Mukand Limited Vs Commissioner of Central Excise (CESTAT Bangalore)
Summary: M/s. Mukand Limited had entered into a “Raising Agreement” dated 03.05.2003 with M/s. Mysore Minerals Limited, the lease holder of the Jambunathanahalli Iron Ore Mines, for carrying out mining operations including exploration, development, excavation, extraction, grading, screening, sizing, sorting and stacking of iron ore/minerals. The Revenue alleged that these activities constituted “Business Auxiliary Service” under clause (v) of Section 65(19) of the Finance Act, 1994, namely production or processing of goods for or on behalf of the client, taxable with effect from 16.06.2005. A show-cause notice dated 22.06.2006 proposed recovery of service tax of Rs.1,55,17,723/- for the period 16.05.2005 to 31.03.2006, with interest and penalty, and the demand was confirmed by the adjudicating authority.
The appellant contended that the activities under the Raising Agreement constituted composite mining operations and were specifically covered by the taxable category of “mining of mineral, oil or gas” under Section 65(105)(zzzy) of the Finance Act, 1994, which was introduced with effect from 01.06.2007. The appellant submitted that the activities could not consequently be classified under the earlier Business Auxiliary Service entry merely because individual activities forming part of the mining operation could be separately described. Reliance was placed upon the principles of classification under Section 65A, the decision in Indian National Shipowner’s Association, the Board’s Circular No.334/1/2007-TRU dated 28.02.2007 and Circular No.232/2/2006-CX.4 dated 12.11.2007, besides several judicial precedents concerning mining activities.
