2010 (12) TMI 453 - AT - Service Tax

Demand - Classification - Storage and Warehousing Services or Cargo Handling Services - Held that assessee collects various charges from importers/exporters including passengers for keeping the cargo in transit safely pending export or customs clearance for home consumption - The entry Cargo Handling Service was clarified by CBEC as not covering export cargo and passenger baggage - Considering the nature of the activities involved, the Commissioner could not have found with certainty that the assessee had deliberately mis-classified the activities undertaken by it under the head Cargo Handling Services instead of Storage and Warehousing Services The Board is of the view that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfilled in accordance with law - an activity performed by a sovereign/public authority under the provisions of law does not constitute provision of taxable service to a person and, therefore, no service tax is leviable on such activities - Appeal is allowed by way of remand

Issues Involved:
1. Classification of services under 'Storage and Warehousing Services' vs. 'Cargo Handling Services'.
2. Legitimacy of invoking extended period under section 73(1) of the Finance Act, 1994.
3. Imposition of penalties under sections 76, 77, and 78 of the Finance Act, 1994.
4. Applicability of Service Tax on various charges: demurrage, wharfage, abandoned cargo, destination charges, OT charges/penalties.
5. Consideration of MSIL as a public authority performing statutory functions exempt from Service Tax.

Detailed Analysis:

1. Classification of Services:
The core issue revolves around whether the activities undertaken by MSIL should be classified under 'Storage and Warehousing Services' or 'Cargo Handling Services'. The Commissioner found that MSIL had misclassified its services to avail exemptions under 'Cargo Handling Services'. MSIL argued that its activities related to handling import cargo, export cargo, and unaccompanied passenger baggage should be classified under 'Cargo Handling Services'. However, the authorities concluded that the activities, including handling/storage charges, demurrage, terminal charges, and cargo handling charges, fell under 'Storage and Warehousing Services' as per CBEC Circular No. B/11/1/2002-TRU, dated 1-8-2002.

2. Legitimacy of Invoking Extended Period:
The Commissioner invoked the extended period under section 73(1) of the Finance Act, 1994, citing deliberate misclassification by MSIL. MSIL contested this, arguing that there was no suppression of facts or intent to evade tax, especially since it was already in appeal on a similar issue. The Tribunal found merit in MSIL's argument, noting the lack of reliable findings by the authorities to justify invoking the extended period.

3. Imposition of Penalties:
Penalties were imposed under sections 76, 77, and 78 of the Finance Act, 1994. MSIL argued against these penalties, asserting no willful intent to evade tax. The Tribunal noted that the penal liability required reconsideration in light of section 80 of the Act, given the absence of deliberate misclassification by MSIL.

4. Applicability of Service Tax on Various Charges:
- Demurrage and Wharfage Charges: The Tribunal agreed with the authorities that these charges, collected for storage beyond specified periods, were part of the taxable value under 'Storage and Warehousing Services'.
- Abandoned Cargo: The Tribunal found that while proceeds from auctioning abandoned cargo were shared towards storage and warehousing, the services were not rendered to any person, making the demand under this head unsustainable.
- Destination Charges: These charges, collected for handing over documents, were not considered part of taxable value under 'Storage and Warehousing Services'.
- OT Charges/Penalties: The nature and purpose of these charges were unclear, and the Tribunal remanded the matter for fresh consideration after hearing the party.

5. MSIL as a Public Authority:
MSIL argued that as a custodian appointed under section 45 of the Customs Act, it performed statutory functions exempt from Service Tax, supported by Circular No. 89/7/2006-ST, dated 18-12-2006. The Tribunal noted that the lower authorities had not examined this plea and remanded the matter for fresh decision, considering whether MSIL qualifies as a public authority and if the collected charges were deposited with the Government.

Conclusion:
The Tribunal allowed all appeals by way of remand, setting aside the impugned orders. It directed the lower authorities to provide MSIL an adequate opportunity to present its case before making a fresh decision, particularly on the applicability of the CBEC Circular and the classification of services.

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