2023 (2) TMI 1315 - AT - Service Tax

Classification of services - Cargo Handling Services or Goods - transporting coal in contractors tipping trucks including loading of coal into said trucks and in some cases loading into Railway wagons, both by the contractor s pay loaders - period from September, 2008 to March, 2010 - time limitation - penalty. Classification of service - HELD THAT - No doubt the Cargo Handling Service has nowhere been defined in the Act, but the department s Circular No. B11/1/2002- TRU, dated 01-08-2002 as has been impressed upon by the learned Counsel for the appellant explains that the services of transporting coupled with loading, unloading, packing, unpacking can be called as Cargo Handling Service if those are done by the authorities as that of Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations etc. Apparently and admittedly the appellant herein is none of these kinds of companies. Hon ble Supreme Court in Sushil Company 2016 (4) TMI 987 - SUPREME COURT has accepted Hon ble High Court interpretation to the Entry viz. Cargo Handling Service where it was observed that there must be a cargo i.e. a packed or unpacked commodity accepted by a transporter or carrier for carrying the same from one destination to another. It is only after the commodity becomes a cargo, its loading and unloading at the freight terminal for being transported by any mode becomes a cargo handling service, if it is provided by an independent agency and the service provider must independently be involved in loadingunloading or packing-unpacking of the cargo. The only reason given by the adjudicating authority for declining the impugned activity to be of that Goods Transport Service is the absence of the consignment note. The mere absence of consignment note is highly insufficient to hold that the activity in question even is not a goods transport agency. The absence of consignment note cannot be the basis for changing classification of the service from Goods Transport Agency service to Cargo Handling Service . With these observations and findings we hold that activity of the appellant has wrongly been held as a Cargo Handling Service - The demand resultantly is held to have wrongly confirmed. Penalty - HELD THAT - The findings of original adjudicating authority, it is found that Section 80 of Finance Act, 1994 has been invoked. This Section permits certain cases where the penalty may not be imposed. While invoking the said section the authority has recorded that party is found to have a reasonable ground to believe that they were not liable for payment of service tax on the impugned activity. Once it is a case of bona fide belief, penalty cannot at all been fastened - It has clearly been held that once assessee is not held liable to pay the penalty for the purpose of Section 80 because of bona fide doubt they entertained, for the said reason, it cannot be said that the case falls in any of the categories under proviso to Section 73 (1) of the Act. Time Limitation - HELD THAT - The recipient in the present case is M/s. NCL. hence, there are no reason with appellant to have registration under service tax regime. The impugned show cause notice has been issued after wrongly invoking the extended period of limitation. Hence, the show cause notice is held to be barred by limitation. The Order under challenge is hereby set aside - Appeal allowed.

Issues Involved:
1. Classification of services as 'Cargo Handling Services' vs. 'Goods Transport Agency Services'.
2. Invocation of extended period of limitation.
3. Requirement of consignment note for classification under 'Goods Transport Agency Services'.
4. Bona fide belief and applicability of Section 80 of the Finance Act, 1994.

Detailed Analysis:

1. Classification of Services:
The primary issue was whether the appellant's activities constituted 'Cargo Handling Services' or 'Goods Transport Agency Services'. The department argued that transporting coal, including loading and unloading, fell under 'Cargo Handling Services' as defined under Section 65(23) of the Finance Act, 1994. However, the appellant contended that their service was merely transportation within the mining area, with loading/unloading being incidental, thus falling under 'Goods Transport Agency Services' as per Section 65(50b).

The Tribunal referred to several precedents and circulars, including Circular No. B11/1/2002-TRU, which clarified that 'Cargo Handling Services' are typically provided by specialized agencies like Container Corporation of India or Airport Authority of India. The Tribunal concluded that the appellant, engaged in transportation within the mining area, did not fit this classification. The Tribunal also noted that the dominant activity was transportation, with loading/unloading being incidental, thus aligning with 'Goods Transport Agency Services'.

2. Invocation of Extended Period of Limitation:
The appellant challenged the invocation of the extended period of limitation, arguing that the demand for the period September 2008 to March 2010 was raised in October 2013, beyond the normal period. The Tribunal noted that the original adjudicating authority had accepted the appellant's reasonable belief of non-liability under Section 80 of the Finance Act, 1994, which precluded the imposition of penalties. This bona fide belief negated the grounds for invoking the extended period of limitation, as there was no willful suppression of facts.

3. Requirement of Consignment Note:
The department argued that the absence of a consignment note disqualified the services from being classified under 'Goods Transport Agency Services'. The Tribunal dismissed this argument, stating that the absence of a consignment note alone was insufficient to reclassify the services as 'Cargo Handling Services'. The Tribunal emphasized that the essential nature of the service should determine its classification, not the presence or absence of a consignment note.

4. Bona Fide Belief and Section 80 of the Finance Act, 1994:
The Tribunal upheld the appellant's claim of bona fide belief, supported by the original adjudicating authority's findings. The Tribunal referenced multiple decisions, including the Supreme Court's ruling in Continental Foundation Jt. Venture, which clarified that bona fide belief precludes the invocation of extended limitation and penalties. The Tribunal also noted that the department had previously issued a show cause notice to M/s. NCL, holding them liable under the reverse charge mechanism for 'Goods Transport Agency Services', reinforcing the appellant's reasonable belief of non-liability.

Conclusion:
The Tribunal set aside the order under challenge, holding that the appellant's activities were wrongly classified as 'Cargo Handling Services' and should be classified as 'Goods Transport Agency Services'. Consequently, the demand was deemed incorrect, and the extended period of limitation was found to be inapplicable. The appeal was allowed, and the show cause notice was declared barred by limitation.

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