2019 (10) TMI 1400 - AT - Service Tax

Non-discharge of tax liability - terminal handling charges - Circular No. B11/2/2002-TRU dated 1st August 2002 of Central Board of Excise Customs - HELD THAT - It is an admitted fact that the respondent is a shipping line that is engaged in transportation of goods for which bills of lading are issued. In that capacity they are required to ensure delivery of cargo at the intended destination whether it is port of discharge an inland container facility or at the door of the consignee and handling of goods/containers is inextricably involved in such activity. Though the service may be end-to-end the goods belong to the shipper/consignee according to the terms of contract of sale and hence any charges that devolve during the course of such transportation must be home by the owner. The shipping line is concerned with safe delivery to the intended consignee. The charges levied by the port authorities in the form of terminal handling charges and detention charges rightfully are to be billed to the owner and to the extent of facilitation by the shipping line is claimable as reimbursement. Furthermore terminal handling charges have already been subject to levy under Finance Act 1994 and hence is not chargeable again unless included as input service in the assessable value of output service which it is not. Therefore on the ground of respondent not being the provider of service as specified in the taxable entry and the nature of the charges reimbursed by the customer the inclusion thereof in the assessable value would not be in accordance with law. Appeal dismissed - decided against Revenue.

Summary

Issues:
Challenge against dropping of proceedings for non-discharge of tax liability on terminal handling charges by a shipping company.

Analysis:
The appeal by Revenue challenged the dropping of proceedings against a shipping company for not discharging tax liability on terminal handling charges billed by another company. The notice claimed the charges were taxable under the Finance Act, 1994. The committee authorized under Section 86 directed the appeal, questioning the adjudicating authority's finding that the respondent was not a provider of cargo handling service and had not established the charges as consideration for taxable service.

The Revenue argued that the respondent's handling of cargo made all charges recoverable from customers taxable. Circular No. B11/2/2002-TRU supported taxability, emphasizing the need for a reasoned order. The Authorized Representative cited a Delhi High Court decision to support the adequacy of the show cause notice. The Tribunal's decision in a previous case was also referenced to strengthen the argument.

Despite procedural issues, the case was considered on merit due to the significant demand in the notice post-June 2006. The respondent's representative contended that the charges were part of a single transportation contract and adequately responded to the show cause notice to negate the tax burden.

The respondent argued that as a shipping line, they were not a cargo handling agency, and charges were related to transportation, not cargo handling services. They contended that charges were billed to the cargo owner and were not to be included in the assessable value as they were not an input service for output service.

The judgment concluded that the respondent, not being a provider of the specified taxable service and the nature of charges reimbursed by customers, did not warrant inclusion in the assessable value. The demands lacked merit in law, leading to the dismissal of Revenue's appeal.