2014 (2) TMI 394 - HC - Service Tax

Waiver of pre-deposit - Classification - Extended period of limiation - Change in the opinion of Audit Wing - whether service tax is chargeable under the head Cargo Handling Service even in respect of consideration received for transportation of goods in barges from a mothership to the jetty known as barging and transport of goods from one minor port to another - Held that - appellant has a strong prima facie case with regard to the limitation in view of the fact that as late as in February 2008, the audit wing of the Department carried out a detailed examination of the appellant s activities including barging and directed the appellant to pay service taxes under the head Port Services . Thus, the department itself was of the view that the activity of barging is not classifiable under the head Cargo Handling Service . However, all of a sudden for the first time in its show cause notice dated October, 2008, the above service was sought to be classifiable under the head Cargo Handling Service - amount of pre-deposit reduced to that extent.

Summary

Issues:
- Dispute over whether service tax is chargeable under 'Cargo Handling Service' for transportation of goods in barges and between minor ports.
- Tribunal's order directing the appellant to predeposit Rs.25 Crores challenged.
- Appellant's contention that transportation services are distinct from 'Cargo Handling Service'.
- Appellant's argument on financial hardship and time-barred demands.
- Revenue's stance on 'Cargo Handling Service' as a composite activity taxable under one heading.

Analysis:
The High Court of Bombay heard an appeal challenging a Customs, Excise, and Service Tax Appellate Tribunal order directing the appellant to predeposit Rs.25 Crores for a service tax demand of Rs.58.53 Crores. The dispute centered around whether transportation services, specifically barging and inter-port transport, fall under the 'Cargo Handling Service' category for service tax purposes. The Tribunal concluded that while activities like stevedoring and transportation from mothership to jetty are part of 'Cargo Handling Service', transport between minor ports does not qualify. The appellant argued that transportation services are distinct from cargo handling and should not be taxed under the same heading. They also raised concerns about financial hardship and time-barred demands amounting to approximately Rs.28 Crores. On the contrary, the revenue contended that 'Cargo Handling Service' is a composite activity covering loading, unloading, and transportation, and should be taxed as a whole. They highlighted the appellant's invoicing practices as evidence of intent to avoid service tax.

The Court acknowledged the need for detailed consideration on the merits but noted the Tribunal's oversight in not addressing the appellant's time-barred demand contention. Considering the appellant's strong prima facie case on limitation, especially due to the Department's previous classification of barging under 'Port Services', the Court reduced the predeposit amount to Rs.10 Crores. This decision aimed to balance the interests of both parties and ensure justice. Ultimately, the Court modified the Tribunal's order, directing the appellant to deposit Rs.5 Crores by a specified date for the appeal to proceed swiftly. The judgment disposed of the appeal with no costs awarded, emphasizing the significant amount involved and the need for expeditious resolution.