Page 121 - GSTL_7th May 2020_Vol 36_Part 1

2020 ] GLOBAL COAL & MINING PVT. LTD. v. COMMISSIONER OF SERVICE TAX, DELHI 79
DEPARTMENTAL CLARIFICATIONS CITED
C.B.E. & C. Circular No. 494/60/99-CX., dated 12-11-1999 ...................................... [Paras 7, 30, 31, 32, 33]
C.B.E. & C. Circular No. 897/17/2009-CX., dated 3-9-2009 .................................................. [Paras 8, 30, 34]
REPRESENTED BY : S/Shri B.L. Narasimhan and Narender Singhvi,
Advocates, for the Appellant.
Shri Vivek Pandey, Authorized Representative, for
the Respondent.
[Order per : Justice Dilip Gupta, President]. - This appeal has been filed
for setting aside the order dated 29 May, 2015 passed by the Principal Commis-
sioner, Central Excise, Delhi [The Principal Commissioner] by which not only the
demand of Service Tax has been confirmed but penalty and interest have also
been directed to be paid.
2. The appellant entered into an agreement with Karnataka Power
Corporation Ltd. [KPCL] for washing of coal transported from mines to the
washing facilities situated in the mining area. This is basically known as benefi-
ciation of coal. The appellant paid Service Tax on this activity w.e.f. 1 June, 2007
as the appellant believed that it was providing a service ‘in relation to mining’
under Section 65(105)(zzzy) of the Finance Act, 1994 [The Act]. The appellant did
not pay Service Tax on reimbursements such as transportation as it felt that this
did not form part of the value of taxable services provided by the appellant.
3. A show cause notice dated 20 October, 2010 was, however, issued to
the appellant mentioning therein that the appellant, in terms of the agreement
with KPCL, while undertaking the work of washing/beneficiation of coal, was
processing goods for or on behalf of the client and such the service provided by
the appellant would fall under ‘business auxiliary service” [BAS] and the appel-
lant would be liable to pay Service Tax from 16 June, 2005. The appellant was,
therefore, required to show cause within 30 days from the date of receipt of the
notice as to why :-
“(i) An amount of Rs. 7,27,31,082/- (including Education Cess and Sec-
ondary Higher Education Cess) as detailed in Annexure A attached with
this demand cum show cause notice should not be demanded and recov-
ered from them under proviso to Section 73(1) of Chapter V of Finance Act,
1994 being the Service Tax on the amounts received by them from KPCL
and Cement and Steel Companies on account of providing taxable service
during the period 2005-06 (from 16-6-2005 to 31-3-2009).
(ii) Interest as applicable should not be paid by them on the amount de-
manded at (i) above under Section 75 of the said Act;
(iii) Penalty should not be imposed on GCM under Section 76 of the Fi-
nance Act, 1994 for failure to pay the due tax.
(iv) Penalty should not be imposed on GCM under Section 77 of the Fi-
nance Act, 1994 for not filing the ST-3 returns correctly.
(v) Penalty should not be imposed on GCM under Section 78 of the Fi-
nance Act, 1994 for suppression of facts and contravening the provisions of
the said Act and Rules made thereunder with intent to evade payment of
Service Tax.“
4. The appellant filed a detailed reply to the aforesaid show cause no-
tice pointing out that the activity of beneficiation of coal is an activity ‘in relation
to mining’ and not ‘in relation to processing of goods’ under the category of BAS.
It was also pointed out that the Service Tax on providing a service ‘in relation to
GST LAW TIMES  7th May 2020  121