2011 (12) TMI 269 - AT - Service Tax

Whether Supply of manpower - laoding, un-loading - handling goods and not cargo can be classified under Cargo Handling Services - Held That - Consensus could not be obtained between two member bench, referred to larger bench.

Issues Involved:
1. Classification of services provided by the appellants as 'Cargo Handling Services'.
2. Applicability of extended period of limitation for demand.
3. Imposition of penalties under various sections of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellants as 'Cargo Handling Services':

The appellants provided various services to CFCL, including urea product handling, bagging, loading, unloading, and miscellaneous jobs. Revenue argued that these services fell under 'Cargo Handling Services' as defined in the Finance Act, 1994, and thus were subject to service tax. The appellants contested this classification, arguing that they were merely supplying manpower for tasks within the factory premises and not handling "cargo" per se. They relied on the Rajasthan High Court's decision in S.B. Construction Co. v. Union of India and other Tribunal decisions to support their claim that their activities did not constitute 'Cargo Handling Services'.

The Tribunal examined the nature of the services provided, noting that items 1 to 11 in the contract involved handling cargo into rail wagons and trucks, which fits the definition of 'Cargo Handling Services'. The Tribunal concluded that the appellants' argument that they were only supplying manpower and overseeing automated systems was not substantiated by the contract details. Therefore, the services provided were classified as 'Cargo Handling Services', making them liable for service tax.

2. Applicability of Extended Period of Limitation for Demand:

The appellants argued that the demand was time-barred, as they were under a bona fide belief that their activities were not taxable under 'Cargo Handling Services'. They contended that mere failure to declare does not amount to wilful suppression or mis-declaration, citing decisions from the Supreme Court in Pahwa Chemicals (P.) Ltd. v. CCE and Chemphar Drugs & Liniments.

The Tribunal noted that the appellants did not take registration or disclose their contracts to the department, which amounted to suppression with intent to evade payment of tax. The Tribunal referred to several Supreme Court decisions, emphasizing that suppression can be inferred from the facts and circumstances of each case. The Tribunal concluded that the extended period of five years for cases involving suppression with intent to evade tax was applicable in this case.

3. Imposition of Penalties under Various Sections of the Finance Act, 1994:

The Tribunal observed that penalties under sections 75A, 76, 77, and 78 of the Finance Act were imposed by the Additional Commissioner. The appellants argued that the penalties were not justified, especially since the demand was time-barred and they had a bona fide belief that their services were not taxable.

The Tribunal upheld the penalty under section 78 but provided an option for the appellants to pay 25% of the tax amount as a penalty within 30 days, following the decision of the Delhi High Court in K.P. Pouches v. UOI. The Tribunal also noted that penalties under sections 75A and 77 were for almost the same offence, and section 75A was omitted from 10-09-2004, thus waiving the penalty under section 75A. Penalty under section 77 was upheld.

Separate Judgment by Judicial Member:

The Judicial Member disagreed with the Technical Member's conclusions, emphasizing that the appellants had only provided manpower for mechanized loading and unloading tasks, which should not be classified as 'Cargo Handling Services'. The Judicial Member referred to the Board's Circular No. B-11/1/2002-TRU and Tribunal decisions supporting the appellants' stance. The Judicial Member also found that the demand was time-barred, as there was no evidence of wilful suppression or misstatement by the appellants.

The Judicial Member proposed remanding the matter to the original adjudicating authority for fresh consideration on merits and limitation, taking into account the Board's Circular and relevant judicial decisions.

Difference of Opinion:

(i) Whether the appeal should be rejected on merits or remanded for reconsideration.
(ii) Whether the invocation of the extended period of limitation should be upheld or remanded for fresh decision.
(iii) Whether the penalty under section 78 should be upheld or decided afresh in the remand order.
(iv) Whether penalties under sections 75A and 76 should be set aside and the penalty under section 77 upheld, or re-adjudged in the de novo proceedings.

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