2008 (1) TMI 162 - AT - Service Tax

Whether providing space for storage of export/import goods comes under Cargo Handling Service and excluded from entry for Storage and Warehousing Services circular 11/02 clarifies that the service provided in relation to any cargo which is meant for export would not be taxable - Prima facie, the storage and warehousing services within the CFS should be regarded as in relation to the cargo handling services - strong prima facie case for waiver of the pre-deposit & penalties

Summary

Issues Involved:
1. Taxability of services provided by MIPL to MLOG under "Cargo Handling Services" or "Storage and Warehousing Services".
2. Applicability of service tax on storage services for export goods.
3. Imposition of interest and penalties under the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Taxability of Services Provided by MIPL to MLOG:
The main issue is whether the services provided by MIPL to MLOG and other clients for storing export goods fall under "Cargo Handling Services" as per Section 65(23) of the Finance Act, 1994, or "Storage and Warehousing Services" under Section 65(102) of the Finance Act, 1994. The Commissioner held that the services are taxable under "Storage and Warehousing Services" and confirmed the demand for service tax of Rs. 53,66,874/-. The definition of "cargo handling service" excludes handling of export cargo, which MIPL argued should prevent their services from being taxed under any other category. However, the Commissioner rejected this argument, stating that exclusion from one entry does not preclude inclusion in another.

2. Applicability of Service Tax on Storage Services for Export Goods:
The Tribunal examined whether the storage services provided by MIPL should be considered part of "cargo handling services". Section 65(23) defines "cargo handling service" to exclude export cargo handling. The Tribunal referenced a similar case (Commissioner of Central Excise, Ludhiana v. Dr. Lal Path Lab (P) Ltd), where it was held that specific exclusions in tax definitions prevent those services from being taxed under general categories. The Tribunal found that storage and warehousing services provided by MIPL within the Container Freight Station (CFS) are related to cargo handling services and thus should not be taxed separately.

3. Imposition of Interest and Penalties:
The Commissioner had ordered MIPL to pay interest under Section 75 of the Finance Act, 1994, and imposed penalties equal to the service tax amount under Sections 76 and 78 due to failure to pay service tax and suppression of facts. However, the Tribunal, following the precedent set by the Punjab and Haryana High Court, concluded that the storage services are integral to cargo handling services and thus not taxable. Consequently, the Tribunal waived the pre-deposit of the service tax and penalties, staying the recovery pending the appeal.

Conclusion:
The Tribunal concluded that MIPL's storage services for export goods are part of "cargo handling services" and should not be taxed under "Storage and Warehousing Services". The Tribunal waived the pre-deposit and stayed the recovery of the service tax and penalties, aligning with the precedent that specific exclusions in tax definitions should be respected.