Service Tax on activities undertaken at mines prior to 1.6.2007 – Board clarifies
On 9.10.2006, Board issued a draft circular on this issue. (See 10 10 2006). More than a year later, the draft is converted into a letter clarifying certain issues pertaining to the period prior to 1.6.2007, when any service in relation to mining has been comprehensively brought under the tax net. There have been doubts about the classification of the following services in relation to mines, which the Board has now clarified.
1. Excavation/drilling and removal of the overburdens : Such services include blasting and rock removal work, clearance of underground, drilling and boring, overburden removal and other development and preparation services of mineral properties and site, and other similar excavating and earth moving services. These activities are taxable under the category of site formation and clearance, excavation and earthmoving and demolition service w.e.f. 16.6.2005.
2. Coal cutting or mineral extraction and lifting them up to the pithead: These activities are essential integral processes and are part of mining operations. Mining activity has been made taxable by legislation under the Finance Act, 2007 (w.e.f.01.06.2007). Prior to this date, such activities, being part of mining operations itself are not subjected to service tax. Therefore, no service tax is leviable on such activities prior to the said date.
3. Handling and transportation of coal/mineral from pithead to a specified location within the mine/factory or for transportation outside the mine: These activities are post-mining activities and are chargeable to service tax under the relevant taxable services, i.e., “Cargo Handling service” and “Goods Transport by Road”. However, in case, such transportation is undertaken by mechanical systems, such as conveyor belt system, ropeway system, merry-go-round systems etc., and the same is not transported by road, no service tax would be chargeable. Service tax is, however, chargeable under cargo handling service, even if the loading, unloading and similar activities are done using mechanical systems.
Board had issued two master circulars on August 23, 2007 even allotting a reference code for each service. It was assumed that all future clarifications will be amendments to those two circulars. Now this clarification is not included in the master list. Where will this fit in?
F.No. dated the 12th November, 2007