the appeal with consequential relief in accordance with law.
FULL TEXT OF THE CESTAT KOLKATA ORDER
M/s. Devendra Nath Mahato & Sons (Prop. Meena Devi) (herein after referred as the appellant) is a resident of Upper Dungri Basti, P.O. Jamadoba, Dhanbad- 828 112. The appellant are engaged in providing transportation service by way of transporting ‘raw coal’ from 2 incline (Pithhead) within the mines of Bharat Coking Coal Limited to Jamadoba Coal Washery of M/s. Tata Steel Limited located at a distance of approximately 5 kilometres. The appellant was also transporting washery rejected from different mines to Ground Hopper of Power Plant of M/s. Tata Seel Limited situated at Jamadoba. The appellant has been registered with the service tax department under Registration No. AETPD2327NSD001.
2. The appellant’s concern was primarily run by the husband of the present proprietor, Devendra Nath Mahato who expired on 09.03.2009 and from then on, the present proprietor Meena Devi, who is a housewife has been running the said business.
3. On the basis of the allegation that the appellant has not paid appropriate service tax, investigation was initiated against the appellant vide letter dated 26.02.2013, followed by several summons on subsequent dates and recording of statements from the authorised person of the proprietor. Statement was also obtained from accountant of M/s. Tata Steel.
4. Further, scrutiny of the audited Balance Sheet and Profit and Loss Account of the appellant was also undertaken by the Department. Ultimately SCN dated 21.01.2013 was issued for the FY 2008-09 to 2012-13, demanding service tax amounting to 42,09,713/- (including Cess) classifying the service rendered by the appellant under the category of ‘mining service’. The notice also demanded interest and proposed for imposition of penalties under Section 76, 77 and 78 of the FA, 1994.
4.1. The demand in the Notice was made on the following grounds:-
(a) Since no consignment notes could be provided by the Noticee, therefore, the service provided by them could not be classified under the category of ‘Transport of Goods by Road Service’.
(b) Perusal of the Work Orders shows that the services rendered by the appellant are akin to Mining Service chargeable to service tax w.e.f 01.06.2007.
(c) W.e.f 01.06.2007, all services provided or to be provided in relation to mining of minerals have been comprehensively covered under the category of ‘Mining of Mineral, Oil or Gas Service’. Accordingly, the activities carried out by the appellant are appropriately classifiable under ‘Mining Service’.
5. The SCN was adjudicated by the Additional Commissioner Central Excise & Service Tax(H), Dhanbad vide his Order-in-Original No. 11/2015/S.Tax/DNM/ADC/DNB (H) dated 03.08.2015, wherein he has set aside the service tax demand of Rs. 16,70,218/- attributable to the period 2008-09 since the earlier proprietor Devendra Nath Mahato has expired on 07.03.2009. However, he has upheld the demand of the balance amount of service tax amounting to 25,39,495/- for the period April, 2009 to March, 2013 along with interest. The Ld. Adjudicating authority has also imposed penalties of Rs. 10,000/- u/s 77 of the Finance Act, 1994 and Rs. 25,39,495/- u/s 78 of the Finance Act, 1994.
6. On appeal, the Commissioner (Appeals) Central Excise & Service Tax, Ranchi vide his Order-in-Appeal No. 63/DNB/2017 dated 29.03.2017 upheld the OIO in full with the following observations:-
…… I hold that the said services of movement of coal/coal rejects by the appellant was mere shifting of the same within the mining area and correct nature of the said services of the appellant were covered under the taxable category of ‘Mining of Mineral, Oil or Gas Service’. Further, the appellant has failed to substantiate the claim that the subject services were Goods Transport Agency services.
