2008 (6) TMI 22 - AT - Service Tax

Activity undertaken by appellants for mechanical transfer of coal from the coal face to tippers and subsequent transportation of the coal within the mining area, does not come under the purview of cargo handing service impugned activity even if includes loading and unloading but these are merely incidental - gross amounts received for the same cannot be taxed under the category of cargo handling service - impugned order is set aside, demand annulled and appeal is allowed

Issues Involved:
1. Classification of service as "cargo handling service"
2. Liability for service tax and penalties
3. Application of extended period for issuing the show-cause notice
4. Availability of CENVAT Credit
5. Suppression of facts and imposition of penalties

Issue-wise Detailed Analysis:

1. Classification of Service as "Cargo Handling Service":
The primary issue was whether the service provided by the appellant, involving the shifting/transportation of raw materials, waste materials, and finished products within a plant, fell under the category of "cargo handling service" as defined under the Finance Act, 1994. The appellant argued that their activities were limited to in-plant transportation and did not involve public transport carriers or issuance of documents of title, and thus did not constitute "cargo handling service". The Tribunal referred to Section 65(23) and Section 65(105)(zr) of the Act, which define "cargo handling service" and its taxable nature. It was determined that the activities undertaken by the appellant, which were confined within the plant and involved material shifting, did not meet the criteria of "cargo handling service" as they were not integrally connected with handling cargo for freight. The Tribunal cited previous decisions, including Sainik Mining & Allied Services Ltd. and ITW India Ltd., to support this conclusion.

2. Liability for Service Tax and Penalties:
The impugned order had imposed service tax, education cess, and penalties under various sections of the Finance Act, 1994, for the alleged "cargo handling service". The appellant contended that their activities were not taxable under the said category. The Tribunal, agreeing with the appellant, held that the activities did not qualify as "cargo handling service" and thus were not liable for service tax. Consequently, the penalties imposed under Sections 76, 77, and 78 of the Act were also found to be unjustified.

3. Application of Extended Period for Issuing the Show-Cause Notice:
The show-cause notice was issued on 3-8-2005, invoking the extended period for demand. The appellant argued that the extended period was not applicable as there was no suppression of facts. The Tribunal noted that the appellant had provided all necessary information to the authorities and had cooperated during the proceedings. It was concluded that the extended period could not be invoked as there was no suppression or misstatement of facts by the appellant.

4. Availability of CENVAT Credit:
The appellant argued that even if there was a liability, it would result in a revenue-neutral situation due to the availability of CENVAT Credit to their client. The Tribunal did not delve deeply into this argument, as it had already concluded that the appellant's activities did not constitute "cargo handling service" and were not taxable.

5. Suppression of Facts and Imposition of Penalties:
The authorities had imposed penalties on the grounds of suppression of facts. The appellant contended that there was no suppression as they had provided all relevant information and had sought expert opinions on their tax liability. The Tribunal found merit in the appellant's contention, noting that the appellant had acted in good faith and had cooperated with the authorities. Therefore, the imposition of penalties was deemed unjustified.

Conclusion:
The Tribunal set aside the impugned order, annulled the demand for service tax and penalties, and allowed the appeal. The activities of the appellant were held not to fall under the category of "cargo handling service", thus exempting them from the liabilities imposed by the lower authorities.

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