2012 (7) TMI 566 - AT - Service Tax

Cargo handling service - service tax demand and penalty of identical amount u/s 78, 75A, 76 and 77 - Held that - After examining the activity undertaken by the appellant as reflected in the agreement the prime work for which the contract was awarded to the appellant for crushing, screening and sieving of the dolomite in the mining area. The movement of the end-product from site of one activity to the site of second activity for further work upon the same is within the mining area. As such, it can be safely concluded that the said activity, being within mining area cannot be held to be covered by the definition of cargo handling service. The activity of loading of finally processed dolomites at Dadhapara Railway sidings for transportation of the same to Bhilai would get covered by the definition of cargo handling service as it is not the case of unloading from where transportation has already been completed but a case of loading, for further transportation of the same. The issue involved is of legal interpretation of the definition of the various services and being a complicated issue, the assessee cannot be saddled with any suppression or misstatement or mala fide intention so as to invoke longer period of limitation - direction to re-quantify the demand of the service tax only on consideration received for movement for loading of dolomite for further movement within normal period of limitation - as no mala fide on the part of the appellant, imposition of penalty upon them is not justified - partly allowed in favour of assessee.

Issues Involved:
1. Classification of services provided by the appellant under "cargo handling service".
2. Applicability of service tax and penalties under various sections of the Finance Act, 1994.
3. Interpretation of the term "cargo handling service".
4. Invocation of extended period of limitation for demand.
5. Imposition of penalties.

Detailed Analysis:

1. Classification of Services Provided by the Appellant under "Cargo Handling Service":
The primary issue was whether the services provided by the appellant to SAIL, including breaking, crushing, screening, loading, and transportation of dolomite, fell under the category of "cargo handling service" as defined under section 65 of the Finance Act, 1994. The Commissioner concluded that the activities undertaken by the appellant, such as loading, unloading, and transporting dolomite, satisfied the definition of "cargo handling service". However, the Tribunal found that the main job for which the contract was awarded was the breaking and crushing of dolomite boulders, which did not fall under "cargo handling service". Only the activity of loading dolomite into railway wagons for further transportation to Bhilai was considered as "cargo handling service".

2. Applicability of Service Tax and Penalties:
The Commissioner had confirmed a service tax demand of Rs. 56,36,761/- along with identical penalties under section 78 and additional penalties under sections 75A, 76, and 77 of the Finance Act, 1994. The Tribunal, however, held that only the activity of loading dolomite into railway wagons for transportation to Bhilai was taxable under "cargo handling service". The rest of the activities, being within the mining area and related to the processing of dolomite, were not taxable under this category.

3. Interpretation of the Term "Cargo Handling Service":
The Tribunal examined the definition of "cargo handling service" under section 65 (21) of the Finance Act, 1994, which includes loading, unloading, packing, or unpacking of cargo but excludes mere transportation of goods. The Tribunal referred to several precedents where similar activities were not considered as "cargo handling service". It concluded that the appellant's activities within the mining area did not constitute "cargo handling service", except for the loading of dolomite into railway wagons for further transportation.

4. Invocation of Extended Period of Limitation:
The demand was issued by invoking the extended period of limitation. The Tribunal noted that the issue involved legal interpretation and was contentious, as evidenced by numerous disputes of similar nature. It held that there was no suppression, misstatement, or mala fide intention on the part of the appellant to justify the invocation of the extended period of limitation. Therefore, the demand should be re-quantified within the normal period of limitation.

5. Imposition of Penalties:
Given the absence of mala fide intention and the contentious nature of the issue, the Tribunal found that the imposition of penalties was not justified. It directed the lower authorities to re-quantify the demand of service tax only on the consideration received for the loading of dolomite at Dadhapara Railway sidings for further transportation to Bhilai, within the normal period of limitation.

Conclusion:
The Tribunal concluded that the appellant's activities within the mining area did not fall under "cargo handling service", except for the loading of dolomite into railway wagons for further transportation to Bhilai. It directed the re-quantification of the demand within the normal period of limitation and set aside the penalties imposed. The appeal was disposed of accordingly.

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