2017 (2) TMI 1175 - AT - Service Tax

Cargo handling services - Held that - The nature of work indicates that the cargo is to be unloaded from the truck or loaded into the truck for inward or outward movement apart from bags to be handled for internal movement, stacking and storage. Such nature of work is covered by the tax entry cargo handling service - the scope of the work as listed in the schedule to the agreement brings it within the ambit of cargo handling service - appeal dismissed - decided against appellant.

Summary

Issues: Classification of services under labor supply or cargo handling service; applicability of service tax demand for the period 2004-2005 to 2006-2007; penalties under Section 76, 77, and 78 of the Finance Act, 1994.

The appeal before the Appellate Tribunal CESTAT NEW DELHI involved a dispute regarding the classification of services provided by the appellants to a cattle feed factory under an agreement. The services included loading, unloading of gunny bags, and shifting of materials within the factory. The issue was whether these services should be classified as labor supply or cargo handling service for the purpose of service tax liability for the period 2004-2005 to 2006-2007. The lower authorities had confirmed a service tax demand of &8377; 10,43,127 and imposed penalties under Section 76, 77, and 78 of the Finance Act, 1994.

The appellant argued that the services provided should be classified as labor supply, emphasizing that they supplied a specific number of laborers for designated work inside the factory premises. The appellant relied on legal precedents, including a decision of the Hon'ble Allahabad High Court and the Hon'ble Supreme Court, to support their argument. However, the authorized representative for the respondent contended that the services fell under cargo handling based on the rate schedule attached to the contract. According to the respondent, the primary work involved handling cargo, including unloading from incoming lorries and loading for dispatch outside the factory.

After hearing both parties and examining the agreement, the Tribunal found that the payment to the appellant was based on the quantum of cargo handled, as specified in the annexure to the agreement. Despite the mention of supplying labor, the nature of work outlined in the agreement indicated that cargo handling was a significant aspect, involving unloading/loading cargo from trucks for internal and external movements. The Tribunal distinguished the cited case laws, noting that the facts were different, as they involved the supply of manpower and handling of cargo by mechanical means. Ultimately, the Tribunal upheld the lower authorities' decision, dismissing the appeal on the grounds that the services provided by the appellant fell within the ambit of cargo handling service, as per the agreement terms.

In conclusion, the Appellate Tribunal CESTAT NEW DELHI upheld the classification of services provided by the appellant as cargo handling service, rejecting the argument for labor supply classification. The Tribunal affirmed the service tax demand for the specified period and upheld the penalties imposed under Section 76, 77, and 78 of the Finance Act, 1994. The decision was based on the nature of work outlined in the agreement, which primarily involved handling cargo, including loading/unloading for internal and external movements, aligning with the tax entry for cargo handling service.