2012 (4) TMI 430 - AT - Service Tax

Valuation of taxable services - Section 67 - Recovery of amount through Debit notes - unloading, loading and transportation of goods to the plant - No Cenvat credit of tax paid on services of unloading, loading and transportation to bring the goods to their plant - Held that - The contract by the appellant with their customers is for doing crushing and grading of iron ore and also for doing activities like unloading, loading and transportation necessary for this purpose - transportation activity was done by others and paid by the Appellant along with service tax payable for transportation of goods - that the amounts billed by them form part of the value of taxable service rendered and should have paid tax on the full value under the head applicable for crushing and grading - the services of the sub-contractors were provided to the appellants and the appellants were eligible to take Cenvat credit of tax paid on it subject to the condition that the appellants pay tax on the full value of service including the amount accounted as reimbursement for transportation decided against the assessee. Classification of service rendered by the transport contractors whether it is Transportation of Goods or Cargo Handling Service Held that - When there is composite service the service should be classified as per provisions in section 65A of Finance Act, 1994 - it cannot be considered that transportation is for the purpose of loading and unloading but loading and unloading is for transportation. Any person dealing with the situation perceives the services as one for transportation and not for loading and unloading- against Revenue. Revenue detected short payment of tax for incidental charges received by them for the years 2005-06 and 2006-07 (Rs. 317324) - Held that - There is a statement by the Appellants in Appeal Memorandum about a payment of Rs. 10,08,225 on 02-06-06 on this count - the matter appears to be arising out of wrong reconciliation - remit the matter to the adjudicating authority to quantify dues if any on this account and pass an order which brings out the issue clearly.

Summary

Issues Involved:
1. Whether the amounts recovered for unloading, loading, and transportation services should form part of the value of the service rendered by the appellants.
2. Whether the appellants are eligible to take Cenvat credit for the tax paid on unloading, loading, and transportation services.
3. Classification of the service rendered by the transport contractors as either Transportation of Goods or Cargo Handling Service.
4. Short payment of service tax on incidental charges.

Detailed Analysis:

1. Inclusion of amounts recovered for unloading, loading, and transportation services in the value of the service rendered:
The appellants provided services including transportation, crushing, and screening of iron ore. They issued invoices under different series for various services, but did not pay service tax on amounts recovered through TRC series (transportation, loading, and unloading charges) and certain debit notes. Revenue argued that these amounts should be included in the value of the service rendered and taxed accordingly. The tribunal found that the appellants' contracts included transportation as part of the service provided, and the amounts billed were not actual reimbursements but part of the service value. Therefore, the amounts recovered should form part of the taxable service value, and the appellants should have paid tax on the full value, including transportation charges.

2. Eligibility for Cenvat credit on tax paid for unloading, loading, and transportation services:
The appellants claimed Cenvat credit for the service tax paid on services procured from sub-contractors for unloading, loading, and transportation. Revenue contended that these services were not input services for the appellants. The tribunal held that since the services of sub-contractors were provided to the appellants, they were eligible to take Cenvat credit of the tax paid, subject to the condition that the appellants pay tax on the full value of the service, including the amount accounted as reimbursement for transportation.

3. Classification of service rendered by transport contractors:
The tribunal examined whether the service rendered by transport contractors should be classified as Transportation of Goods or Cargo Handling Service. Revenue argued it was cargo handling, involving unloading, loading, and transportation. The tribunal disagreed, stating that the essential character of the service was transportation, with loading and unloading being ancillary. As per section 65A of the Finance Act, 1994, the service should be classified under Transportation of Goods. The tribunal also noted that if it were cargo handling, the tax should have been demanded from the contractors, not the appellants. Therefore, the tax paid by the appellants was properly classified, and they were entitled to credit for the tax paid.

4. Short payment of service tax on incidental charges:
Revenue detected a short payment of Rs. 9,92,721/- on incidental charges. The appellants had paid Rs. 8,78,636/- during the investigation and claimed a further payment of Rs. 10,08,225/-. The tribunal found the matter unclear due to reconciliation issues and remitted it to the adjudicating authority to quantify the dues accurately and pass a clear order.

Conclusion:
The appeal was partially allowed. The tribunal allowed the disputed Cenvat credit and remanded the case for determining the quantum of tax payable. The adjudicating authority was directed to consider submissions regarding time-bar, liability to penalty, and quantum of penalty, and to pass fresh orders. The impugned order was set aside, and the matter was remitted for re-adjudication in line with the tribunal's principles.