2020 (1) TMI 1450 - AT - Service Tax

Levy of service tax - cargo handling agency or not - contract for raising, calibration and transportation of iron ore and fines by mechanized means - suppression of facts or not - penalty - HELD THAT - The activities undertaken by the appellants under the impugned contracts primarily involves excavation and transportation of iron ore subsequent to blasting in the iron ore mines and feeding of iron ore to the crusher plant. The activities incidentally may involve some loading and unloading of iron ore while carrying out the principal activities under the contracts. Such incidental activities of loading and unloading undertaken by the appellants cannot give the entire contracted activities the character of cargo handling services . The coverage under cargo handling service would extend ordinarily to what is commercially known as cargo carried as freight in a ship, airplane, rail or truck. As such, the activities undertaken by the respondents are primarily in the nature of mining activities comprising of excavation, transportation and feeding of iron ores to the crusher plant, etc. and these activities may incidentally involve some loading and unloading. The same cannot however be covered under the category of cargo handling service as what is carried cannot be commercially called cargo in the facts and circumstances of the case - the definition of cargo handling services under the Finance Act, 1994, does not include the kind of activities undertaken by the appellants hence the same are not chargeable to Service Tax. Penalty - HELD THAT - There is no ingredient of suppression or mis-statement by the appellants regarding the nature of activities undertaken by the appellants and hence the imposition of penalty on the appellant is not at all justified. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Whether the appellant is liable to pay Service Tax under the category of "Cargo Handling Services" for the period from February 2005 to February 2007.
2. Whether the show cause notice issued to the appellant was barred by limitation.
3. Whether the appellant's activities can be categorized as "cargo handling services" for the purpose of Service Tax.

Issue 1: Liability for Service Tax under "Cargo Handling Services":
The appellant, a mining contractor, was awarded a contract involving various activities from mining to delivering iron ore to a designated place. The loading and unloading involved were considered incidental to the primary activities of mining and transportation. The Tribunal held that the appellant cannot be assessed as a cargo handling agent as the activities were part of completing the entire work assigned under the contract. The Tribunal found that the appellant's activities primarily involved excavation, transportation of iron ore, and feeding it to the crusher plant, with incidental loading and unloading. These activities did not fall under the category of "cargo handling services" as defined under the Finance Act, 1994. Therefore, the Tribunal ruled that the appellant was not liable to pay Service Tax under the category of "Cargo Handling Services."

Issue 2: Limitation on Show Cause Notice:
The appellant argued that the show cause notice was barred by limitation as the conditions for invoking a longer period were not fulfilled. The appellant claimed to have been under a bona fide belief that they were not liable to pay Service Tax as a cargo handling agency. The Tribunal did not find any suppression or misstatement by the appellant regarding their activities. Therefore, the Tribunal held that the show cause notice was not justified and set aside the penalties imposed on the appellant.

Issue 3: Categorization of Activities as "Cargo Handling Services":
The Tribunal analyzed the definition of "cargo handling services" under the Finance Act, 1994, which typically involves loading, unloading, and handling of cargo in various modes of transport. The Tribunal determined that the appellant's activities, primarily related to mining operations, did not align with the commercial understanding of cargo handling services. The activities of the appellant, such as excavation, transportation, and feeding of iron ore, were not considered as falling under the category of cargo handling services. Therefore, the Tribunal concluded that the appellant's activities were not chargeable to Service Tax under the category of "Cargo Handling Services."

In conclusion, the Tribunal ruled in favor of the appellant, stating that their activities did not constitute "cargo handling services" for the purpose of Service Tax liability. The show cause notice was deemed unjustified, and the penalties imposed were set aside.