2017 (7) TMI 649 - AT - Service Tax

Cargo Handling Agent Service - Held that - provisions of sub-section (23) of section 65 of the Finance Act, 1994, Cargo Handling Service means loading, unloading, packing or un-packing of cargo and includes Cargo Handling Services provided for freight in special containers or for non-containerized freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport and Cargo Handling Service incidental to freight, but does not include handling of export cargo or passenger baggage or mere transportation of goods - From the definition of Cargo Handling Service , what emerges is that mere transportation of cargo is excluded from that definition. Every activity of service of transportation of goods will surely include some manner of loading and unloading of the goods. The question to be asked is whether such loading/unloading is the primary activity involved in the services carried out. From the facts of the matter at hand, we find that the answer is in the negative. Just because appellant carried out ancillary activities of loading, unloading etc., which is not the essential character of the activity contracted to him but only ancillary to the main work of transportation of break-bulk cargo, it would not be just and proper to bring such activity within the fold of Cargo Handling Service . The essential character of the activity carried out is only transportation. In view of Board s clarification, we have no doubt that such activity cannot then fall under the ambit of cargo handling service. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Determination of tax liability for cargo handling services provided by the appellant.
2. Interpretation of the definition of Cargo Handling Service under the Finance Act, 1994.
3. Assessment of whether transportation is the primary activity or incidental to cargo handling services.
4. Consideration of relevant circulars and clarifications issued by the Board regarding cargo handling and transportation services.

Analysis:

Issue 1: Determination of Tax Liability
The appellant, a Custom House Agency Service provider, was engaged by a company to transport break-bulk cargo. The department alleged that the appellant was a Cargo Handling Agent and imposed a tax liability of ?12,02,004 along with interest and penalties. The adjudicating authority confirmed the liability, considering the appellant's involvement in various activities related to cargo handling. The appellant contested this decision before the forum.

Issue 2: Interpretation of Cargo Handling Service
The definition of Cargo Handling Service under the Finance Act, 1994 includes loading, unloading, packing, or unpacking of cargo. The definition clarifies that mere transportation of goods is excluded from this category. The primary question is whether loading/unloading is the main activity. The circular issued by the Board further emphasizes that transportation is incidental to cargo handling service, which involves packing, unpacking, loading, and unloading of goods.

Issue 3: Primary Activity vs. Incidental Activities
The appellant argued that transportation was the essential character of their service, supported by a circular stating that transportation is not the essential character but only incidental to cargo handling. The Board clarified that ancillary services like loading/unloading provided by a Goods Transport Agency are part of a composite service of transportation. In this case, the essential character of the appellant's activity was transportation, not cargo handling.

Issue 4: Board's Clarifications and Precedent
Considering the Board's clarifications and the appellant's favorable decision for a subsequent period, it was established that the appellant's main activity was transportation, not cargo handling. The forum found that the ancillary activities of loading/unloading were not the essential character of the appellant's service. Therefore, the appeal was allowed in favor of the appellant based on the essential character of transportation services provided.

In conclusion, the forum allowed the appeal, emphasizing that the appellant's activity primarily involved transportation, not cargo handling. The decision was supported by the Board's clarifications and the precedent of a favorable ruling for the appellant in a subsequent period.