No Service Tax Payable On Administrative Charges Received From Coal Mine Companies By Coal Mines PF Organization: CESTAT

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not payable on administrative charges received from coal mine companies by the Coal Mines Provident Fund Organisation.

The bench of P.K. Choudhary (Judicial Member) and K. Anpazhakan (Technical Member) observed that since there is no service provider-service recipient relationship and in the absence of ‘consideration’ which condition is a sine qua non as per the definition of ‘service’, there is no case of rendition of service, much less a ‘taxable service’.

The appellant/assessee, Coal Mines Provident Fund Organisation, is a creature of statute and is governed by the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948. The preamble of the Act states that it is an Act to make provisions for framing a provident fund scheme, a pension scheme, a deposit link insurance scheme, and a bonus scheme for persons employed in coal mines. For undertaking the various functions, the appellant is entitled to recover administrative charges at the rate of 3% of the amount payable by the coal mine companies for managing the fund.

The department contended that by recovering the administrative charges, the appellant is liable to pay service tax under the category of banking and other financial services under the category of "service" when the negative list of services was introduced under the Finance Act, 1994.

The term ‘service’ has been defined under Section 65B(44) of the Finance Act, 1994, to "mean an activity carried out by a person for another for consideration".

The tribunal held that since there is no consideration involved in the case of the appellant, it cannot be said that any service has been rendered by the appellant to the coal mine companies. The question of exemption shall arise only when there is a levy, and if there is no levy at all, there would be nothing to exempt.

Case Title: Coal Mines Provident Fund Organization Versus Commissioner of Central Excise & Service Tax, Dhanbad

Case No.: Service Tax Appeal No.75540 of 2015

Date: 09/06/2023

Counsel For Appellant: CA Sanjay Dixit

Counsel For Respondent: J.Chattopadhyay

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