2010 (9) TMI 592 - AT - Service Tax

Demand - Terminal charge - Storage and Warehousing Service - Penalty - As per the assessee, this accounted for Rs. 1.10 crores of a total demand of Rs. 1.35 crores wrongly adopted as Rs. 1.99 crores - terminal charges are collected for services rendered by the appellants incidental to the provision of storage of cargo by it as a custodian - dispute involved was of technical nature and in such cases, penalty was not imposable in the light of several judgments of the Apex Court The appellant had collected demurrage charges for storing unaccompanied baggage in the appellants warehouse for storage beyond the free period - As per Circular F. No. B/11/1/02-TRU, dated 1-8-2002, services provided in relation to export cargo and passenger baggage were excluded from tax net - since the passenger baggage was specifically excluded from the entry cargo handling service , passenger baggage could not be subjected to tax under any other entry - storage and warehousing of passenger baggage is not exempted for the reason that cargo handling service does not apply to passenger baggage Regarding penalty - assessee did not file ST-3 returns declaring the correct taxable value as prescribed - Held that the assessee was not liable to pay service tax on demurrage and handling charges with respect to export cargo baggage in appellants own case - The circumstances clearly show that the appellant had not attempted to evade service tax due - the penal liability of the appellant under Section 76 of the Act to be adjudicated afresh considering the provisions of Section 80 of the Act - The appeal is rejected

Issues Involved:
1. Short-payment of service tax on terminal charges.
2. Exclusion of agricultural products from taxable charges.
3. Limitation period for demand.
4. Classification of terminal charges as storage charges.
5. Penalty imposition and its validity.
6. Taxability of various charges (warehousing, demurrage, handling, etc.).
7. Inclusion of facilitation charges for x-raying cargo in taxable income.
8. Exclusion of export cargo and passenger baggage from service tax.
9. Penalty under Section 76 of the Finance Act, 1994.

Detailed Analysis:

1. Short-payment of Service Tax on Terminal Charges:
During the period August 2002 to September 2004, KSIE rendered services such as stacking, unloading, re-packing, and facilitation for X-raying of export cargo, collectively termed as terminal charges. The original authority found that KSIE had short-paid service tax amounting to Rs. 14,38,692/- on terminal charges taxable under "Storage and Warehousing Service" and demanded applicable interest and imposed penalties under Sections 76 & 78 of the Finance Act, 1994.

2. Exclusion of Agricultural Products from Taxable Charges:
The Commissioner (Appeals) remanded the dispute to the original authority with a direction to re-quantify the liability of the assessee after excluding charges related to the storage and warehousing of agricultural products. The original authority was to compute the liability correcting arithmetical errors pointed out by the appellants and vacated the penalties imposed.

3. Limitation Period for Demand:
The appellants argued that the Commissioner failed to decide the issue of limitation while remanding the matter. The Commissioner observed that the dispute was of a technical nature, hence there was no scope for imposing a penalty in view of several Supreme Court judgments, and therefore, there was no legal sanction for invoking the extended period. The demand had to be confined to the period July 2004 to September 2004.

4. Classification of Terminal Charges as Storage Charges:
The appellants contended that terminal charges should not be treated as storage charges. The relevant entry of Section 65(102) of the Act includes storage and warehousing services for goods, excluding agricultural products and goods kept in cold storage. The Tribunal observed that terminal charges are collected for services incidental to the provision of storage of cargo by KSIE as a custodian and held that the levy applies to these amounts even if the duration of storage is brief and cargo is in transit prior to its removal for export.

5. Penalty Imposition and its Validity:
The Commissioner vacated penalties imposed by the original authority, finding that the dispute was of a technical nature, and in such cases, penalties were not imposable in light of several judgments of the Apex Court. The Tribunal found merit in the argument that the extended period could not be validly invoked after finding the assessee not liable to penalty for not paying service tax. The demand was ordered to be restricted to the normal period.

6. Taxability of Various Charges:
KSIE collected various charges, including warehousing, demurrage, handling charges for import cargo and unaccompanied baggage, terminal charges for export, fork lift charges, x-ray charges, facilitation charges, and cold room charges. The Commissioner held that these charges formed part of the value assessable under "Storage and Warehousing." The Tribunal upheld the demand for these charges, finding them associated with the storage of goods and forming part of the taxable value.

7. Inclusion of Facilitation Charges for X-raying Cargo in Taxable Income:
The Commissioner confirmed the demand of 20 paise per Kg collected by KSIE from various airlines for using the airport premises for x-raying cargo and baggage. These charges were considered additional consideration received from client airlines for renting out the premises. The Tribunal upheld this demand as short payment of tax on renting of immovable property.

8. Exclusion of Export Cargo and Passenger Baggage from Service Tax:
The appellants argued that demurrage and handling charges with respect to passenger baggage/export cargo were outside the purview of service tax as clarified in Circular No. F. No. B/11/1/02-TRU, dated 1-8-2002. The Tribunal found that the Circular dealt with the scope of cargo handling service and clarified that passenger baggage did not come under the levy. However, the Tribunal held that storage and warehousing of passenger baggage is not exempted from tax, and the duration of storage is not material to determine the liability to tax under this heading.

9. Penalty under Section 76 of the Finance Act, 1994:
The Tribunal found that the assessee did not file ST-3 returns declaring the correct taxable value as prescribed. However, the Commissioner refrained from confirming the demand for the extended period, showing that the appellant had not attempted to evade service tax. The Tribunal referred to the Apex Court's decision in Hindustan Steel Ltd. v. State of Orissa, holding that in the absence of mala fide conduct, it is not necessary to impose a penalty. The Tribunal remanded the penal liability under Section 76 of the Act to be adjudicated afresh considering the provisions of Section 80 of the Act.

Conclusion:
The appeals were partly allowed, with the demand restricted to the normal period, and the penal liability remanded for fresh adjudication. The Tribunal upheld the taxability of various charges under "Storage and Warehousing" and the inclusion of facilitation charges for x-raying cargo in taxable income. The exclusion of export cargo and passenger baggage from service tax was not accepted, and the appeal was otherwise rejected.

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