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2014 (12) TMI 502 - AT - Service TaxClassification of services - cargo handling service for import of goods - transportation by barges from the mother vessel to the jetty onshore - Held that - when the goods are being transported by the barges from the mother vessel to the jetty onshore, that activity is part of the import transaction of bringing the goods into India from a place outside India. The question of rendering any service in respect of such goods by way of cargo handling or otherwise can take place only after the customs transaction is completed. Therefore, the question of levying to service tax the transportation by barges from the mother vessel to the jetty onshore, would not arise at all since the said activity is part of the import transaction leviable to import duty and we hold accordingly. This is also evident from the fact that section 14 of the Customs Act, 1962 relating to determination of value of import goods for the purposes of levy of customs duty and the Customs Valuation Rules, 2007 (CVR in short) were amended to specifically include barge charges and handling charges in the transaction value of the imported goods vide Finance Act, 2007 to overcome the adverse decision in the case of Ispat Industries (2006 (9) TMI 181 - SUPREME COURT OF INDIA). Section 14 was substituted to specifically provide that transaction value of imported goods shall include, in addition to the price, any amount paid or payable for costs and services, including commissions, cost of transportation to the place of importation, insurance, unloading and handling charges to the extent and in the manner specified in the rules made in this regard . If the bills raised for the services rendered indicates the amount charged for cargo handling and transportation separately on actual basis, then the tax would be leviable only on the cargo handling charges. The contracts entered into with the customers show separately the charges towards shipping charges of cargo from Mother Vessel to Dharamtar jetty. Therefore, there is no merit in the contention that transportation charges should be included in the value of taxable services in respect of cargo handling service. Transport of coastal goods and goods transported through inland water came under the purview of service tax levy vide Finance Act, 2009, with effect from 06/07/2009. Vide notification No. 30/2009-ST dated 31/08/2009 transport of coastal goods in respect of items specified in the Table annexed thereto were exempt from service tax. The appellant herein undertook coastal transportation of fertilizers, which is one of the items specified in the notification as eligible for exemption. Revenue is seeking to confirm service tax demand under the category of cargo handling service. It is a settled position in law that when a new entry is brought under service tax levy, the same activity cannot be subjected to levy under an existing entry unless the new entry is carved out of the existing entry - Therefore, there cannot be any demand for service tax on coastal transportation of goods prior to July, 2009. Further the goods transported by the appellant is also covered by Notification 30/2009-ST. In this factual and legal scenario, the demand of service tax under the category of cargo handling service has to be set aside especially when the activity is squarely covered under the entry of coastal transportation of goods and we hold accordingly. Department initially sought to recover the tax under the entry for Port Services vide letter dated 22.02.2008 but changed its stance to Cargo Handling Service upon being informed by the Appellant vide letter date 27.02.2008 that it did not possess the requisite port authorisation for the barging to be classified under Port Services . The decision of the apex court in Uniworth Textiles Ltd. vs. CCE, Raipur 2013 (1) TMI 616 - SUPREME COURT , wherein it was held that the extended period of limitation is not invokable for mere non-payment and requires a deliberate default on the part of the assessee, is also applicable. The facts available on record clearly show that the department itself was not clear as to the classification of service rendered by the appellant and has been changing their stand. In such a scenario, the allegation of suppression with an intent to evade service tax cannot be sustained. Thus the appeal succeeds on account of time bar also apart from merits. Impugned orders classifying the services rendered by the appellant under cargo handling service and confirming the service tax demands accordingly are clearly unsustainable in law. Accordingly we set aside the same - Decided in favour of assessee.
Issues Involved:
1. Levy of service tax on barge (shipping) charges. 2. Classification of composite contracts for transportation and cargo handling services. 3. Service tax applicability on coastal transportation of goods. 4. Invocation of the extended time period for service tax demand and penalties. Detailed Analysis: 1. Levy of Service Tax on Barge (Shipping) Charges: The core issue was whether barge charges for transporting imported goods from the mother vessel to the jetty, which form part of the transaction value of imported goods, can be subject to service tax under 'Cargo Handling Services'. The tribunal held that the transportation of goods by barges from the mother vessel to the jetty is part of the import transaction. The import process completes when goods reach the customs barriers and the bill of entry for home consumption is filed. Therefore, the transportation by barges is part of the import transaction and cannot be taxed under 'Cargo Handling Services'. This interpretation aligns with the apex court's ruling in Garden Silk Mills Ltd. and the amended provisions of Section 14 of the Customs Act, 1962. 2. Classification of Composite Contracts for Transportation and Cargo Handling Services: The tribunal examined whether in a composite contract with separate rates for transportation and cargo handling, service tax can be levied under a single category of 'Cargo Handling Services'. It was concluded that if bills indicate separate charges for transportation and cargo handling, service tax is leviable only on the cargo handling charges. This position is supported by the CBEC Circular B/11/1/2002-TRU and upheld in cases such as Hira Industries Ltd., Jet Airways (India) Ltd., and R.K. Transport Company. Thus, the tribunal ruled in favor of the appellant, stating that transportation charges should not be included in the value of taxable services for cargo handling. 3. Service Tax Applicability on Coastal Transportation of Goods: The tribunal addressed whether coastal transportation of goods could be taxed under 'Cargo Handling Services' before 06/07/2009. It was established that coastal goods transportation was brought under service tax only from 06/07/2009 via Finance Act, 2009. The tribunal referenced the Bombay High Court's ruling in Indian National Shipowner's Association, which states that a new entry under service tax cannot be taxed under an existing entry unless it is carved out from it. Therefore, coastal transportation of goods before July 2009 cannot be taxed under 'Cargo Handling Services'. Additionally, the appellant's transportation of fertilizers was exempt under Notification 30/2009-ST. Hence, the tribunal set aside the service tax demand for coastal transportation of goods. 4. Invocation of Extended Time Period for Service Tax Demand and Penalties: Regarding the extended period for service tax demand and penalties, the tribunal noted that the department initially sought to classify the services under 'Port Services' but later changed to 'Cargo Handling Services'. This indicated confusion within the department itself. The tribunal cited the Supreme Court's decision in Uniworth Textiles Ltd., which states that extended periods are not invokable for mere non-payment without deliberate default. Given the department's inconsistent stance, the tribunal concluded that suppression with intent to evade tax could not be established. Consequently, the appeal succeeded on the grounds of time bar as well. Conclusion: The tribunal found the orders classifying the services under 'Cargo Handling Services' and confirming the service tax demands unsustainable in law. The tribunal set aside the impugned orders and allowed the appeals with consequential reliefs in accordance with law.
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