2008 (2) TMI 91 - AT - Service Tax

Stevedoring, CHA, cargo handling services held that handling of export cargo & stevedoring within port area are cargo handling services not port service demand not sustainable because cargo handling services are outside the purview of service tax in case of outsourcing of Cargo handling activity, appellant is laible to pay tax if sub-contractor has not paid it tax paid @ Re. 1 per MT on CHA service but dept sought 15% - since assessee regularly filed tax returns, demand is time barred

Summary

Issues Involved:
1. Classification and liability of services under 'Port Services', 'CHA Services', and 'Cargo Handling Services'.
2. Entitlement to credit for service tax already paid.
3. Applicability of service tax on export cargo handling.
4. Time-bar for demand of service tax.
5. Classification of services under 'Business Auxiliary Services'.
6. Imposition of penalties and interest.

Issue-wise Detailed Analysis:

1. Classification and liability of services under 'Port Services', 'CHA Services', and 'Cargo Handling Services':
The appellants, M/s. VBC Exports Ltd., were engaged in providing various taxable services including stevedoring, CHA, and cargo handling services. They had registered for CHA services and were paying service tax accordingly. However, the dispute arose concerning the contracts with M/s. RINL and M/s. PEC Ltd. The Commissioner demanded service tax under 'Port Services' for activities related to handling export cargo, which the Tribunal found incorrect. It was held that handling export cargo falls under 'Cargo Handling Services' and not 'Port Services'. The Tribunal also noted that stevedoring within the port area amounts to 'Cargo Handling' and not 'Port Services'. Hence, the demand of Rs. 41,83,131/- under 'Port Services' was not sustainable.

2. Entitlement to credit for service tax already paid:
The appellants argued that they had already paid service tax to Dock Labour Board (DLB) and Vizag Port Trust (VPT) for stevedoring activities and should be entitled to credit for these payments. The Tribunal directed that the liability for service tax on the contract with M/s. RINL should be recomputed, taking into account the service tax already paid to DLB and VPT. The appellants were required to provide evidence of such payments.

3. Applicability of service tax on export cargo handling:
The appellants contended that services related to the export of wheat and maize under the contract with M/s. PEC Ltd. were exempt from service tax as they related to export cargo handling. The Tribunal agreed, citing that export cargo handling services are excluded from the scope of service tax. Therefore, the demand of Rs. 41,83,131/- under 'Port Services' for these activities was not sustainable.

4. Time-bar for demand of service tax:
The appellants had been filing service tax returns regularly. The Tribunal found that the demand for service tax on CHA services was time-barred as the Department had not raised any issues within the prescribed period despite having the necessary information. Consequently, the demand of Rs. 5,16,296/- for CHA services was set aside.

5. Classification of services under 'Business Auxiliary Services':
The appellants argued that their services could be classified under 'Business Auxiliary Services', which became taxable only from 10-9-2004. However, the Tribunal did not find this argument relevant to the current dispute, as the primary issue was the classification under 'Port Services', 'CHA Services', and 'Cargo Handling Services'.

6. Imposition of penalties and interest:
Given the Tribunal's findings that significant portions of the demand were not sustainable, the imposition of penalties was deemed unwarranted. However, for any recomputed amount of service tax liability, the appellants were liable to discharge interest as per law. The Tribunal remanded the case to the Original authority for recomputation of the liability, considering the service tax already paid and any payments made by sub-contractors.

Conclusion:
The Tribunal set aside the demands of Rs. 41.83 lakhs under 'Port Services' and Rs. 5.16 lakhs under 'CHA Services'. The case was remanded for recomputation of service tax liability under 'Cargo Handling Services' for the contract with M/s. RINL, taking into account the service tax already paid to DLB and VPT and any payments made by sub-contractors. No penalties were imposed, but interest on any recomputed liability was to be discharged as per law. The de novo order was to be issued within four months.