2019 (5) TMI 258 - AT - Service Tax

Demand of service tax - transportation activities which is being conducted by the appellant through their H T Contractor - HELD THAT - Revenue cannot split the cargo handling services into transport services and other services while vivisecting the contract entered by the appellant with H T contractor M/s Durgesh Shukla, for charging service tax under GST category on the RCM basis - CBEC itself vide their Circular dated 8.1.2002 has clarified that for storage, warehousing keeper is required to pay tax under the category of cargo handling services only. Thus, it cannot be held that providing the cargo handling service in which the transportation of goods is also an ancillary activity, can be vivisected into transportation service and other services, such as loading and unloading of the goods, in this case agricultural produce. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Charging of service tax on transportation activities conducted by the appellant through their Handling and Transport (H&T) Contractor. Interpretation of the contract for various activities including handling of goods, transportation, and other related services. Classification of services under cargo handling services for service tax liability. Applicability of Reverse Charge Mechanism (RCM) under the Finance Act.

Analysis:

Issue 1: Charging of Service Tax on Transportation Activities
The appellant, a Government undertaking primarily engaged in storage and warehousing, was charged service tax for transportation activities conducted through their H&T Contractor. The Department conducted an audit and issued a Show Cause Notice for payment of service tax for the period from January 2005 to March 2009. The appellant contested the tax liability based on the nature of services provided and the contract terms with the H&T Contractor.

Issue 2: Interpretation of Contract for Various Activities
The contract with the H&T Contractor specified rates for cargo handling services and included Goods Transport Agency (GTA) services for transportation of goods by road, which became taxable under the Finance Act from January 2005. The appellant argued that the services provided were composite in nature and bundled, with transportation being incidental to the principal supply of cargo handling services. The appellant maintained a consistent classification of services as cargo handling throughout the period in question.

Issue 3: Classification of Services under Cargo Handling Services
The Tribunal referred to a similar case involving Karnataka State Warehousing Corporation, where it was held that activities like loading, unloading, and stacking of goods constitute cargo handling services. The Tribunal emphasized that the Revenue cannot split cargo handling services into separate categories for taxation purposes. The CBEC circular clarified that warehousing keepers are required to pay tax under cargo handling services only. The Tribunal also noted that the H&T Contractor did not issue consignment notes, thus not qualifying as a GTA.

Issue 4: Applicability of Reverse Charge Mechanism (RCM)
The Tribunal ruled in favor of the appellant, stating that the benefit of exemption under Notification No. 10/2002-ST dated 1 August 2002 was available for the appellant's activities during the concerned period. As the H&T Contractor did not issue consignment notes and the services were classified as cargo handling, no service tax liability was found to be leviable on the appellant. The impugned order was set aside, and the appeal was allowed with consequential benefits.

In conclusion, the Tribunal found in favor of the appellant, emphasizing the composite nature of the services provided and the consistent classification of services as cargo handling. The judgment highlighted the importance of interpreting contracts and service classifications accurately to determine service tax liabilities under the applicable laws.