2011 (11) TMI 358 - AT - Service Tax

Whether loading/Unloading of coal on tippers by pay loaders and manual labor can be taxed under Cargo Handling Services - Held That - As per circular 232/2/2006-C.X-4 dt 12/11/2007 - Handling and Transportation of coal/mineral from pithead to a specified location within the mine/factory or for transportation outside the mine are post-mining activities and are chargeable to service tax under the relevant taxable services i.e. Cargo Handling Service and Goods Transport by Road except transportation done by mechanical system. - In the given case there was use of manual labor means thus Services liable to Tax. - Decided against assessee. Extended period of limitation - held that - At the infancy stage of implementation of law there appears to have been confusion as to taxability. In these circumstances, the invocation of larger period of limitation is not sustainable. Further, in view of, no positive act, on the part of the appellant penalties are not imposable upon them. Therefore, we set aside the demand for the larger period and the penalties imposed.

Summary

Issues Involved:
1. Classification of services as 'Cargo Handling Service.'
2. Applicability of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
3. Invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994.
4. Determination of value and quantification of demand for the normal period.

Issue-wise Detailed Analysis:

1. Classification of Services as 'Cargo Handling Service':
The primary issue was whether the services provided by the appellants, involving loading/unloading and transportation of coal within the mining area, fell under 'Cargo Handling Service.' The appellants argued that their services were composite contracts for transportation, with loading/unloading being incidental. However, the tribunal found this contention factually incorrect, noting that the work orders explicitly separated the tasks of loading/unloading and transportation with distinct rates. The tribunal emphasized that the definition of 'Cargo Handling Service' under Section 65(23) of the Finance Act, 1994, includes loading and unloading of cargo, irrespective of whether these activities are performed manually or mechanically. Consequently, the tribunal upheld that the services rendered by the appellants were indeed 'Cargo Handling Service.'

2. Applicability of Penalties under Sections 76, 77, and 78:
The appellants contended that penalties should not be imposed as there was no suppression of facts and the issue involved interpretation of law. The tribunal agreed, noting that the confusion around taxability at the infancy stage of the law's implementation justified the non-imposition of penalties. The tribunal set aside the penalties under Sections 76, 77, and 78, citing the absence of any positive act of suppression by the appellants.

3. Invocation of Extended Period of Limitation:
The tribunal addressed the invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994. It concluded that the issue involved interpretation of law and there was no willful suppression of facts by the appellants. Consequently, the tribunal found the invocation of the larger period of limitation unsustainable and set aside the demand for the extended period.

4. Determination of Value and Quantification of Demand for the Normal Period:
The tribunal noted that the appellants failed to produce documentary evidence to support their claim that service tax on transportation had already been paid. Therefore, it remanded the case to the Commissioner for the limited purpose of determining the value and quantifying the demand for the normal period, along with the applicable interest. The tribunal instructed that both sides be allowed to produce supporting documents and that the appellants be granted a reasonable opportunity of hearing.

Conclusion:
The tribunal upheld the classification of services as 'Cargo Handling Service' but set aside the penalties and the demand for the extended period due to the interpretative nature of the issue and the lack of suppression. The case was remanded for the limited purpose of determining the value and quantifying the demand for the normal period, ensuring a fair opportunity for both parties to present their evidence.