CESTAT Upholds Tax on Mining Services Between Joint Venture Partners; ₹28 Lakh Refund Claim Dismissed
Pranav B Prem
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), New Delhi, has upheld the denial of refund claims totalling over ₹28 lakh towards service tax paid on limestone mining transactions, holding that services rendered under a joint venture mining arrangement between distinct legal entities are taxable under the Finance Act, 1994.
The matter involved two appeals by M/s Mayur Inorganics Limited, assailing orders of the Commissioner (Appeals), CGST, Udaipur and Jodhpur, which rejected refund claims of ₹6,95,985 and ₹21,13,639 respectively. The amounts represented service tax paid by the appellant pursuant to debit notes issued by Rajasthan State Mines & Minerals Limited (RSMML) for mining services rendered under an agreement dated 27 August 1997.
The appellant, represented by Advocate O.P. Agarwal, argued that RSMML and the appellant were co-promoters in a joint venture, with RSMML also holding share capital and nominating a director to the appellant’s board. It was contended that the mining activity amounted to “self-service” and therefore fell outside the ambit of service tax. The appellant further claimed that service tax was not legally payable on consideration for mined limestone and that they bore the incidence of tax without passing it on to buyers, negating unjust enrichment. Reliance was placed on several judicial precedents to support the claim.
The Revenue, represented by Authorized Representative Shashank Yadav, countered that the appellant and RSMML were distinct legal entities. RSMML, registered under the Finance Act with Service Tax Registration No. AAACR7857HST001, provided mining services to the appellant for consideration at ₹125 per metric tonne, plus royalty. Such services, it argued, were squarely taxable under Section 65B(44) of the Finance Act, 1994. The department also noted that part of the refund claim, amounting to ₹7,26,647, was time-barred under Section 11B of the Central Excise Act, 1944, and that the appellant failed to establish a direct correlation between the claimed refund and the service tax actually paid and deposited.
The bench of Judicial Member Dr. Rachna Gupta and Technical Member P.V. Subba Rao examined the negative list regime introduced on 1 July 2012, and the statutory definition of “service” under Section 65B(44). It relied on Explanation 3(a) to the definition of service, which provides that an unincorporated association or body of persons and its members are to be treated as distinct persons. Referring also to a CBEC circular dated 24 September 2014, the Tribunal held that joint ventures and their members must be treated as separate taxable persons, and that services provided between them for consideration are taxable.
The Tribunal observed that the agreement terms showed a clear flow of consideration from the appellant to RSMML for mining activities, thus ruling out the “self-service” contention. It further held that the appellant failed to furnish adequate documentary evidence to link the claimed refund amounts with the service tax actually paid to RSMML and deposited with the Government. Additionally, part of the claim was dismissed as time-barred, and the principle of unjust enrichment was found applicable.
Concluding that the service tax paid on the mining activity was validly levied and that the appellant was not entitled to any refund, the CESTAT dismissed both appeals, upholding the orders of the Commissioner (Appeals).
Appearance
Counsel For Appellant: Om.P. Agarwal
Counsel For Respondent: Shashank Yadav
Cause Title: M/s. Mayur Inorganics Limited V. Commissioner of CGST & Central Excise-Jodhpur
Case No: Service Tax Appeal No. 53035 of 2018
Coram: Hon’ble Dr. Rachna Gupta [Member (Judicial)], Hon’ble Mr. P.V. Subba Rao [Member (Technical)]
