2019 (2) TMI 1497 - SC - Service Tax

Maintainability of appeal - issue relating to Classification of services - cargo handling service or GTA Service - respondent is an association, whose members are transport operators engaged in the business of transportation of goods entrusted by the customers - Held that - It is not in dispute that if the show cause notices culminate into an order, the appeal would lie to this Court. When the show cause notices are issued to respondent nos.2 and 3-members, the writ petition is filed by the first respondent-association and the recipients of show cause notices who are respondent nos.2 and 3. As we are not in agreement with the view taken by the High Court, in entertaining the writ petition against show cause notices, we refrain from recording any finding on contentious issues which arise for consideration. If any finding is recorded by this Court at this stage, same will prejudice either of the parties. Having regard to the contentions raised, it cannot be said that there are no factual disputes. Applicability of the circulars dated 06.08.2008 and 05.10.2015 is also in serious dispute. Further the classifiability of service rendered by a particular assessee is to be considered with reference to facts of each case depending upon nature of service rendered and the contract entered into. There cannot be any general declaration, as prayed for. We find force in the contention of the learned senior counsel, Sri Radhakrishnan, appearing for the appellants that the High Court has committed error in entertaining the writ petition under Article 226 of Constitution of India at the stage of show cause notices. Though there is no bar as such for entertaining the writ petitions at the stage of show cause notice, but it is settled by number of decisions of this Court, where writ petitions can be entertained at the show cause notice stage. Neither it is a case of lack of jurisdiction nor any violation of principles of natural justice is alleged so as to entertain the writ petition at the stage of notice. High Court ought not to have entertained the writ petition, more so, when against the final orders appeal lies to this Court. The judgment of this Court in the case of Deputy Commissioner, Central Excise Anr. v. Sushil and Company 2016 (4) TMI 987 - SUPREME COURT also cannot be applied to the facts of the case on hand to come to the conclusion that the services rendered by the respondents will fall in the category of goods transport agency but not cargo handling service . In the aforesaid judgment, the contract was only for supply of labour and it was the specific case of the assessee that such labour was not doing any work of packing, unpacking, loading, unloading of any cargo. In view of such written contract for limited services referred above, this Court has held that such service cannot be held to be cargo handling service . The said judgment is distinguishable on facts and same cannot be applied to the case on hand. Appeal allowed.

Issues Involved:
1. Maintainability of writ petition against show cause notices.
2. Classification of services as "cargo handling service" or "goods transport agency".
3. Applicability of CBEC circulars to the classification of services.
4. Jurisdiction and procedural propriety in issuing show cause notices.

Issue-wise Detailed Analysis:

1. Maintainability of Writ Petition Against Show Cause Notices:
The High Court entertained the writ petition filed by the respondents against the show cause notices issued by the appellants. The appellants raised a preliminary objection regarding the maintainability of the writ petition, arguing that it was premature to challenge the show cause notices and that the High Court should refrain from entertaining the petition as the matter involved classification of services, which could be appealed to the Supreme Court. The High Court overruled this objection, citing that there were no factual disputes and relying on the judgment in Deputy Commissioner, Central Excise & Anr. v. Sushil and Company (2016) 13 SCC 223. However, the Supreme Court disagreed with the High Court's decision to entertain the writ petition at the show cause notice stage, emphasizing that there was no lack of jurisdiction or violation of natural justice principles, and thus the High Court should not have entertained the writ petition.

2. Classification of Services as "Cargo Handling Service" or "Goods Transport Agency":
The core issue was whether the services provided by the respondents fell under "cargo handling service" or "goods transport agency". The appellants contended that the respondents split their transactions to evade higher service tax rates applicable to "cargo handling service". The respondents argued that their services were limited to road transportation and that they merely facilitated services provided by shipping lines without adding any margin. The High Court ruled in favor of the respondents, classifying their services under "goods transport agency" based on CBEC circulars. However, the Supreme Court noted that the classification of services should be determined by the competent authority based on the facts of each case and that the High Court should not have made a general declaration at the show cause notice stage.

3. Applicability of CBEC Circulars to the Classification of Services:
The respondents relied on CBEC circulars dated 06.08.2008 and 05.10.2015 to support their classification under "goods transport agency". The appellants argued that these circulars were not applicable to the respondents' case as they pertained only to road transportation. The High Court accepted the respondents' interpretation of the circulars, but the Supreme Court emphasized that the applicability of these circulars should be assessed by the competent authority during the adjudication process. The Supreme Court also highlighted that circulars are binding on departmental authorities but their applicability must be determined based on the facts of each case.

4. Jurisdiction and Procedural Propriety in Issuing Show Cause Notices:
The appellants issued show cause notices to the respondents, proposing to demand service tax under the category of "cargo handling service". The respondents challenged these notices, arguing that they were contrary to the provisions of the Finance Act, 1994, and CBEC circulars. The High Court quashed the show cause notices, but the Supreme Court found that the High Court erred in doing so at the notice stage. The Supreme Court held that the respondents should have responded to the show cause notices and allowed the adjudicating authority to consider their explanations and evidence before approaching the High Court.

Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's judgment and order. The respondents were granted four weeks to file responses to the show cause notices, and the appellants were directed to consider these responses on their merits without being influenced by the observations made by the Supreme Court. The Supreme Court emphasized the importance of following procedural propriety and allowing the competent authority to adjudicate the classification of services based on the specific facts of each case.

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