2014 (3) TMI 510 - AT - Service Tax

Classification of service - Manpower supply or Cargo Handling Services - Demand of service tax - Penalty u/s 76, 77 & 78 - Interest u/s 75A - Held that - matter referred to larger bench with the following questions (i) Whether the appellant has to be rejected on merits as held by learned Member (Technical) or the same is required to be remanded for reconsideration as held by Member (Judicial). (ii) Whether the invocation of longer period of limitation has to be upheld as observed by the learned Member (Technical) or the matter is required to be remanded for deciding the issue on merits afresh as held by Member (Judicial) (iii) Whether the penalty is to be imposed under section 78 has to be upheld to pay 25% of the same as held by the Learned Member (Technical) or the same is required to be decided afresh in the remand order. (iv) Whether the penalty is to be imposed under section 75A and 76 is to be set aside and penalty under section 77 is to be upheld as observed by the Learned Member (Technical) or penalty have to be re-adjudged by the adjudicating authority in the de novo proceedings.

Issues Involved:
1. Classification of services provided by the appellants.
2. Applicability of service tax under Cargo Handling Services.
3. Invocation of extended period of limitation for demand.
4. Imposition of penalties under various sections of the Finance Act, 1994.

Detailed Analysis:

1. Classification of Services Provided by the Appellants:
The appellants argued that they were merely supplying manpower for specific tasks within the factory premises of CFCL, such as packing, unpacking, loading, and handling goods, and not engaging in Cargo Handling Services. They relied on the Rajasthan High Court decision in S.B. Construction Company Vs. Union of India and other tribunal decisions like J & J Enterprises Vs. CCE, Raipur, and Renu Singh & Co. Vs. CCE, Hyderabad, to support their claim that handling goods within a factory does not fall under Cargo Handling Services.

2. Applicability of Service Tax under Cargo Handling Services:
The Revenue contended that the services rendered by the appellants fell under Cargo Handling Services as defined in the Finance Act, 1994. The contract with CFCL detailed various tasks related to loading cargo into wagons and trucks, which were considered as Cargo Handling Services. The Tribunal noted that handling goods within a factory does not amount to Cargo Handling Services, but the specific tasks listed in the contract involved loading cargo into rail wagons and trucks, thus fitting the definition of Cargo Handling Services.

3. Invocation of Extended Period of Limitation for Demand:
The appellants argued that the demand was time-barred, as they were under a bona fide belief that their activities were not covered by Cargo Handling Services. They cited the Supreme Court decisions in Pahwa Chemicals Private Limited Vs. CCE, Delhi, and CCE Vs. Chemphar Drugs and Chemicals, which held that mere failure to declare does not amount to willful suppression. The Tribunal, however, emphasized that non-registration and non-disclosure of the contract to the department amounted to suppression with the intent to evade tax, justifying the invocation of the extended period of five years.

4. Imposition of Penalties under Various Sections of the Finance Act, 1994:
The Tribunal upheld the imposition of penalties under Section 78, but noted that no option was given to the appellants to pay 25% of the tax amount as penalty within 30 days of receipt of the order, following the Delhi High Court decision in K. P. Pouches Vs. UOI. Penalties under Section 75A and 76 were waived, as they were deemed for the same offense as Section 78, and Section 75A was not in existence when the show cause notices were issued. Penalty under Section 77 was upheld.

Separate Judgments:

Judgment by Mathew John:
The Tribunal concluded that the services provided by the appellants were indeed Cargo Handling Services, and the extended period for demand was applicable due to suppression of facts. The penalties were adjusted as per the applicable legal provisions and precedents.

Judgment by Archana Wadhwa:
Archana Wadhwa dissented, emphasizing that the appellants were merely supplying manpower and were not engaged in Cargo Handling Services. She argued that the lower authorities did not consider the detailed submissions and relevant judicial precedents. She also found the demand time-barred due to the lack of evidence of willful suppression or mis-statement by the appellants. She proposed remanding the matter for fresh consideration on merits and limitation.

Conclusion:
The Tribunal delivered a split judgment, with Mathew John upholding the classification of services as Cargo Handling Services and the extended period of limitation, while Archana Wadhwa called for a remand for reconsideration on both merits and limitation. The penalties were adjusted accordingly, with specific directions for the appellants to be given the option to pay a reduced penalty within 30 days.

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