2014 (11) TMI 586 - AT - Service Tax

Composite transactions - Discharge of service tax on stevedoring operations - Cargo Handling Services and port service - Discharge of tax under reverse charge mechanism - Issue of separate invoices - Held that - Appellants are not charging the lump sum amount for both transportation and cargo handling. Separate purchase orders are filed, separate bills are raised and separate heads have been fixed. The view taken by the Commissioner that only when the appellant collected actual amount incurred they can be treated separately is not correct. It appears that Commissioner has not applied the meaning of amount charged correctly. Amount charged does not mean the actual amount payable - claim of the learned counsel that the 3 activities undertaken by them namely handling of fertilizers and handling of the same within the port, transportation from port to outside the port and thereafter bagging activity are 3 independent separate activities, separately charged and separately billed for. That being the position, it cannot be treated as a composite activity at all. Moreover, service tax is payable on GTA service and there is no evidence that service tax has not been paid on GTA service by IPL. In our opinion, transportation activity in this case is a distinct activity since it comes in the middle of handling of cargo within the port and bagging outside the port and unless the appellants charged a lump sum amount for all the three activities and there is no divisibility according to the understanding of both the parties, it cannot be treated as a composite contract. Therefore in our opinion appellants have made out a case on merits - Stay granted.

Summary

Issues:
1. Whether the different services provided by the appellant should be treated as a single composite service under 'Cargo Handling Service' for tax purposes.

Analysis:
The appellant, a licensed stevedore, provided various services including stevedoring operations, transportation of bulk cargo, bagging of fertilizers, and loading operations. The impugned order categorized these services as a single composite service under 'Cargo Handling Service,' demanding differential service tax of Rs. 1,80,60,703 with interest and penalties. The appellant argued against this categorization, highlighting that separate invoices, orders, and bills were raised for each activity. The appellant paid service tax under the category of Port Service for handling fertilizers within the port, emphasizing that individual services cannot be treated as composite if separately contracted, provided, and charged. The Circular issued by the Board supported this argument, stating that when services are separately contracted, provided, and charged, they should not be treated as composite.

2. Whether the transportation activity should be considered a distinct service and not part of a composite contract.

The Tribunal found that the activities undertaken by the appellant, namely handling of fertilizers within the port, transportation from port to outside the port, and bagging activity, were independent and separately charged. The Tribunal noted that service tax had been paid on GTA service by the party responsible for transportation, Indian Potash Ltd. The Tribunal emphasized that transportation was a distinct activity since it occurred between handling of cargo within the port and bagging outside the port. As there was no evidence of a lump sum amount being charged for all three activities, the Tribunal ruled that the transportation activity could not be considered part of a composite contract. Consequently, the Tribunal waived the requirement of pre-deposit and granted a stay against recovery for 180 days from the date of the order.