2011 (10) TMI 453 - AT - Service Tax

Demand - department was of the view that the appellant s activity is taxable as manpower recruitment/supply agency service taxable under Section 65(105)(k) readwith Section 65(68) of the Finance Act, 1994 - Commissioner (Appeals) in the impugned order has given a clear finding that the appellant s activity does not fall under the category of manpower supply, but falls under the category of Cargo Handling Service - Held that the appellant are eligible for benefit of exemption under Notification No. 10/2002-ST dated 1-8-2002 - Appeal is allowed

Summary

Issues:
1. Whether the appellant's activity is taxable as manpower recruitment/supply agency service under the Finance Act, 1994.
2. Whether the appellant's activity falls under the category of Cargo Handling Service.
3. Whether the appellant is eligible for full exemption under Notification No. 10/2002-S.T.
4. Validity of the penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994.

Analysis:
1. The department alleged that the appellant's activity of lifting food grains for Punjab State Grain Procurement is taxable as a service under the Finance Act, 1994. A show cause notice was issued for non-payment of service tax, interest, and penalties. The Jurisdictional Deputy Commissioner confirmed a service tax demand against the appellant, along with penalties. The Commissioner (Appeals) dismissed the appellant's appeal, but acknowledged that the activity may fall under Cargo Handling Service rather than manpower supply.

2. The Commissioner (Appeals) held that the appellant's activity is more appropriately classified as Cargo Handling Service rather than manpower supply. The appellant argued that since the service involves handling agricultural produce, it should be eligible for full exemption under Notification No. 10/2002-S.T. The Revenue defended the impugned order, claiming the appellant is not entitled to the exemption.

3. The Tribunal considered the submissions and records. It noted that the appellant's activity relates to the movement of agricultural produce and falls under Cargo Handling Service. However, the Commissioner (Appeals) did not address how service tax would apply despite the exemption under Notification No. 10/2002-S.T. The Tribunal concluded that the appellant is eligible for the exemption, setting aside the service tax demand, interest, and penalties. The appeal was allowed, and the stay application was disposed of.

4. The Tribunal found that the appellant qualifies for the exemption under the notification, rendering the penalties imposed unsustainable. The decision highlights the importance of correctly categorizing services for tax purposes and ensuring compliance with relevant exemptions to avoid unnecessary financial burdens.