2018 (8) TMI 332 - AT - Service Tax

Classification of Services - work of loading and unloading of reels/reams/bundles/pallets on to and from trailer/trucks in the godown within the company s mill - extended period of limitation - penalty. Held that - The term cargo is not defined in Finance Act, 1994. Therefore, the dictionary meaning of the word which refers to goods carried on ship, aircraft or motor vehicle. Thus, for the activity to be classified as cargo handling services, the goods in question must be cargo, i.e., the goods must be put on a motor vehicle or ship or aircraft etc., and moved out of or into factory. The contract requires the handing to be done within the godown of the mill premises but is silent on whether this handling is meant for movement within the factory or it is handling of cargo to be shifted out of the factory. Usually, goods are moved within the factory, using material handling equipment such as cranes and forklifts although trucks etc., can also be used - If the goods are moved out of the factory or into the factory they meet the definition of cargo and the activities of handling it is cargo handling service - the activity under taken by the appellant/assessee must be classified as cargo handling service. Extended period of limitation - Held that - It is not in dispute that this is a classification issue and the Department had issued the show cause notice in 2008 whereas, the assessee had been paying service tax under various other headings namely Manpower supply and Business Auxiliary Service from 2005 onwards. Thus, the nature of activity undertaken by the assessee is within the knowledge of the Department from 2005-2006 onwards - there is no ground to invoke extended period of limitation in this case. Penalty - Held that - As it is the question of interpretation of classification of services, where the Department appears to have changed its opinion, no penalties under Section, 76, 77 78 are imposable. The penalties are therefore set aside and the demand along with interest within the normal period of limitation is upheld - The demand for extended period is set aside - appeal allowed in part.

Summary

Issues Involved:

1. Classification of services as Cargo Handling Services.
2. Invocation of the extended period of limitation.
3. Consideration of the amount paid by the appellant as cum tax amount.
4. Levy of interest on service tax if payable.
5. Imposition of penalties under Section 76, 77, and 78.

Issue-wise Detailed Analysis:

1. Classification of Services as Cargo Handling Services:

The primary issue was whether the services provided by the appellant fell under the category of "Cargo Handling Services." The appellant had an agreement with M/s ITC Ltd. for loading and unloading reels/reams/bundles/pallets within the mill premises. The Department argued that these services constituted Cargo Handling Services, which are taxable. The Tribunal defined "cargo handling service" as loading, unloading, packing, or unpacking of cargo, excluding handling of export cargo or passenger baggage or mere transportation of goods. The term "cargo" was interpreted as goods carried on a ship, aircraft, or motor vehicle. It was concluded that since the goods were meant for dispatches outside the factory, the services provided by the appellant qualified as Cargo Handling Services.

2. Invocation of the Extended Period of Limitation:

The appellant contended that the show cause notice issued in 2008 was barred by limitation as the Department was aware of the nature of services rendered since 2005. The Tribunal agreed, noting that the Department had not objected to the classification of services under Manpower Supply and Business Auxiliary Services in earlier returns. The Tribunal found that the Department had changed its opinion regarding the classification, and the entire exercise was Revenue Neutral since M/s ITC Ltd. could claim credit for the service tax paid. Thus, there was no ground to invoke the extended period of limitation.

3. Consideration of the Amount Paid by the Appellant as Cum Tax Amount:

The Department argued that the benefit of cum tax value should not be extended for the period prior to 10.09.2004, as the concept was introduced by amending Section 67 of the Finance Act, 1994. The Tribunal agreed, noting that the explanation 2 of Section 67 was not applicable during the relevant period. Furthermore, the contract specified that the amount received by the appellant was exclusive of service tax. However, since the extended period of limitation was not applicable, this decision was deemed irrelevant.

4. Levy of Interest on Service Tax if Payable:

The Tribunal upheld the demand for service tax along with interest within the normal period of limitation. It was noted that the appellant had voluntarily paid a portion of the service tax upon noticing discrepancies. Thus, interest was leviable on the service tax payable.

5. Imposition of Penalties under Section 76, 77, and 78:

The appellant argued that no penalties should be imposed as they acted under a bona fide belief and there was no intention to evade tax. The Tribunal found merit in this argument, noting that the issue was one of classification and the Department had changed its opinion. Consequently, no penalties under Section 76, 77, and 78 were imposable. The penalties were set aside, and the demand along with interest within the normal period of limitation was upheld.

Conclusion:

The Tribunal concluded that the services rendered by the appellant were classified as Cargo Handling Services. The invocation of the extended period of limitation was set aside, and the demand for service tax within the normal period of limitation was upheld along with interest. The penalties under Section 76, 77, and 78 were set aside. The appeal was disposed of accordingly.