7. Being aggrieved, the appellant filed the instant appeal.
8. The appellant submits that the services rendered by them are not covered under the category of ‘mining service’, due to the reason that the contract copies clearly show that that services rendered by them are ‘transportation of goods by road’. Such transported coal was subsequently used in the power plant of Tata Steel. Thus, the gist of the activities undertaken by them in the instant case was only ‘transportation of coal from mine to the power plant of TATA steel. Such transportation activities undertaken by them was not confined within a particular mining area for shifting/transporting coal and coal rejects to another area within the mine. Hence, the activity undertaken by them does not fall within the ambit of the definition of ‘mining service’.
9. The appellant also pointed out that the department while issuing the SCN at Para 18 had rightly observed that the services provided by them are not covered under Goods Transport Agency service since no consignments note was issued by them. But simultaneously, had wrongly charged service tax against rendering of ‘mining service’.
10. Accordingly, the appellant submits that the demand of service tax confirmed in the impugned order under the category of ‘Mining Service’ is not sustainable and prayed for setting aside the same.
11. The Ld. A.R. submits that all activities undertaken by the appellant are within the mining area and hence the services rendered by them are appropriately classifiable under the category of ‘Mining Service’ and hence the appellant is liable to pay service tax.
12. Heard both sides and perused the appeal documents.
13. The issue involved in the instant appeal is whether the activities undertaken by the appellant are appropriately classifiable under the category of ‘Mining Service’ as claimed by the department or ‘Transportation of goods by road service’, as claimed by the appellant.
13.1. In this regard, we have perused the copy of the Work Order. As per the contract, the appellant is liable to perform the following activities:
a. transporting raw coal from 2 incline (Pithhead) within the mines of Bharat Coking Coal Limited and transportation of the same to Jamadoba Coal Washery of M/s. Tata Steel Limited through public road transversing a distance of almost 5 kilometers
b. transporting washery rejected from different mines to Ground Hopper of Power Plant of M/s. Tata Seel Limited situated at Jamadoba.
13.2. From the above, we observe that the appellant has performed the service of transportation of goods by road service. In this regard, we find that the activities undertaken by the appellant during the material period were limited to ‘transportation of coal’. But, since no consignment note was issued for such transportation, we hold that the activities undertaken by the appellant did not attract service tax during the material period being covered under the ‘Negative List’ Entry as Section 66D(P)(i)(A) of Finance Act, 1994. We find that this view is supported by the judgment of the Hon’ble Tribunal Ahmedabad in the case of Chartered Logistics Ltd. v Commissioner of Central Excise [(2024) 16 Centax 473 (Tri-Ahmd)] upheld by the Hon’ble Apex court in vide [(2024) 16 Centac 474 (SC)]. For ready reference, the relevant part of the said judgement is reproduced below:
6.5 Accordingly, a person can be said to be Goods Transport Agency, if the person provides services in relation to the transportation of goods by road and issues the consignment note. From the above legal position, it is clear that not all persons who transport of goods by road are qualified as Goods Transport Agency. To qualify as services of GTA, GTA should issue necessarily a consignment note then only service provided by GTA are taxable under Finance Act, 1994.
13.3. The same view has also been held by this Tribunal in the case of Tabassum Enterprises v Commissioner of CGST &CX [Final Order No. 77452/2025]. The relevant part of the said decision is reproduced below:
6. Regarding the merits of the case, I find that the appellant were rendering the service of arranging transportation of goods. They did not issue any consignment note. I observe that the service of transportation of goods by road is liable to service tax under the category of GTA service, only when the service provider issues ‘consignment notes’. As the appellant have not issued any ‘consignment note, I hold that’ the service rendered by them were clearly excluded, as the said services were covered in the ‘Negative List’ Entry under Section 66D(P)(i)(A) of Finance Act, 1994.
13.4. Thus, by relying on the ratio of the decisions cited supra, we hold that the demand of service tax confirmed in the impugned order under the category of ‘Mining Service’ is not sustainable and hence we set aside the same. As the demand itself is not sustainable, the question of demanding interest or imposing penalties does not arise and hence we set aside the same.
14. In the result, we set aside the impugned order and allow the appeal filed by the appellant with consequential relief, if any, as per law.
(Operative part of Order was pronounced in Open court)
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