2019 (4) TMI 812 - AT - Service Tax

Classification of services - Cargo Handling Services or Goods Transport Agency Services? - Hiring of Pay Loader and Tippers for Loading and transporting of coal - Held that - The work of loading and unloading is incidental to transportation , which has also been clarified by Circular dated 6 August, 2008 issued by Government of India, Ministry of Finance, Department of Revenue in regard to Service tax levy on goods transport by road services. Composite service may include various intermediary and ancillary services such as loading/ unloading, packing / unpacking etc. provided in the course of transportation of goods by road. These services are not provided as independent activity but as means of successful implementation of the principal service, namely the transportation of goods by road. It has, therefore, been clarified that a composite service even if it consists of more than one service, should be treated as a single service based on the main or principal service. It has, therefore, been held that any ancillary / intermediate service provided in relation to transportation of goods, and the charges, if any, for such services are included in the invoice issued by the Goods and Transport Agency and not by any other person. Such service would form part of Goods and Transport Agency Service and , therefore, the abatement of 75% would be available on it. Whether in the present case transportation is the main service and loading / unloading is ancillary service provided for successful completion of the main service? - Held that - The cost of transportation charge is ₹ 41.65 per ton of limestone quantity delivered at a distance of 10.5 km. It is apparent that the essential feature of the service is transportation. Loading and unloading are ancillary / intermediate service provided in relation to transportation of goods, and such service would be Goods and Transport Agency Service. It cannot be Cargo Handling service as was found by the Commissioner. It has been held by the Supreme Court in COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR VERSUS SINGH TRANSPORTERS 2017 (7) TMI 494 - SUPREME COURT that transportation of coal from the pit-heads to the railway sidings within the mining area is more appropriately classified under the heading Transportation of Goods by road service . Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of services provided by the appellants: Whether it falls under "Cargo Handling Service" or "Goods Transport Agency."
2. Applicability of the extended period of limitation for the demand of Service Tax.
3. Determination of the dominant nature of the contract between the appellants and Western Coalfields Ltd.
4. Interpretation of composite services and their classification as per Section 65A of the Finance Act, 1994.
5. Applicability of the Supreme Court decision in Commissioner of Central Excise & Service Tax, Raipur vs. Singh Transporters.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellants:
The primary issue is whether the appellants' services are classified as "Cargo Handling Service" under Section 65(23) of the Finance Act, 1994, or as "Goods Transport Agency" under Section 65(50b). The Department contends that the appellants are engaged in "Cargo Handling Services," while the appellants argue that their services fall under "Goods Transport Agency."

2. Applicability of the Extended Period of Limitation:
A show cause notice dated 16th April 2008 invoked the extended period of limitation, demanding Service Tax under Section 73 of the Act, along with interest under Section 75 and penalties under Sections 76, 77, and 78. The appellants argued that the extended period of limitation could not be invoked as the loading was integral to transportation.

3. Determination of the Dominant Nature of the Contract:
The agreement between the appellants and Western Coalfields Ltd., dated 29/30 April 2005, involved hiring Pay Loaders and Tippers for loading and transporting coal over a distance of 10.5 Kms. The appellants contended that the predominant nature of the contract was transportation of coal, making it fall under "Goods Transport Agency." The agreement specified that the transportation cost was ?41.65 per ton, indicating that transportation was the dominant service, with loading and unloading being incidental.

4. Interpretation of Composite Services and Their Classification:
Section 65A of the Finance Act, 1994, deals with the classification of taxable services. It states that when a service is classifiable under multiple sub-clauses of Section 65(105), the classification should be based on the most specific description. Composite services should be classified based on the service that gives them their essential character. The Tribunal found that the essential feature of the service was transportation, with loading and unloading being ancillary. Therefore, the service should be classified as "Goods Transport Agency" and not "Cargo Handling Service."

5. Applicability of the Supreme Court Decision:
The appellants relied on the Supreme Court's decision in Commissioner of Central Excise & Service Tax, Raipur vs. Singh Transporters, which held that transportation of coal within the mining area is classified under "Transportation of Goods by road service." The Tribunal agreed with this interpretation, further supporting the classification of the appellants' services as "Goods Transport Agency."

Conclusion:
The Tribunal set aside the impugned orders, concluding that the appellants' services should be classified as "Goods Transport Agency" rather than "Cargo Handling Service." The appeals filed by the appellants were allowed, and the extended period of limitation was deemed inapplicable.

(Dictated & pronounced in the open court)