Coal Beneficiation Not Taxable As Business Auxiliary Service Before June 1, 2007: CESTAT Delhi

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi has recently held that beneficiation and washing of coal could not be taxed under the category of Business Auxiliary Service for the period prior to June 1, 2007.

Relying on an earlier case involving the taxpayer beore it, the tribunal ruled, "In that circumstance, reliance has been placed in appellant's own case for the earlier case(supra), we hold that the activity of beneficiation/ washing of coal does not fall under the category of “Business Auxiliary Service” prior to 01.06.2007 as the same is classified under Mining Service w.e.f. 01.06.2007" the tribunal observed.

A bench of Judicial Member Ashok Jindal and Technical Member P.V. Subba Rao dismissed the revenue's appeal and upheld the adjudicating authority's order dropping the service tax demand against Aryan Coal Benefications Pvt. Ltd.

The dispute arose after an audit in which the department alleged that the company had suppressed the value of taxable services by not declaring receipts under various heads, including commission income and provisional beneficiation receipts.

It subsequently issued show cause notices demanding service tax of more than ₹29 crore for different periods. The adjudicating authority, however, dropped the proceedings.

Before the tribunal, the Revenue argued that beneficiation and washing of coal were taxable as Business Auxiliary Service until May 31, 2007, because the activity did not amount to manufacture. It relied on the Supreme Court's decision in Tata Iron & Steel Co. Ltd. in support of its contention.

Relying on its earlier decision in the company's own case, which followed the rulings in Aryan Energy Pvt. Ltd., Spectrum Coal & Power Ltd. and Global Coal & Mining Pvt. Ltd., the tribunal concluded that the adjudicating authority had rightly dropped the demand. Finding no infirmity in the order under challenge, it upheld the order and dismissed the Revenue's appeal.

For Appellant: Jaya Kumari, Authorised Representative

For Respondent: Advocates Sumit Goel and Abhishek Thakural,