2007 (8) TMI 57 - AT - Service Tax

Cargo Handling Service - Revenue contended that appellant liable for service tax under Cargo Handling Service on the activity of unitisation straping and packing of goods - Matter remanded for reconsideration and decided afresh

Summary

Issues:
- Interpretation of the definition of 'Cargo Handling Service' under the Finance Act, 1994.
- Classification of services provided by the Appellants as cargo handling service.
- Exclusion of export cargo from the levy of service tax.
- Imposition of penalty on the Appellants.

Analysis:
1. Interpretation of 'Cargo Handling Service': The Appellants argued that the services they provide are not covered under the definition of 'Cargo Handling Service' as per the Finance Act, 1994. They contended that the new service related to packaging service, effective from 16-6-2005, applies to their activities. The definition of 'Cargo Handling Service' includes loading, unloading, packing, or unpacking of cargo for all modes of transport, excluding handling of export cargo or passenger baggage. The Appellants claimed they do not handle cargo and should not be considered a 'Cargo Handling Agency.'

2. Classification of Services: The department argued that the Appellants were engaged in 'cargo handling service' and thus liable to pay the demanded service tax. The Appellants' activities of packing goods for subsequent transport were considered as falling under the definition of 'cargo handling service.' The Tribunal found that the Appellants' activities of packing goods into cargo for transport by trucks and/or rail constituted 'cargo handling service,' making them liable for service tax.

3. Exclusion of Export Cargo: The Tribunal agreed with the Appellants that part of the cargo meant for export should be excluded from the levy of service tax. This exclusion was deemed necessary based on the definition of 'Cargo Handling Service' and the specific exclusion of handling export cargo from the taxable services.

4. Imposition of Penalty: The Tribunal considered the imposition of a penalty on the Appellants in light of the classification of their services as cargo handling service. Given that the levy on cargo handling service was a new tax, the Tribunal viewed a lenient approach towards penalty imposition as appropriate. Consequently, the penalties imposed on the Appellants were set aside, considering the nature of the tax and the classification of their services.

In conclusion, the Tribunal held that the activities of the Appellants fell under the taxable category of cargo handling service. However, the matter was remanded to the original authority to exclude the cargo handling service provided by the Appellants concerning export cargo and to re-determine the tax payable accordingly. The penalties imposed on the Appellants were set aside, and all three Appeals, along with the Cross Objection, were disposed of accordingly.