Kolkata CESTAT Sets Aside Mining-Service Tax on Contractor’s Composite Mine-Site Jobs, Finds Them Classifiable as Works Contracts

The appellant carried out various works for Tata Steel Ltd. and Monnet Ispat & Energy Ltd. at mining sites, including painting, fabrication and installation of conveyors and hoppers, and construction and repair work.

The Department treated the receipts as taxable under “mining of mineral, oil or gas service” and also demanded tax for manpower supply and rent-a-cab services.

A show cause notice demanded ₹47,02,778, with interest and penalties; the adjudicating authority confirmed the demand, and the Commissioner (Appeals) upheld it.

The appellant contested the mining-service demand and the penalties, but did not contest the tax demands for manpower supply and rent-a-cab services

Section 65(105)(zzzy) of the Finance Act, 1994 covers mining services; the Tribunal treated the relevant inquiry as whether the activity was directly and operationally connected with core mining processes, rather than whether it was merely performed within a mine.

It referred to the separate service entries for maintenance or repair, erection, commissioning or installation, and commercial or industrial construction under Sections 65(105)(zzg), (zzd) and (zzq), respectively.

For composite contracts involving both labour and transfer of goods, the Tribunal relied on Commissioner of Central Excise & Customs v. Larsen & Toubro Ltd., 2015 (39) S.T.R. 913 (S.C.), and treated such contracts as works contracts; it also relied on Article 366(29A)(b) of the Constitution concerning deemed sales.

It cited Commissioner of Central Excise v. Singh Transporters, 2017 (4) G.S.T.L. 257 (S.C.), for the proposition that an activity does not become a mining service merely because it occurs within a mining area.

Under the proviso to Section 73(1), the extended period requires the requisite culpable conduct, such as fraud, wilful misstatement or suppression with intent to evade tax; the Tribunal also considered Sections 77 and 78 in determining penalties.

The Tribunal found that painting, construction of sheds, installation of conveyors and hoppers, and work on coal-handling equipment were auxiliary, structural or post-extraction activities, not core processes of mineral extraction. Their location within mining premises did not alter their essential character.

It further found that certain contracts involved both labour and the supply or consumption of materials, and that the appellant had produced VAT invoices and returns evidencing tax on the material component. Those contracts were therefore treated as composite works contracts; because the show cause notice had not proposed a demand under the works-contract category, the demand could not be sustained under the mining-service category.

The Tribunal also found no evidence of fraud or wilful suppression: the appellant was registered, had filed ST-3 returns, and had accounted for receipts in its books. It consequently held the extended-period demand unsustainable and found no basis for the penalties.

The appellant’s concession on the manpower-supply and rent-a-cab demands meant those liabilities were not disturbed.

It left undisturbed the tax demands for manpower-supply and rent-a-cab services, directing that they, together with interest, be appropriated against the ₹6,15,261 already paid.

It set aside the penalties under Sections 77 and 78 and allowed the appeal with consequential relief, if any, as per law.