2012 (3) TMI 271 - AT - Service Tax

Cargo Handling Service - The Appellants are engaged in activities of mining for excavation of bauxite ore, loading of the same into trucks at the stock yards, transportation of the same by road and unloading of the same at specified area to BALCO and HINDALCO - revenue issued a Show Cause Notice confirming a Service tax demand along with interest and penalty classifying the activities under Cargo Handling Service - Assessee contented that their contract is for integrated activity of mining and cannot be vivisected and subjected to tax- . For the period from 01-01-05 service tax has been discharged on the entire consideration received for transportation of goods and for the period prior to 01.01.05 no service tax is legally tenable as neither GTA nor Business Auxiliary Service was in force - the Appellants have also the argument that the demands are time barred - the The Ld SDR on the other hand relies on Circular 232/2/2006-CX-4 dated 12-11-07 issued by CBEC when mining service was brought under tax net by Finance Act, 2007 - Held that - In the activities carried out by the appellants there appears to be a small component of loading and unloading of cargo. The contract with BALCO has an integrated rate of ₹ 485 per ton for mining, transportation, loading and unloading - on the entire component of transportation the receiver of the service has already paid service tax under the category of services of Transportation of Goods by Road - The cargo handling activity is incidental to transportation - It can be seen from fixed base transportation charge and there is no attempt to show that this is an unreasonable rate for transportation, jacked up on account of value of cargo handling included in it - Appeal was allowed in the favour of Assessee

Issues Involved:
1. Classification of services rendered by the Appellant.
2. Applicability of service tax for the period prior to 01-06-2007.
3. Time-barred demands.
4. Vivisection of composite contracts for tax purposes.
5. Interpretation of "Cargo Handling Service" under the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Classification of Services Rendered by the Appellant:
The Appellant was engaged in activities related to mining, including excavation, loading, transportation, and unloading of bauxite ore. The Revenue classified these services under "Cargo Handling Service" and demanded service tax. The Appellant contested this classification, arguing that their activities were part of an integrated mining service, which was only brought under the service tax net from 01-06-2007. They claimed that their services should be classified under "mining service" and not "cargo handling service."

2. Applicability of Service Tax for the Period Prior to 01-06-2007:
The Appellant argued that for the period from 01-01-2005, service tax was already paid under "Goods Transport Agency Service" and "Business Auxiliary Service." They contended that no service tax was legally tenable for the period before these categories were in force. The Revenue relied on CBEC Circular 232/2/2006-CX-4 dated 12-11-07, which clarified that certain mining-related services were taxable under "site formation and clearance, excavation and earth-moving and demolition service" from 16-06-2005, and "cargo handling service" and "Goods Transport by Road" for post-mining activities.

3. Time-barred Demands:
The Appellant argued that the demands were time-barred, as the scope of "cargo handling service" was under confusion, evidenced by the Board's Circular dated 12-11-07. They claimed that they had disclosed their contracts to the Department in December 2006 and that there was no intention to evade tax. The Revenue countered that the Appellant did not disclose contract details and failed to file returns, justifying the extended period for demand.

4. Vivisection of Composite Contracts for Tax Purposes:
The Tribunal referred to the Larger Bench decision in CCE Vs. BSBK Pvt. Ltd, which held that turnkey contracts could be vivisected, and discernible service elements could be classified and valued for service tax. The Appellant's argument that their integrated mining activity could not be vivisected was rejected. However, the Tribunal noted that the facts of each case must be considered.

5. Interpretation of "Cargo Handling Service" Under the Finance Act, 1994:
The Tribunal examined the contracts and found that the primary activities were mining and transportation, with a minor component of loading and unloading. The definition of "cargo handling service" excluded "mere transportation." The Tribunal concluded that handling or transportation within a factory or mining area did not amount to cargo handling, as the goods were not considered cargo at that stage. The Appellant's services were deemed to be primarily transportation, not "cargo handling service."

Conclusion:
The Tribunal allowed the appeal, concluding that the services provided by the Appellant were primarily transportation of goods and not cargo handling service. The demand for service tax under "cargo handling service" was set aside, and the appeal was allowed with consequential relief.

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