CESTAT: Coal Extraction & Crushing Not Taxable as ‘Mining Services’
The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the extraction, crushing, and sizing of coal amounts to manufacture and cannot be taxed under “Mining Services.
” Integrated Coal Mining Ltd., the appellant, is engaged in mining and selling coal after crushing and sizing it to meet the requirements of buyers under agreements with CESC Ltd. and Crescent Power Ltd. The appellant paid central excise duty and VAT on the sale of coal, treating these activities as manufacture under the Central Excise Act.
The department issued multiple show cause notices demanding service tax under “Mining Services” for the period from 2008 to 2017. Aggrieved by the demands and penalties, the appellant approached the CESTAT. The appellant's counsel argued that extraction, crushing, and sizing of coal constitute manufacture under Section 2(f) of the Central Excise Act and are covered under the negative list of the Finance Act.
They argued that VAT and service tax cannot be imposed on the same activity and that excise duty had already been paid on the coal. They also argued that separate accounts were maintained for inputs, and there was no improper availing of Cenvat credit.
The revenue counsel argued that the appellant’s activities were liable under “Mining Services” despite excise duty payment and that the appellant was liable for reversal under Rule 6(3)(i).
The two-member bench comprising Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) observed that the appellant’s activities amounted to manufacture, which had been accepted by the department through consistent excise duty collection and could not be taxed under “Mining Services.”
