2017 (9) TMI 1064 - AT - Service Tax

Classification of services - Cargo Handling Services - appellants have entered into an agreement with M/s Rajasthan State Mines and Minerals Limited, Jodhpur for providing services of loading limestone gitties into trucks, transportation from Sonu Landstone Mines- I & II to Jaisalmer railway station, unloading the same at railway plots, stacking and then loading these gitties into railway wagon - Held that - The qualification to undertake the work for the client, as mentioned in the pre-qualifying criteria for tendering, makes it clear that the tenderer should be basically a fleet operator with minimum of 50 trucks, though equipment and experience for mechanized loading in railway wagons is also one of the criteria - the pre-qualification makes it clear that the contract is essentially for transportation and incidentally for loading of transported cargo into the railway wagons. The service agreement now under consideration is essentially for transportation of lime stone over a long distance, by trucks. The appellant is not paid any consideration for loading which is automatically done from the hoppers. They are involved in stacking and loading of lime stone in the railway yard after transportation - the proposal of the Revenue to demand service tax on the whole of consideration received by the appellant treating the same is cargo handling service is not legally sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Service tax liability under the category of "cargo handling service."
2. Applicability of penalty under Sections 78, 76, and 77 of the Finance Act, 1994.
3. Interpretation of the agreement for services provided.
4. Classification of services as transportation or cargo handling.

Analysis:
1. The appeal challenged an order confirming a service tax liability of ?75,08,894 under "cargo handling service." The appellant argued they were not a cargo handling agency, emphasizing their role as a transportation service provider. The agreement and tender criteria highlighted transportation as the primary activity, with incidental cargo handling. The appellant's submission was supported by case laws and CBEC clarifications.

2. The original authority imposed penalties under Sections 78, 76, and 77 of the Finance Act, 1994. The appellant contended that their activities did not solely constitute cargo handling services, leading to a dispute over the tax liability. The appellant's position was based on the essential character of their services being transportation, with ancillary cargo handling elements.

3. The agreement between the appellant and the client detailed the breakdown of rates for different activities, emphasizing transportation over cargo handling. The Tribunal analyzed the agreement and tender documents to ascertain the nature of services provided. The appellant's argument centered on the primary service being transportation, supported by circulars clarifying the tax measure for cargo handling services.

4. The Tribunal deliberated on the classification of services as transportation or cargo handling, referencing previous cases for guidance. The Revenue relied on specific cases to support their position on cargo handling services. However, the Tribunal distinguished the present case as primarily involving transportation of limestone, with incidental cargo handling activities. The Tribunal concluded that the Revenue's proposal to tax the entire consideration as cargo handling service was not legally sustainable.

In conclusion, the Tribunal found the impugned order lacking merit and set it aside, allowing the appeal. The detailed analysis focused on interpreting the agreement, determining the essential character of services, and classifying the activities as transportation rather than cargo handling.