2014 (9) TMI 483 - AT - Service Tax

Cargo Handling Service - inclusion of the estimated cost of transportation of goods by barges from mother vessel to jetty or vice versa in the value of services rendered. - On the other hand, the main contention of the applicant is that transportation is a separate activity and cannot be considered as Cargo Handling Service . Before 2009 though there was Service Tax on transportation of goods by road, air or railways, but there was no Service Tax for transportation of goods by water ways. - The main issue to be considered in this case is whether the activity of unloading of goods from ship to finally trucks/rails would be considered as a single service or it can be split into two parts. The first one, cargo handling and the second one transportation of the cargo within the port area. Held that - our prima facie view is that the services provided by them cannot be considered as a port service atleast before the definition was amended w.e.f. 1-7-2010. Nature of services is relating to handling of goods and can be provided in port area as also in place outside port. Prima facie the services provided within the port area if covered by the definition of various services would be covered by that service if the same is not covered by the definition of Port Service/Other Port Service . Even applicant was paying service tax on certain activities under Cargo Handling Services from 16-8-2002 to 30-6-2003. From 1-7-2003, on the same activity, applicant started paying tax under other port service. Applicants have not made out a prima facie case on merits (except in case of transportation from one port to another which forms minor part of the demand) - No financial hardships has been pleaded - stay granted partly.

Issues Involved:
1. Classification of services under "Cargo Handling Service" versus "Port Service."
2. Inclusion of transportation costs in the value of services rendered.
3. Applicability of service tax on transportation of goods by water.
4. Validity of extended period for demand and penalties.

Issue-wise Detailed Analysis:

1. Classification of Services:
The primary issue is whether the activities performed by the applicant, including stevedoring, unloading of cargo from ships to barges, transportation to the jetty, and further movement within the port area, should be classified under "Cargo Handling Service" or "Port Service." The applicant contends that these activities should be classified as "Port Service" since they occur within the port area and are integrally connected. However, the Tribunal observed that the applicant was not authorized by the port to provide port services, and hence, the activities cannot be classified as "Port Service" before the definition was amended on 1-7-2010. The Tribunal noted that the services provided were related to handling goods and could be performed both within and outside the port area, thus fitting the definition of "Cargo Handling Service."

2. Inclusion of Transportation Costs:
The main dispute revolves around whether the transportation of goods by barges from the mother vessel to the jetty should be included in the value of "Cargo Handling Service." The Tribunal highlighted that the definition of "Cargo Handling Services" includes loading, unloading, and handling of cargo, and any service incidental to freight, but excludes mere transportation. The Tribunal found that transportation by barges within the port area is an integral part of the cargo handling process and should be included in the value of "Cargo Handling Service." The Tribunal emphasized that splitting the scope of work into various segments or contracts does not change the nature of the service.

3. Applicability of Service Tax on Transportation by Water:
The applicant argued that transportation of goods by water was not subject to service tax before 2009. The Tribunal acknowledged that from 1-9-2009, transportation of coastal goods and goods through national waterways became taxable under a new service tax entry. The Tribunal agreed that when goods are transported from one port to another, it constitutes transportation of goods and not "Cargo Handling Service." Therefore, service tax should be applied accordingly.

4. Validity of Extended Period for Demand and Penalties:
The Tribunal noted that the extended period for demand and penalties is a matter of fact and law that will be examined during the final hearing. The Tribunal did not find any prima facie case for the applicant on merits, except for the transportation of goods from one port to another. The Tribunal directed the applicant to deposit Rs. 25 crores within eight weeks and stayed the recovery of the balance amount of duty, interest, and penalties upon compliance.

Conclusion:
The Tribunal concluded that the applicant's activities primarily fall under "Cargo Handling Service," including transportation by barges within the port area. The Tribunal also recognized that transportation of goods from one port to another should be treated separately under the relevant service tax provisions. The Tribunal's decision underscores the importance of understanding the integrated nature of services within the port area and the specific conditions under which different service tax categories apply.

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