2014 (6) TMI 393 - AT - Service Tax

Demand of service tax - Cargo Handling Service - work orders mention separate rates for transportation, tipper loading and wagon loading and according to the appellant, the invoices had been issued on this basis only. - Held that - Since, the work orders prescribe separate rates for tipper loading that is loading of the coal/mineral ore into the tipper trucks, its transportation up to the railway siding and unloading of the coal/mineral ore into the railway wagons, the appellant s contracts with their clients has to be treated as separate contracts for transportation, loading and unloading of coal/mineral ores, though under one instrument. The coal/mineral ore loaded by the appellant at the coal/mineral ore heaps and thereafter unloaded into the wagons was meant for transportation to its destination by railways and, therefore, the same would have to be treated as cargo and its loading into the tipper trucks and thereafter unloading into the railway wagons would have to be treated as cargo handling service. Since, in this case in the appellant s contracts with their clients, the activity of the loading of the coal/mineral ore into the tipper trucks and its subsequent unloading into the railway wagons for its transportation is clearly identified and separate rates are prescribed for the same, we hold that the service tax would be chargeable on the amount charged by the appellant for these services under Section 65 (105) (Zr) readwith Section 65 (23) of the Finance Act, 1994. - Decided against the assessee. However, service tax would not be chargeable on the amount charged for transportation, as even if this transportation within the mines is treated as GTA service provided by the appellant agency, the liability to pay service tax in respect of this activity would be of the service recipient - Matter remanded back - Decided in favour of assessee. Extended period of limitation - Held that - non-payment of service tax has to be treated on account of bonafide belief of the appellant that their activity was not taxable and accordingly the longer limitation period under proviso to Section 73 (1) of the Finance Act, 1994 would not be available to the Department. - demand beyond the normal period of limitation set aside - Decided in favor of assessee. Levy of penalty - Held that - during the period of dispute there were conflicting decisions by the Tribunal with regards to taxability of the appellant s activity, it has to be held as the non-payment of service tax by the appellant was due to bonafide belief on the part of the appellant that their activity is not taxable. Therefore in view the provisions of Section 80 of the Finance Act, 1994, the penalty under Section 77 and 78 would have to be waived. - Penalty waived - Decided in favor of assessee.

Summary

Issues:
1. Interpretation of the activity of loading and unloading coal/mineral ore within mines as Cargo Handling Service for service tax liability.
2. Applicability of extended period for demand of service tax.
3. Imposition of penalty under Section 77 and 78 of the Finance Act, 1994.

Analysis:

Issue 1: Interpretation of Cargo Handling Service
The appellant's agreements with clients involved loading coal/mineral ore into dumpers at mines and transporting them to railway sidings for unloading into wagons. The department treated this as Cargo Handling Service taxable under the Finance Act 1994. The appellant argued their activity was not solely cargo handling, citing precedents like Sainik Mining and Allied Services Ltd. case. However, the Tribunal found loading/unloading activities within the contracts constituted cargo handling service. The Hon'ble Orissa High Court's judgment supported this view, stating pre-transportation and post-transportation activities fall under cargo handling. The Tribunal held service tax applicable to loading/unloading charges but not transportation charges.

Issue 2: Applicability of Extended Period
The department issued two show cause notices for service tax demand, one within the limitation period and the other invoking the extended period. Conflicting decisions existed on the taxability of similar activities during the dispute period. Considering the appellant's bonafide belief in non-taxability, the Tribunal ruled the longer limitation period couldn't be applied. The duty demand for loading/unloading services was limited to the normal period, to be quantified by the Adjudicating Authority.

Issue 3: Imposition of Penalty
Due to conflicting Tribunal decisions during the dispute period, the Tribunal waived penalties under Section 77 and 78, as the appellant's non-payment of service tax was deemed a result of a genuine belief in non-taxability. This decision was in line with the provisions of Section 80 of the Finance Act, 1994.

In conclusion, the matter was remanded to the Commissioner for quantification of service tax demand within the normal limitation period. Service tax would only apply to loading/unloading charges, not transportation charges. Penalties under Section 77 and 78 were waived due to the appellant's bonafide belief in non-taxability.