2008 (6) TMI 1 - AT - Service Tax

Cargo handling services versus Transport of goods by Air - Transport of goods by air services brought into tax net with effect from 10-9-2004 without disturbing already existing entries relating to cargo handling services demand raised for the period before 10-9-2004 is not sustainable and therefore tribunal set-aside the order-in-original

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of service tax under the category of "Cargo Handling Services".
3. Interpretation of the term "Cargo Handling Services".
4. Applicability of the new service tax entry "Transport of Goods by Air".
5. Legitimacy of the extended period for issuing the show cause notice.
6. Relevance of the Board circulars and Tribunal decisions.

Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The appellant contended that they are primarily engaged in the business of air transportation of passengers and goods. They argued that their services are restricted to the transportation of cargo from one air cargo station to another and do not include cargo handling services. The Deputy Commissioner initially accepted this argument, dropping the service tax demand, but the Commissioner later reversed this decision.

2. Applicability of Service Tax under the Category of "Cargo Handling Services":
The show cause notice proposed a service tax demand on the grounds that the appellant was providing "Cargo Handling Services" under Section 69 of the Finance Act, 1994. The appellant argued that they do not provide such services. They emphasized that they do not collect cargo from the shipper's premises nor deliver it to the consignee's premises, which are key aspects of cargo handling services.

3. Interpretation of the Term "Cargo Handling Services":
The definition of "Cargo Handling Services" under Section 65(23) categorically excludes "mere transportation of cargo". The appellant argued that their activities fall under this exclusion. They cited Circular No.F.No.B-11/1/2002-TRU dated August 1, 2002, which clarifies that cargo handling services include activities by entities like Container Corporation of India and Airport Authority of India, but not airlines.

4. Applicability of the New Service Tax Entry "Transport of Goods by Air":
The appellant pointed out that "Transport of Goods by Air" was introduced as a taxable service from September 10, 2004. They argued that this new entry indicates that their services were not previously taxable under the "Cargo Handling Services" category. They relied on the Tribunal decision in the case of Glaxo Smithkline Pharmaceuticals Ltd. vs. C.C.E., Mumbai.

5. Legitimacy of the Extended Period for Issuing the Show Cause Notice:
The appellant challenged the invocation of the extended period for issuing the show cause notice, arguing that there was no positive act of suppression on their part. They contended that the longer period was unjustified.

6. Relevance of the Board Circulars and Tribunal Decisions:
The Tribunal referred to various Board circulars and previous Tribunal decisions to support the appellant's case. They noted that the Board circular dated September 10, 2004, clarified that charges related to storing, handling, loading, and unloading in relation to air transportation of cargo are subject to service tax under "Transport of Goods by Air". This implies that such services were not covered under "Cargo Handling Services" earlier. The Tribunal also referenced the decision in Dr. Lal Path Lab (P) Ltd. vs. C.C.E., Ludhiana, which supported the view that incidental services related to transportation do not constitute cargo handling services.

Conclusion:
The Tribunal concluded that the appellant is not a cargo handling agency but an airline engaged in the transportation of goods. They held that the services provided by the appellant do not fall under the category of "Cargo Handling Services" but are part of the transportation of goods by air. The Tribunal set aside the impugned order and allowed the appeal with consequential relief to the appellant.

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