2017 (3) TMI 938 - AT - Service Tax

Classification - Cargo handling services / airport services - The service tax liability was sought to be confirmed on the appellant under the category of storage and warehousing service upto 09/09/2004 and under airport services w.e.f. 10/09/2004. The appellants contended that the services now sought to be categorized under these tax entries were actually cargo handling services and as they relate to export cargo they are excluded from tax liability - Held that - the appellants are basically engaged in various composite activities starting from receipt, shifting, handling, loading, packaging in suitable manner, security X-ray, scanning and loading of cargo for outward movement by aircraft. These activities are not relating to storage and warehousing of cargo - The cargo brought by exporters are not for storage or warehousing in the airport. The cargo is brought for shipment and the shipment happens at the earliest available opportunity. Till the shipment, the cargo is held for a short duration by the appellant. During this duration, various activities to make the cargo fit for shipment is undertaken - As such, appellant are not involved in providing storage and warehousing service with reference to the cargo - there is no tax liability under this tax entry for the appellant upto 09/09/2004. Admittedly the appellants are an airport authority involved in providing service in the airport. The claim of the appellant is that cargo handling service is more specific than airport service . We are not in agreement with such proposition. While cargo handling may be specific with reference to services rendered in connection with cargo, airport service is also specific to the extent that this service can be rendered only by airport authority or any other person in a designated airport or a civil enclave. The service is area specific - this is not a general category of tax entry - the services rendered by the appellant are taxable under the category airport service w.e.f. 10/09/2004. Time limitation - Held that - these activities were not subjected to levy as they were relating to export cargo till 09/09/2004. The all covering entry of airport service was brought in w.e.f. 10/09/2004. As such, there is no justification for the allegation of fraud, collusion, willful mis-statement and intention to evade tax against the appellant - the service tax liability shall be restricted to the normal period - penalty u/s 77 and 78 also set aside for the same reason. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Classification of services provided by the appellant under service tax categories.
2. Applicability of tax liability on the appellant for the period in question.
3. Contention regarding time bar for the demand of service tax.
4. Imposition of penalties under Section 77 and 78 of the Act.

Analysis:

Classification of Services Provided:
The appellants contended that the services in question, such as Terminal Charges, Unitization Charges, X-Ray Charges, Export Packing, and Export Miscellaneous Charges, were related to handling export cargo and should not be categorized as "storage and warehousing services." They argued that their activities primarily involved cargo handling and not storage or warehousing. The Tribunal agreed, noting that the appellants engaged in various activities like handling, loading, packaging, and security measures for outbound cargo. The cargo was not stored but processed for immediate shipment, exempting them from tax liability under the "storage and warehousing" category until 09/09/2004.

Applicability of Tax Liability:
With the introduction of "airport services" category from 10/09/2004, the appellants were found liable for service tax under this classification. The Tribunal determined that the services provided by the appellants fell under the definition of services provided in an airport, making them subject to tax under the specific category of "airport services." The argument that "cargo handling service" was more specific than "airport service" was rejected, emphasizing that airport services were area-specific and applicable to activities within the airport premises.

Time Bar for Demand of Service Tax:
Regarding the time bar issue, the Tribunal noted that the appellants had received clarifications in 2002 stating that services related to export cargo were not taxable. However, with the introduction of "airport services," their liability arose, even without considering the later amendment through the Finance Act, 2010. The Tribunal found no justifiable reason to invoke the extended period for tax demand, considering the appellants' status as a government organization and the absence of evidence indicating an intention to evade tax. The demand was restricted to the normal period, and penalties under Sections 77 and 78 were set aside.

Penalties Imposed:
The Tribunal concluded that the penalties imposed on the appellant under Sections 77 and 78 of the Finance Act, 1994, should be set aside based on the lack of sufficient grounds to support the allegations of fraud, collusion, willful misstatement, or intention to evade tax. The service tax liability was upheld for the normal period without penalties, leading to the disposal of the appeal in favor of the appellant.

In summary, the Tribunal ruled in favor of the appellant, determining the tax liability based on the specific services provided and restricting the demand to the normal period while setting aside penalties imposed under Sections 77 and 78 of the Act.