2019 (3) TMI 1098 - AT - Service Tax

Classification of services - Cargo handling service or GTA Service? - handling soya seeds, DOC, coal, etc. in the factory premises and for local transport from the factory to Mandideep Railway Station for loading in the racks - whether the entire amount received by the appellant is for the alleged cargo handling service only? Held that - The contract is for transportation and loading of cargo from factory at Mandideep to railway goods shed. The contract has 13 terms therein. Cumulative reading and the apparent interpretation, to our opinion for these terms is that the contract was entered into with an intention for the products of M/s Bhaskar Exxoils Pvt. Ltd. to be transported from their factory to the railway shed. It is also apparent from the contract that in fact the goods were loaded from the factory into the trucks of the appellant and were directly transferred to the railway wagons except in case of delay where an additional charge of ₹ 1 per bag has been agreed to be paid for the labour charges - Though Ld. DR has laid emphasis on para 9 thereof which reads that the agreed value per metric ton is inclusive of transportation while emphasizing that transportation is not the main activity but we are not convinced with the said submission in the light of the remaining other 12 terms and conditions. Use of word inclusive of transportation is opined to be a mere language error. The main activity of the appellant appears to be that of the transportation - thus, the services rendered by the appellant do not amount to cargo handling service. Whether the entire amount received by the appellant is for the alleged cargo handling service only? - Held that - Apparently and admittedly, the value relied upon by the Department does not merely include the transport/ freight charges rather in addition includes charges as that of freight on DOC (rate), freight on soya seed purchased (agricultural produce). Further, it is observed that these freights are for the movement of the soya seed, produced, within the factory premises. The law has already been settled that the movement of goods within the factory premises cannot be classified as the service of cargo handling. Inclusion of all such prices in the impugned demand is therefore highly unjustified on the part of the adjudicating authorities. Time Limitation - Held that - The demand is otherwise observed as being barred by time except for the one year thereof, period of demand being 2007-08 to 2011-12 and SCN being of October 2012 0 There is no apparent evasion on the part of the appellant. The taxable service stands already been paid under reverse charge mechanism by M/s. Bhaskar Exxoils Pvt. Ltd., the recipient of transport service - Seeing from this angle as well, the demand confirmed is not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the service provided by the appellant amounts to cargo handling service.
2. Whether the entire amount received by the appellant is for the alleged cargo handling service only.

Issue 1:
The appellant, engaged in providing taxable services falling under Cargo Handling Service, was alleged not to have paid appropriate service tax despite the services being made taxable. The Department proposed recovery of service tax, interest, and penalties, which was confirmed initially and on appeal. The appellant contended that the activity was mainly transportation, excluded from cargo handling, and the demand was unjustifiable. The Department argued that the contract emphasized loading of cargo, including transportation charges. The Tribunal analyzed the contract terms, concluding that the activity was primarily transportation, not cargo handling. Reference to relevant case law supported this finding, leading to a decision in favor of the appellant on this issue.

Issue 2:
Regarding the second controversy, it was observed that the value relied upon by the Department included charges beyond transport/freight, such as freight on DOC and soya seeds within the factory premises. Movement of goods within the factory does not qualify as cargo handling service. The bifurcation of received amounts was evident from a statement by the Manager Finance of the recipient company, which the Department relied upon in the Show Cause Notice (SCN). The Tribunal found the inclusion of these charges in the demand unjustified and ruled in favor of the appellant on this aspect as well. Additionally, the demand was deemed time-barred, with no apparent evasion by the appellant, as the recipient had already paid the service tax under reverse charge mechanism. Consequently, the Tribunal set aside the order under challenge, allowed the appeal, and granted any consequential benefits.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT NEW DELHI provides a comprehensive overview of the issues involved, the arguments presented by both parties, the legal interpretation applied by the Tribunal, and the final decision reached on each issue.