Case Law Details
KRSS Manpower Service Vs Commissioner of GST & Central Excise (CESTAT Chennai)
Introduction: In the case of KRSS Manpower Service vs. Commissioner of GST & Central Excise, the CESTAT Chennai addressed a crucial question regarding the classification of activities related to the collection, cleaning, segregation, and stacking of blasted raw magnesite. The central issue was whether these services should be classified as ‘Business Auxiliary Service’ or ‘Mining Services’ under the Finance Act, 1994. This article provides an in-depth analysis of the CESTAT Chennai’s order and its implications.
Background of the Case
The appellant, M/s. KRSS Manpower Service, registered with the Service Tax Department, undertook the tasks of collecting, cleaning, segregating, and stacking blasted raw magnesite within a mining area on behalf of M/s. Burn Standard Co. Ltd. During a specific period, the appellant received a sum of Rs. 15,22,166 but did not pay any service tax, file ST-3 returns, or adhere to relevant provisions. Subsequently, a Show Cause Notice dated 24.11.2010 was issued, proposing to classify the activity as ‘Business Auxiliary Service’ and demanding service tax of Rs. 1,86,514, along with interest and penalties.
Adjudication and Appeal
After following the due process of law, the original authority confirmed the demand for service tax with interest and imposed penalties. The appellant appealed this decision before the Commissioner of Central Excise (Appeals), who upheld the adjudication order. Dissatisfied with this outcome, the appellant approached the CESTAT Chennai.
Classification Controversy
The primary issue to be determined was the correct classification of the service provided by the appellant. Specifically, the question was whether the activity of collecting, cleaning, segregating, and stacking blasted raw magnesite should be classified as ‘Business Auxiliary Service’ or ‘Mining Service’ under the Finance Act, 1994.
Appellant’s Arguments
The appellant’s counsel argued that the activities in question were integral to mining operations and should, therefore, be classified as ‘Mining Services.’ The appellant contended that these services had been erroneously categorized as ‘Business Auxiliary Service.’ They cited previous judgments and a Tribunal order that supported their position.
Revenue’s Response
The Revenue’s counsel defended the classification made in the original order, maintaining that the activity could be classified under both ‘Business Auxiliary Service’ and ‘Mining Service.’ However, they emphasized that as per section 65A of the Finance Act 1994, the first applicable sub-clause should be preferred, leading to the classification as ‘Business Auxiliary Service.’
CESTAT Chennai’s Decision
The CESTAT Chennai considered the arguments from both sides and examined relevant legal provisions. They concluded that the activity of collecting, cleaning, segregating, and stacking blasted raw magnesite should be classified as ‘Mining Services’ under section 65(105)(zzzy) of the Finance Act, 1994. Furthermore, they clarified that this classification would only apply from 01/06/2007 onwards. Consequently, late fees and penalties were set aside.
Conclusion: In the case of KRSS Manpower Service vs. Commissioner of GST & Central Excise, the CESTAT Chennai’s ruling clarified the classification of services related to magnesite collection. By classifying these activities as ‘Mining Services,’ the CESTAT’s decision impacts the applicability of service tax and penalties. This order highlights the significance of precise classification under the Finance Act, 1994, and its implications for businesses involved in similar activities.
FULL TEXT OF THE CESTAT CHENNAI ORDER
This appeal is filed by the appellant M/s. KRSS Manpower Service against Order in Appeal No. 36/2014 dated 28.1.2014 passed by Commissioner of Central Excise (Appeals), Salem.
2. Brief facts of the case are that the appellant who is registered with the Service Tax Department carried out the work of collection, cleaning, segregation and stacking of blasted raw magnesite within the mining area for M/s. Burn Standard Co. Ltd. by entering into an agreement / contract. During the period from 6.10.2006 to 11.6.2007, it was noticed by the Central Excise officers that they had received a sum of Rs.15,22,166/- as consideration but had not paid any service tax, not filed ST-3 returns and not followed the relevant provisions of the FA. A Show Cause Notice dated 24.11.2010 was issued seeking to classify the activity under ‘Business Auxiliary Service’ and demanding service tax of Rs.1,86,514/- with interest and also proposed to impose penalties. After due process of law, the original authority vide Order in Original dated 29.9.2011 confirmed the demand of service tax with interest and also imposed penalty of Rs.3,73,028/- under section 78 and Rs.5,000/- under Sec. 77. Aggrieved against the Order in Original, the appellant preferred appeal before Commissioner of Central Excise (Appeals) who vide the impugned order rejected the appeal filed by the appellant and upheld the adjudication order. Hence the appellant is before the Tribunal.
3. No cross-objections have been filed by the respondent-department.
4. We have heard learned counsel Ms. Nivedita Mehta and Ms. R. Rekha for the appellant and learned AR Shri N.Satyanarayanan, Assistant Commissioner for the Revenue.
