2017 (9) TMI 1384 - AT - Service Tax

Cargo Handling Services - case of assessee is that it was not a cargo handler but it was a mere transporter of luggage of the passengers delivered at the checking point or collected from different points engaging contractors - Board s Circular No. 80/2004 dated 17.09.2004. Held that - As per the 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. It is further seen that the assessee themselves do not carry out even these peripheral activities of loading or unloading. The same is carried out instead by independent contractors. Throughout this exercise due carrier charges are collected by the appellants from the clients to defray the cost of carting and x-ray of cargo paid to third parties. This is just a reimbursement of convenience for all parties involved to ensure seamless, prompt and timely services to the clients. The activities of the assessee herein would definitely fall within the ambit of the said service, namely, Transportation of Goods by Air introduced w.e.f 10.09.2004. However, for the prior period (16.08.2002 to 09.09.2004), the department is seeking to bring the same activities under the fold of cargo handling service. This, in our considered opinion, is not just or fair. Law is well settled that when a new entry is brought under the levy of service tax, the same activity cannot be subjected to levy under an existing entry, unless the new entry has been specifically carved out of the earlier one. This is certainly not the case here. In a recent decision, in the case of United Shippers Ltd. Vs Commissioner of Central Excise, Thane-II 2014 (12) TMI 502 - CESTAT MUMBAI the Tribunal to held that transport of coastal goods cannot be taxed under categories of Cargo Handling Service. The services provided by the assessee cannot be brought under the ambit of Cargo Handling Services - demand set aside - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Classification of services as Cargo Handling Services.
2. Liability to pay service tax on composite charges.
3. Applicability of penalties under the Finance Act, 1994.
4. Invoking of the extended period for service tax demand.
5. Exclusion of certain charges from the taxable value.

Issue-wise Detailed Analysis:

1. Classification of Services as Cargo Handling Services:
The primary contention was whether the services provided by the assessee, Jet Airways India Ltd., constituted Cargo Handling Services. The department argued that the services, including freight, airway bill charges, valuation charges, due carrier charges, charges collect fees, and demurrage charges, were incidental to freight and hence taxable under Cargo Handling Services. However, the assessee contended that they were merely a transporter and not a cargo handler. The Tribunal referred to the definition under Section 65(23) of the Finance Act, 1994, which excludes mere transportation of goods from Cargo Handling Services. The Tribunal concluded that the assessee's activities primarily involved transportation and not cargo handling, supported by the fact that loading/unloading was done by independent contractors.

2. Liability to Pay Service Tax on Composite Charges:
The department's stance was that a lump sum amount charged for both transportation and cargo handling should attract service tax on the entire amount. The Tribunal, however, noted that if charges for cargo handling and transportation were separately indicated, tax would be levied only on the cargo handling portion. The Tribunal found that the assessee's primary activity was transportation, and the charges collected were for reimbursement of costs paid to third-party contractors for loading/unloading, not for cargo handling services.

3. Applicability of Penalties under the Finance Act, 1994:
The original authority imposed penalties on the assessee, but the Commissioner (Appeals) did not propose penalties, observing no intention to evade tax. The Tribunal upheld this view, noting that the assessee's actions did not demonstrate intent to evade tax, and thus penalties were not warranted.

4. Invoking of the Extended Period for Service Tax Demand:
The Commissioner (Appeals) held that the extended period was not invokable, limiting the service tax demand to the cargo handling aspect only. The Tribunal agreed, emphasizing that the activities in question were primarily transportation and not cargo handling, thus not justifying the extended period for service tax demand.

5. Exclusion of Certain Charges from the Taxable Value:
The Commissioner (Appeals) excluded valuation charges, airway bill charges, due carrier charges, charges collect fees, and demurrage charges from the taxable value, stating they were not connected to cargo handling services. The Tribunal concurred, finding that these charges were for transportation-related activities and not for cargo handling, thus not forming part of the assessable value for service tax under Cargo Handling Services.

Conclusion:
The Tribunal concluded that the services provided by the assessee did not fall under Cargo Handling Services and thus were not liable for service tax under this category. The demand for service tax on the assessee was set aside, and the appeal filed by the assessee was allowed with consequential relief as per law. The department's appeal was dismissed.

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