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2013 (10) TMI 587 - AT - Service TaxClassification of service - Cargo Handling Services - process right from mine stage to formation of limestone gitties - composite services - essential character - Whether activities of the appellants fall under taxable services of Cargo Handling Service as defined under Section 65(23) of the service Act prior to 10.09.2004 - Held that - appellants are engaged in various activities. Whenever a composite service consisting of different services which cannot be classified in clause 2(a) of Section 65A, services are to be classified as service which gives them essential character of service as per clause 2(b) of Section 65A. We note that Cargo Handling Services does not give essential character of activities of the appellants. We therefore hold that activities of the appellants prior to 10.09.2004 do not fall under Cargo Handling Service as defined under Section 65 (23) of the Act as loading/unloading are only incidental and not the main activity of the appellants - Decided in favour of assessee. Classification of service - Whether activities of the appellants are classifiable under Business Auxiliary Services with effect from 10.09.2004 - Held that - The activities undertaken include, sorting, grading pre-screening, screening and crushing of limestone of various sizes. These activities are more in the nature of processing of raw and crude limestone to Low silica limestone gitties of desired sizes. We are therefore of the view that these activities more appropriately can be termed as processing activities and not production of goods. Since processing has been added in the defined of Business Auxiliary Services with effect from 16.06.2005, we hold these activities are classifiable as Business Auxiliary Services with effect from 16.06.2005 only - Decided in favour of assessee.
Issues Involved:
1. Classification of services provided by the appellants under "Cargo Handling Services" prior to 10.09.2004. 2. Classification of services provided by the appellants under "Business Auxiliary Services" from 10.09.2004. 3. Applicability of penalties under the Finance Act. Issue-wise Detailed Analysis: 1. Classification under "Cargo Handling Services" prior to 10.09.2004: The appellants were engaged in activities such as excavation, transportation, and crushing of limestone for M/s Rajasthan State Mines and Minerals Ltd. The Department contended these activities fell under "Cargo Handling Services" as defined under Section 65(23) of the Finance Act. However, the appellants argued that their primary activity was mining and not cargo handling. The Tribunal noted that the essential character of the service was mining and production of limestone gitties, with loading/unloading being incidental. Therefore, it was held that the activities did not fall under "Cargo Handling Services" prior to 10.09.2004. 2. Classification under "Business Auxiliary Services" from 10.09.2004: The Commissioner classified the services under "Business Auxiliary Services" as defined under Section 65(19) of the Finance Act, which includes services related to the production of goods on behalf of the client. The Tribunal observed that the appellants' activities, such as sorting, grading, and crushing limestone, were more akin to processing rather than production. Since processing was included in the definition of "Business Auxiliary Services" only from 16.06.2005, the Tribunal held that the services were classifiable under "Business Auxiliary Services" from 16.06.2005 and not from 10.09.2004. 3. Applicability of Penalties: The appellants argued that the Show Cause Notice issued on 17.03.2008 for the period 01.02.2003 to 31.03.2007 was time-barred and there was no intention to evade tax. The Tribunal noted that the appellants were already paying service tax under "Business Auxiliary Services" from 16.06.2005. Given that the Tribunal held the appellants were not liable for service tax prior to 16.06.2005 under either "Cargo Handling Services" or "Business Auxiliary Services," it concluded that no penalties were applicable. Summary: - The appellants are not liable for service tax under "Cargo Handling Services" prior to 10.09.2004. - The appellants are not liable for service tax under "Business Auxiliary Services" from 10.09.2004 to 15.06.2005. - The appellants are liable for service tax under "Business Auxiliary Services" from 16.06.2005. - The appellants are not liable for any penalties. Conclusion: The appeal was allowed in the above terms.
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