2018 (2) TMI 397 - AT - Service Tax

Cargo Handling service - liability of service tax - whether appellant are liable to Service Tax on handling charges paid separately to the transporter/supplier for handling the molasses within the factory premises of the appellant? - Held that - as the same have been incurred for activity within the factory of the appellant and the same forms part or valuation of the goods cleared being excisable goods liable to duty, no Service Tax is leviable on the same - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant-assessee is liable to Service Tax on handling charges paid separately to the transporter/supplier for handling the molasses within the factory premises?

Analysis:
The appellant, a manufacturer of sugar and molasses with a distillery division, faced a show cause notice alleging short payment of Service Tax on handling charges paid to the transporter/supplier. The notice claimed a demand of &8377; 4,63,498/- + Cess, with interest and penalty under Section 78. The Assistant Commissioner confirmed the demand, interest, and imposed a penalty. The appellant contended before the Commissioner (Appeals) that the handling charges for molasses within the factory premises are not taxable under GTA. They argued that the demand was time-barred and based on a change of opinion. The Commissioner (Appeals) upheld the extended limitation, noting suppression of facts and intent to evade tax, confirming the tax and penalty but remanding for credit verification of &8377; 73,402/- + 1,13,495/-.

The appellant appealed to the Tribunal, asserting that they had already paid tax on transportation charges, not in dispute. The dispute centered on handling charges for molasses within the factory premises, considered part of production cost or valuation of cleared goods. The appellant argued that no Service Tax should apply to these handling charges. The Revenue relied on the impugned order. After considering the arguments, the Tribunal held that since handling charges were incurred within the factory and formed part of the valuation of excisable goods liable to duty, no Service Tax was applicable on these charges. The Tribunal allowed the appeal on this ground, directing the Adjudicating Authority to grant tax adjustments as directed by the Commissioner (Appeals), if not done already. The appellant was entitled to consequential benefits as per the law.