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2023 (4) TMI 664 - AT - Service TaxCENVAT Credit of Service Tax paid - exempt services or not - hire charges for the use of Fork Lift and Cranes for providing cargo handling services in the Inland Container Depot, which were hired from M/s. St. John Heavy Equipment Ltd., for loading, unloading and transporting both export and import cargos - export of services or not - exempt service or not - Circular No. 868/6/2008 dated 09.05.2008 - whether the Revenue is justified in demanding Service Tax at the rate of 8/6% of the value of services rendered and received in respect of export of cargo by treating the handling of export cargo as an exempted service? HELD THAT - It is clear from the definition under Rule 2(e) ibid., as was applicable for the periods under dispute, that an exempted service is one on which no Service Tax is leviable. That is to say, but for the fact that it is exempted, otherwise the tax is leviable. Further, no service could be treated as an exempted service unless it is specified so under Rule 2(e) ibid - The definition of cargo handling service per Section 65 (23) ibid. clearly excludes the handling of export cargo and hence, the lis between the appellant and the Revenue here is whether the exclusion tantamounts to exemption and consequently, whether the same could be brought within the definition under Rule 2(e) ibid. The services which are excluded cannot be given the colour of exemption just to fit it somewhere so that a benefit flowing from the statute to a taxpayer is denied. The words does not include in the definition of cargo handling service takes the service very much out of the purview of taxability, thereby touching upon the jurisdiction of the taxing authority and hence, the same, at no stretch of imagination, could be held or equated with an exempted service. Hence, the services rendered by the appellant in this case, insofar as the same related to the handling of export cargo, is excluded from taxability and thus, the same cannot be brought as exempted under Rule 2(e) ibid. Once it is held as excluded , there is also no scope to consider the same as an exempted service just for the purposes of Rule 6 of the CENVAT Credit Rules, 2004. The Revenue is not justified in demanding the Service Tax by treating the handling of export cargo as an exempted service - Appeal allowed.
Issues Involved:
1. Whether the handling of export cargo by the appellant is an exempted service. 2. Whether the appellant is liable to pay Service Tax on the value of services rendered for export cargo handling. 3. Applicability of Rule 6 of the CENVAT Credit Rules, 2004 to the services provided by the appellant. Summary: Issue 1: Whether the handling of export cargo by the appellant is an exempted service. The appellant, a Cargo Handling Agency, availed CENVAT Credit of Service Tax paid on hire charges for Fork Lifts and Cranes used for export cargo handling. The Department issued Show Cause Notices, proposing that the appellant was not eligible for CENVAT Credit since no separate accounts of input service were maintained, and common input services were used for both taxable and exempted services. The appellant contended that handling export cargo is not an exempted service as defined under Rule 2(e) of the CCR, 2004, and that export services are outside the ambit of Service Tax. The Tribunal noted that the definition of "cargo handling service" under Section 65(23) of the Finance Act, 1994, excludes handling of export cargo, and clarified that exclusion does not equate to exemption. The Tribunal referred to the Karnataka High Court's decision in M/s. Konkan Marine Agencies, which held that handling export cargo does not attract Service Tax. Issue 2: Whether the appellant is liable to pay Service Tax on the value of services rendered for export cargo handling. The Tribunal examined the contentions in light of the definitions under the Finance Act and the CCR, 2004. It was established that handling of export cargo is excluded from the definition of taxable service, and thus, no Service Tax is leviable. The Tribunal emphasized that exclusion from taxability cannot be equated with exemption. Consequently, the services rendered by the appellant for handling export cargo are excluded from taxability. Issue 3: Applicability of Rule 6 of the CENVAT Credit Rules, 2004 to the services provided by the appellant. The Tribunal held that since the handling of export cargo is excluded from taxability, it cannot be considered an exempted service under Rule 2(e) of the CCR, 2004. Therefore, Rule 6 of the CCR, which pertains to the maintenance of separate accounts for input services used for taxable and exempted services, is not applicable to the appellant's case. The Tribunal concluded that the Revenue's demand for Service Tax by treating the handling of export cargo as an exempted service is unjustified. Conclusion: The Tribunal set aside the impugned order and allowed the appeal, holding that the handling of export cargo by the appellant is excluded from taxability and cannot be treated as an exempted service for the purposes of Rule 6 of the CENVAT Credit Rules, 2004. The appellant is not liable to pay Service Tax on the value of services rendered for export cargo handling.
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