2018 (11) TMI 1755 - AT - Service Tax

Classification of services - Cargo Handling services or not - loading and unloading of limestone gitti - composite services or not - appellant is primarily engaged in the work of transportation of products of lime stone of the stone mines owned by M/s. Rajasthan State Mines and Minerals Ltd. - HELD THAT - The agreement dated 29th/30th April 2005 between the Appellants and M/s. Rajasthan State Mines and Minerals Ltd. deals with hiring of Pay Loader and Tippers for loading and transporting of stone gitti from Mining Area to Railway siding at Jaisalmer including stocking of the same and watch and ward till further loading into Railway wagons. The distance is also mentioned as 119 Kms. on average basis. Thus it is a composite agreement both for hiring of Pay Loader and Tippers for loading and for transporting coal to a distance of 119 Kms - The terms conditions also deals with diesel escalation/de-escalation which may be given as per rules of the company. A perusal of the agreement does indicate that the dominant nature of the work is for transportation of goods covering an average distance of 119 Kms. Hiring of pay loader and tippers for loading as Watch and Ward services for the purpose of transporting is only incidental. In fact the unloading was by mechanical means. The cost of transportation is Rs. 121.35 per ton and the distance is 119 km. The work of loading and unloading watch and ward of cargo is incidental to transportation which has also been clarified by Circular dated 6 August 2008 issued by Government of India Ministry of Finance Department of Revenue in regard to Service tax levy on goods transport by road services. Whether in the present case transportation is the main service and loading / unloading is ancillary service provided for successful completion of the main service? - HELD THAT - The cost of transportation charge is Rs. 121.35 per ton of limestone quantity delivered at an average distance of 119 km. It is apparent that the essential feature of the service is transportation. Loading and unloading watch and ward etc. are ancillary service provided in relation to transportation of goods and such service would be Goods and Transport Agency Service - On the similar issue the Hon ble Supreme Court in casse of Commissioner of Central Excise Service Tax vs. Singh Transporters reported in 2017 (7) TMI 494 - SUPREME COURT Supreme Court has held that the activity as it in the present case is more appropriately classifiable under the category of Goods Transport Agency Service rather than in the category of the Cargo Handling Services . Thus the activity of the appellant is correctly classifiable under Goods Transport Agency Service . Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of service tax on loading, unloading, and watch and ward services.
3. Interpretation of composite contracts under service tax law.
4. Invocation of extended time proviso for demanding service tax.
5. Applicability of penal provisions under sections 76, 77, and 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The primary issue was whether the services provided by the appellant, which included loading, unloading, transportation, and watch and ward of limestone gitti, should be classified under 'Cargo Handling Services' or 'Goods Transport Agency Service'. The Tribunal examined the agreement dated 18 January 2007, which detailed the scope of work, including loading limestone gitti into tippers, transporting it to railway sidings, unloading, stacking, and providing watch and ward services. It was determined that the predominant nature of the contract was transportation of limestone gitti, and other services were ancillary to this main activity. Therefore, the service was classified under 'Goods Transport Agency Service' rather than 'Cargo Handling Services' or 'Security Services'.

2. Applicability of Service Tax on Loading, Unloading, and Watch and Ward Services:
The appellant contended that they did not receive any payment for service tax from M/s. Rajasthan State Mines and Minerals Ltd. (RSMML) and raised bills exclusive of service tax. The Tribunal referred to the agreement, which stated that service tax, if applicable, would be reimbursed by RSMML. The Tribunal also considered the Circular dated 6 August 2008, which clarified that intermediary and ancillary services like loading/unloading provided in the course of transportation by road should be treated as part of the Goods Transport Agency Service. Therefore, the Tribunal concluded that the ancillary services were part of the composite service of transportation and should not be taxed separately.

3. Interpretation of Composite Contracts under Service Tax Law:
Section 65A of the Finance Act, 1994, which deals with the classification of taxable services, was pivotal in this case. The Tribunal emphasized that composite services consisting of a combination of different services should be classified based on the service that gives them their essential character. The Tribunal found that the transportation of limestone gitti was the essential character of the service provided by the appellant, and other activities were incidental to this main service. Thus, the composite contract was classified under 'Goods Transport Agency Service'.

4. Invocation of Extended Time Proviso for Demanding Service Tax:
The Department invoked the extended time proviso under section 73 of the Finance Act, 1994, to demand service tax for the period from April 2006 to March 2008. The Tribunal did not find any discussion on the applicability of the extended time proviso in the judgment, implying that the decision was primarily based on the classification and nature of the services provided.

5. Applicability of Penal Provisions under Sections 76, 77, and 78 of the Finance Act, 1994:
The Show Cause Notice had invoked penal provisions under sections 76, 77, and 78 of the Finance Act, 1994. However, since the Tribunal concluded that the services provided by the appellant were correctly classifiable under 'Goods Transport Agency Service' and not under 'Cargo Handling Services' or 'Security Services', the demand for service tax and the associated penalties were set aside.

Conclusion:
The Tribunal set aside the impugned Order-in-Original, holding that the services provided by the appellant were correctly classifiable under 'Goods Transport Agency Service'. The ancillary services of loading, unloading, and watch and ward were considered part of the composite service of transportation. Consequently, the appeal was allowed, and the demand for service tax and penalties was quashed.