2026-VIL-1490-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Removal of Overburden, Disposal by Way of Sale - Characterization as Service Vs Sale - Mining lessee authorized appellant to dispose of accumulated overburden from mining lease area on payment of applicable royalty and short term permit fee. Appellant admitted that overburden was provided free of cost - Appellant subsequently sold boulder collected from overburden to third parties and charged consideration. Department contended that removal and disposal of overburden by Appellant constituted rendering of taxable service to JSL classifiable as Business Auxiliary Service for which no amount was paid by JSL directly but consideration was amount received by Appellant from its customers on sale of boulders - Whether transaction of removing overburden constitutes sale or rendering of service, whether royalty and permit fees were subject to service tax, and whether extended period of limitation was validly invoked - HELD - Mere allocation of export quotas does not create vested rights. Transaction between JSL and Appellant is not one of sale as no consideration or price exists for sale of overburden. Invoices are accounting jugglery and camouflage to hide activity of service. Lifting and disposal of overburden by Appellant is rendering of service to JSL for which no amount was paid directly but consideration received by Appellant from its customers on sale of boulders represents amount which Appellant should have received from JSL for providing service - Under mining laws JSL was responsible for removal of overburden and if JSL had hired Appellant to do so, JSL would have paid service charges. There is no justification why Appellant would lift and remove overburden without charging any amount. This reflects understanding between parties to evade liability of service tax. No quarrel with proposition that to be classified as service there must be activity carried out by one person for another for consideration - Revenue correctly treats amount received by Appellant from its customers for further sale to them as consideration received by Appellant for rendering service to JSL for disposal of overburden. Amount charged by Appellant from its customers is actually amount which Appellant should have received from JSL for providing service and same should form gross amount as per Section 67 of Act - Service tax on royalty and permit fees for removal of overburden is payable as periodic charges made by business entities to Government are not exempted though assignment of right to use natural resources prior to 01.04.2016 are exempt from one time charges only - Appellant suppressed true nature of relationship and transaction between it and JSL. Invoices are nothing but camouflage. Ingredients specified under proviso to Section 73(1) are fully satisfied and extended period of limitation has been validly invoked – The appellant is liable to pay service tax on amount received against sale of overburden and service tax on royalty and permit fees paid to Government – The appeals are dismissed
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