2024 (4) TMI 864 - AT - Service Tax

Classification of services - transporting coal from one location to another - GTA services or cargo handling service - reverse charge mechanism - HELD THAT - When WCL required a service provider to move the coal from one location to another and for this purpose engaged the service of the appellant the essential part of the contract is of transportation. Loading and unloading are incidental to it. Loading and unloading per se are of no use except when they are in conjunction with the transportation. The intention of the WCL is to transport coal and in the process it also gets loaded on to the truck and unloaded at the destination. While the activities such as packing loading unloading and unpacking may take substantial time and may even take longer than the actual transportation the main purpose of the contract is to transport the goods from the old to the new residence which is the essential character of the service and packing loading unloading and unpacking are mere incidental activities to the main function of transportation. WCL has already paid service tax on reverse charge basis on the transportation of coal under reverse charge. Therefore the demand of service tax on the same service again from the appellant classifying it as cargo handling service cannot be sustained. The impugned order is set aside - appeal allowed.

Summary

Issues Involved: Classification of services under 'cargo handling service', time limitation for Show Cause Notice (SCN), imposition of penalties under Finance Act, 1994.

Classification of Services under 'Cargo Handling Service': The appellant provided coal transportation services to M/s. Western Coalfields Ltd. and was responsible for loading and unloading the coal. The department contended that this service fell under 'cargo handling service'. The appellant argued that their primary service was transportation, with loading and unloading being incidental. The Tribunal found that the essential character of the contract was transportation, with loading and unloading being ancillary activities. The Tribunal compared it to hiring a transport company for shifting residence, where transportation is the main purpose and other activities are incidental. The Tribunal held that the demand for service tax under 'cargo handling service' was not sustainable as WCL had already paid service tax on reverse charge basis for transportation.

Time Limitation for Show Cause Notice (SCN): The Deputy Commissioner had issued an SCN in 2009 within the normal period of limitation, which indicated awareness of the appellant's activities. Subsequently, another SCN was issued in 2011 invoking an extended period of limitation. The Tribunal ruled that the 2011 SCN was time-barred as the department was already aware of the appellant's activities and had issued a previous SCN within the normal limitation period. Therefore, the 2011 SCN covering an earlier period was deemed void.

Imposition of Penalties under Finance Act, 1994: The department had proposed penalties under sections 76, 77, and 78 of the Finance Act, 1994. The appellant argued that since they were not liable to pay service tax, interest should not be charged, and penalties should be set aside. The Tribunal allowed the appeal, set aside the impugned order, and provided consequential relief to the appellant. The order was pronounced in open court on 22/04/2024.