2024 (10) TMI 1258 - AT - Service Tax

Levy of service tax - weighment activity carried out within the Navlakhi Port - classifiable under the taxable category of Business Support Service as defined under Section 65(104c) of Finance Act, 1994 read with Section 65(105)(zzzg) of the Finance Act, 1994 or not - HELD THAT - It is found that the weighbridge activity is an independent activity of the respondent appellant. The weighbridge, therefore, under any circumstances, this activity cannot be classified as Business Support Service as the Respondent is not doing any activity to support in anyone s business. Therefore, firstly, the category of the demand itself is incorrect and on that ground itself the demand raised in the Show Cause Notice does not survive. Consequently, the learned Commissioner (Appeals) has dropped the demand on the ground that the appellant have undertaken the statutory obligation by the activity of weighbridge at the Navlakhi Port. Thus, for the operation of the port, there are some statutory obligation to be performed for smooth operation of the port and such statutory obligations are assigned to different person as in the present case is weighbridge statutory obligation has been assigned to the respondent. Therefore, being a statutory obligation, the same cannot be taxed as held in various judgments cited by the learned counsel for the respondent. Reliance placed in the case of Food Corporation of India 2023 (8) TMI 538 - CESTAT CHANDIGARH where it was held that ' The Business Auxiliary Service means any service in relation to promotion or marketing or sale of goods produced or provided by or belonging to clients. As respondents are not concerned with the sale or marketing of the goods, therefore, cannot be said to be provider of incidental or auxiliary service to any activity such as promotion or marketing or sale of goods produced. In these circumstances, we find no infirmity in the impugned orders. The appeals are dismissed.' From the above judgment not only on the point of statutory obligation but also on the specific activity of weighment, it was held that the said activity is not liable to service tax. Thus, no interference is required in the impugned order - the impugned order is upheld - Revenue s appeal is dismissed.

Issues Involved:

1. Whether the "weighment activity" conducted by the respondent within Navlakhi Port is liable to service tax.
2. Classification of the weighment activity under the taxable category of Business Support Service as defined under Section 65(104c) of the Finance Act, 1994.
3. Whether the activity constitutes a statutory obligation, thereby exempting it from service tax.
4. Applicability of the time bar in raising the demand for service tax.

Detailed Analysis:

1. Liability of Weighment Activity to Service Tax:

The central issue in the Revenue's appeal is whether the respondent's weighment activity within Navlakhi Port is subject to service tax. The Revenue argued that the service provided by the appellant is a private business activity and not a statutory function, thus making it liable for service tax. The appellant, however, contended that the activity is part of a statutory obligation, which exempts it from service tax.

The Tribunal found that the weighment activity is an independent activity and cannot be classified as a Business Support Service. The appellant was performing a statutory obligation essential for the operation of the port, which, as per established legal precedents, is not taxable. The Tribunal referenced several judgments, including those of Instrumentation Ltd. and CST, Hyderabad vs. C.S. Software Ent. P. Ltd., which support the position that activities carried out as sovereign functions are outside the purview of service tax.

2. Classification Under Business Support Service:

The Revenue sought to classify the weighment activity under Business Support Service. The Tribunal, however, determined that the activity does not support any business in a manner that would classify it under Business Support Service. The Tribunal emphasized that the activity of operating a weighbridge does not align with the definition of Business Support Service, as it does not relate to promoting or marketing goods or services. The Tribunal cited judgments such as Deepak Computers and Northern Computer, which held that weighment activities do not constitute Business Auxiliary Service, further supporting the Tribunal's stance.

3. Statutory Obligation and Exemption from Service Tax:

The Tribunal upheld the First Appellate Authority's decision, which quashed the demand on the grounds that the weighment activity was a statutory obligation. The Tribunal noted that statutory obligations assigned for the smooth operation of a port, such as weighbridge operations, cannot be taxed. This conclusion aligns with previous rulings, including the Food Corporation of India case, where similar activities were deemed non-taxable due to their statutory nature.

4. Applicability of Time Bar:

The appellant argued that the demand was time-barred, asserting a bona fide belief that the activity was not taxable. The Tribunal did not explicitly address the time bar issue in its final decision, focusing instead on the classification and statutory obligation aspects, which were sufficient to dismiss the Revenue's appeal.

Conclusion:

The Tribunal dismissed the Revenue's appeal, confirming that the weighment activity performed by the respondent is not subject to service tax. The activity was deemed a statutory obligation and not classifiable under Business Support Service. The Tribunal found no basis for the demand, aligning with established legal precedents and clarifications provided in relevant Circulars. The impugned order was upheld, and the appeal was dismissed.

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