2011 (7) TMI 563 - HC - Service Tax

Terminal charges collected from various Airline companies for the facilities provided in the AIR Cargo Terminal - whether would attract service tax for storage and warehousing provided under section 65(102) of the Finance Act 1994 - Held that - The department has not conducted any enquiry as to whether appellant is charging varying rates for the same cargo depending on the period of retention of the goods whatever be the reason in their terminal. The matter is remanded for conducting enquiry and for levying service tax if any payable on any part of the charges collected after issuing notice to the appellant and after hearing the appellant. Since the appellant s is not the unique business but identical business would be carried on by other agencies in International Airports it is for the department to collect details from the Commissioners outside Kerala and to take a uniform pattern for levy - even if the appellant is found to be liable for payment of part of the handling charges as attributable to storage and warehousing charges there is no scope for levy of penalty as no contumacious conduct can be presumed in the matter - So much so penalty in any case will stand vacated - So far as dispute raised on the levy of tax on X-raying charges is concerned the appellant has conceded the issue in favour of the department and the appeals on that issue will stand dismissed.

Summary

Issues:
Whether terminal charges collected by a Public Sector Company from Airlines for facilities provided at an Air Cargo Terminal are subject to service tax for storage and warehousing under section 65(102) of the Finance Act, 1994.

Analysis:
1. The main issue in this case revolves around whether the "terminal charges" collected by the Public Sector Company from Airlines for services provided at the Air Cargo Terminal are liable for service tax under the category of "storage and warehousing" as per section 65(102) of the Finance Act, 1994. The appellant contends that the charges are for cargo handling services exempted under section 65(23) for export cargo and passenger baggage. The Tribunal held that regardless of the storage period, the appellant is liable for service tax. The appellant challenges this decision.

2. Section 65(23) excludes export cargo and passenger baggage from liability for cargo handling service tax. The appellant argues that the terminal charges for export cargo and passenger baggage fall under cargo handling services exempted by section 65(23), thus no service tax should be levied. The court agrees that exemptions should be liberally construed to encourage exports. However, if charges are for storage and warehousing covered by section 65(102), service tax could be applicable for retention beyond 48 hours.

3. The court considers the nature of operations at the terminal building. While the goods are not physically handled by the appellant's employees, services like X-raying and customs formalities are provided. The charges are for facilities like security checks and customs completion, not storage. The court emphasizes that storage and warehousing involve safe custody over time, which is not the case here due to the short duration between arrival and shipment.

4. The court notes that the department did not investigate if the charges vary based on retention periods. If charges remain the same regardless of the time goods spend in the terminal, no service tax for storage and warehousing should apply. However, if excess charges for delayed goods are identified, they can be subject to service tax. The court remands the matter for further inquiry and potential tax levy on such charges.

5. The court allows the appeal partially, reversing the Tribunal's decision on terminal charges but allowing for tax on additional charges for delayed handling. The court emphasizes the need for uniformity in levy patterns across International Airports. It also rules out penalties due to lack of contumacious conduct. The dispute on X-raying charges is conceded in favor of the department, resulting in dismissal of appeals on that issue.