Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: VAT RATES :: TAX RATES - GOODS TAXABLE @ 4% :: due date for vat payment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARD :: ARTICLES ON INPUT TAX CREDIT IN VAT :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARDS :: list of goods taxed at 4% :: empanelment :: articles on VAT and GST in India :: TDS :: VAT Audit :: form 3cd :: cpt
« News Headlines »
 How to save income tax? Here are 6 investments with tax free income
 10 Top salary deductions that can save tax for you
 What are the tax saving options beyond Section 80C?
 The penalties for not paying tax on time
 How to make your salary tax efficient
 I-T Department may go into overdrive this quarter
 Ways to reduce the TDS deduction from your salary
 4 Tips for choosing who prepares your 2017 Tax Returns
 Processing of income-tax returns under section 143(1) of the Income-tax Act which were filed in Forms ITR-1 to 6 & applicability of section 143(1)(a)(vi)
 Price Waterhouse gets 2-year ban in Satyam case
 How to save income tax under section 80C

Do not call mining a taxable service
October, 30th 2006

A circular (F.No.232/2/2006-CX.4) now proposed to be issued by the Central Board of Excise and Customs in regard to the applicability of service tax on activities undertaken at open cast mines has raised the fundamental issue of whether mining activity is manufacture or service. The circular observes that taxable service, namely Business Auxiliary Service, includes activities which are in the nature of production or processing of goods for or on behalf of the client, provided any such activity does not amount to manufacture within the meaning of Section 2 (f) of the Central Excise Act, 1944. 
In the instant case, the contractors undoubtedly produce coal for their clients, namely the coal companies. Further, extraction of coal is not a process amounting to manufacture within the meaning of Section 2(f) of the Central Excise Act. Therefore, such an activity would fall under the purview of Business Auxiliary Service. 
So the hypothesis is that the activity of the contractors for open cast mining (which involves deployment of labour and machinery for breaking and extraction of coal, conversion of coal layers/starter into lump size, etc) is production and not manufacture; and therefore is a service falling within the purview of the taxable service called Business Auxiliary Service. This hypothesis that this activity is not manufacture is wrong for the following reasons: 
(A) Coal was an excisable item in the central excise tariff in mid-1970s. The Ministry of Finance would never have made coal excisable if it was not excisable. Even now coal is a specific entry in Chapter 2701. 
(B) The production of coal has been held as covered under Entry 84 of List 1 of the Seventh Schedule of the Constitution in several judgements [Aluminium Corporation of India Ltd vs Coal Board AIR1959 Calcutta 222 (DB)] 
(C) Production and manufacture cannot be distinguished for Entry 84. Some differences have been admitted by some High Courts but all High Courts have agreed that both production and manufacture have been used in juxtaposition in the Constitution. Both production and manufacture result in marketable goods. But in the case of production, one begins with goods not quite marketable or reachable which with human labour are brought into marketable state fit for human consumption. However, in the case of manufacture, raw material is transformed into different product altogether, again a marketable one. Both these concepts together define the scope of Entry 84 [Hyderabad Asbestos Cement Products Ltd vs U.O.I 1980(6) ELT 735(Del) and Corpus Juris Secundum Vol.55 page 657 and Vol.72 page 1208]. The Supreme Court [Empire Industries case-1985(20)ELT179(SC)] has elaborately discussed the content of Entry 84, which mentions manufactured or produced in India. It has approvingly quoted para 17 of the judgement of the Calcutta High Court in the case of Aluminium Corporation of India (supra) almost verbatim to come to the conclusion that in this case the grey fabrics subjected to printing, dyeing, mercerising, etc. could even be called produced, if not manufactured, and so covered under Entry 84. This judgement has also been further approved by Higher Bench in the Ujagar Prints [1987 (27)ELT 567(SC)]. 
(D) The use of the word production in the definition of Business Auxiliary Service is incorrect. The expression used is production or processing of goods for or on behalf of the client. This was inserted by Finance Act, 2004 wef 10.9.2004. 
(E) The conclusion in the circular that the transport of coal in both the cases, within mines and outside mines, is in the nature of transport of goods by road is also incorrect. 
The conclusion is that while expanding the scope of service tax, the government should not overstep on the scope of manufacture. And this circular should not be issued without amending as suggested here.

Sukumar Mukhopadhyay

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
SEO Company Search Engine Optimization Company US SEO Local SEO Company Website SEO Company Alabama SEO Company Alaska SEO Company Arizona SEO Company Arkansas SEO Company California SEO Company Colorado SEO Company Connecticut SEO Company Delawa

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions