2014 (1) TMI 1197 - AT - Service Tax

Cargo handling service - Whether packing, labelling, loading and unloading of the goods in question shall amount to cargo handling service - Held that - following the rules of classification enacted in Finance Act, 1994 the activity of packing amounting to manufacture by Central Excise Tariff Act, 1985 shall not be cargo handling service while reading Section 65(19) of Finance Act, 1994 excludes manufacturing of excisable goods from the purview of business auxiliary service and immune from Service Tax. This shows that legislature has recognized the activity of manufacture to be free from Service Tax - when principal activity is manufacture according to Central Excise Tariff Act, 1985 it is not possible to hold that the said activity carried out by appellant shall be cargo handling. We could have come to rescue of Revenue, had there been proper bifurcation of the activities for taxation of the considerations received for each sub-activity carried out - Decided in favour of assessee.

Summary

Issues:
Whether packing, labelling, loading, and unloading of goods amount to cargo handling service for taxation under Service Tax.

Analysis:
The precise issue in the appeals revolved around determining whether the activities of packing, labelling, loading, and unloading of goods constituted cargo handling services subject to Service Tax. The appellant argued that packing and labelling were essential activities for handling oil, which was considered a principal activity and amounted to manufacturing under the Excise Tariff. The appellant contended that taxing them as cargo handling service providers was incorrect.

The Revenue, on the other hand, opposed the appellant's claim and denied the averments made. The case was heard by the Tribunal, and both sides presented their arguments, following which the records were examined.

Upon careful consideration, the Tribunal analyzed the issue as stated in the adjudication order. It was observed that the appellant provided services for packing, labelling, loading, and unloading of goods for specific companies, with packing and labelling being identified as the primary activities. The Tribunal noted that the activity of packing, considered as manufacturing under the Central Excise Tariff Act, 1985, could not be categorized as cargo handling service under the Finance Act, 1994. The legislation excluded the manufacturing of excisable goods from business auxiliary services, making it exempt from Service Tax.

The Tribunal emphasized that when the principal activity was manufacturing, as per the Central Excise Tariff Act, it was not feasible to classify the appellant's activities as cargo handling. The Tribunal highlighted the absence of proper bifurcation by the Revenue for taxing the considerations received for each sub-activity. Consequently, both appeals were allowed, overturning the initial appellate order.

In conclusion, the Tribunal's judgment clarified that activities such as packing and labelling, considered as manufacturing under the Excise Tariff, could not be treated as cargo handling services for the purpose of Service Tax. The decision underscored the legislative recognition of manufacturing activities being exempt from Service Tax, emphasizing the importance of correctly categorizing activities for taxation purposes.