5. The learned counsel for the appellant submitted that the appellant is engaged in the business of collection, cleaning, segregation and stacking of blasted raw magnesite within the mining area on behalf of M/s. Burn Standard Ltd. Show Cause Notice dated 24.11.2010 was issued proposing to demand service tax of Rs.1,86,514/- as service tax payable on Business Auxiliary Service alleged to have been rendered during the period 6.10.2006 to 11.6.2007. The original authority confirmed the demand. The appellate Commissioner without affording a reasonable opportunity of hearing to the appellant upheld the adjudication order. It is submitted that the issue involved in the present case is squarely covered in favour of the appellant. The Tribunal vide Final Order No. 42314 and 42315/2017 dated 26.9.2017 held that the services rendered by the appellants who were also engaged in the business of segregating, lifting and stacking raw materials would fall under the category of ‘Mining Services’ and not under ‘Business Auxiliary Service’. Reliance was also placed on the following judgments:-
a. M/s. Aryan Energy Pvt. Ltd. Vs. CCE, Hyderabad – 2009 (13) STR 42 (Tri. Bang.)
b. Union of India Vs. Spectrum Coal Power Ltd. – 2016 (41) STR 592 (Chhattisgarh)
c. CCE, Salem Vs. Thriveni Earth Movers Ltd. – 2015 (39) STR 749 The learned counsel submitted that the issue stands covered in favour of the appellant and the appeal is therefore liable to be allowed with consequential relief.
6. The learned AR Shri N. Satyanarayanan reiterated the findings in the impugned order.
7. We have heard both sides and perused the records and the case laws cited. The issue to be decided is whether the service of “segregation of magnesite” is classifiable under ‘business auxiliary service’ under section 65(105)(zzb) of the Finance Act, 1994 or under ‘mining service’ classifiable under section 65(105)(zzzy) of the Finance Act, 1994. We find that the impugned order had found that the activity is equally classifiable under both the services and as per section 65A of the Finance act 1994, the activity under the sub-clauses which occurs first among the sub-clauses is preferable. The learned Commissioner (Appeals) has hence chosen to accept the classification of the service as ‘Business Auxiliary Service’ as in the Order in Original and rejected the appeal.
7.1 We find that the activity of collection, cleaning, segregation and stacking of blasted raw magnesite is provided in relation to mining. The activities undertaken by the appellant are a part of the mining operations and are more appropriately classified as a ‘Mining Service’. Mining activity has been made taxable by legislation with effect from 1.6.2007 only. Prior to this date, such activities, being part of mining operations, were not subjected to service tax. The period of demand in this case is from 6.10.2006 to 11.6.2007, therefore, no service tax is leviable on such activities for a major part of the impugned period. We find that a similar issue was examined by a Coordinate Bench of this Tribunal vide Final Order No. 42314 and 42315/2017 dated 26.9.2017 in the case of Commissioner of Central Excise Salem Vs R Suresh Kumar. Relevant portion of the said order s reproduced below:
“3. The learned counsel Ms. Nivedita Mehta appeared on behalf of the respondent and submitted that the respondents were primarily engaged in cleaning, segregation and stacking of blasted raw magnesite and, therefore, Commissioner (Appeals) has rightly held that the said services would fall within the meaning of mining activities. In this regard, she submitted that Commissioner (Appeals) rightly relied upon the decision in the case of M/s. Aryan Energy Pvt. Ltd. Vs Commissioner of Customs & Central Excise, Hyderabad-I repo in 2009 (13) S.T.R.42 (Tri.-Bang.) Learned counsel also relies on the decision in the case of Union of India Vs M/s. Spectrum Coa l Power Ltd., reported in 2016 (41) S.T.R.592 (Chattisgarh).
4. Heard both sides and we have gone through the records.
5. The issue whether the activities of cleaning, segregation and stacking of blasted raw magnesite would fall within the meaning of service or “Business Auxiliary Services” during the disputed period has been analysed in the decisions relied upon by the learned counsel for the respondents. The Commissioner (Appeals) has applied the decision in the case of M/s. Aryan Energy Pvt. Ltd. (supra), which we feel squarely covers the issue. The Hon’ble High Court in the case of CCE, Salem Vs. Thriveni Earth Movers Ltd. reported in 2015 (39) STR 749 had an occasion to discuss similar issue and the same has been decided in favour of the assessee.”
We find concurrence with the above order.
7.2 Having regard to the facts as discussed above we hold that the activity of collection, cleaning, segregation and stacking of blasted raw magnesite is classifiable under the category ‘Mining Services’ classifiable under section 65(105)(zzzy) of the Finance Act, 1994 and the demand is restricted to the period from 01/06/2007 onwards. We order that duty and interest may be worked out accordingly. Since duty was payable only from 01/06/2007 late fee and penalties are set aside. 8. Based on the discussions above the appeal is disposed of accordingly. The appellant is eligible for consequential relief, if any, as per law.
(Pronounced in open court on 12.09.2023)
