2014 (7) TMI 1012 - AT - Service Tax

Waiver of pre-deposit - Cargo handling service - whether by way of loading, unloading or transportation or stacking - within the factory premises of RINL these activities would not fall within the ambit of cargo handling service - Held that - The demand under management, maintenance or repair service is to the tune of ₹ 98 lakhs, that under commercial or industrial construction service is to the tune of ₹ 38 lakhs and the rest of the demand (a little over ₹ 1 lakh) is under manpower recruitment or supply agency service - Prima facie, from the description of works, it appears that the first appellant was handling cargo of RINL. This activity was undertaken by way of loading, unloading, stacking etc. and, of course, incidental transportation of the goods also. We are not impressed with the argument that goods are different from cargo . Incidental transportation of any goods would not per se take out such activities from the purview of the definition of cargo handling service - It is not the case of the appellant that they voluntarily disclosed their activities to the department. The departmental knowledge referred to by the learned counsel might be related to visits by the Range Officer to the factory of RINL. But there is nothing on record to show that there was any positive act or gesture on the appellant s part to disclose the material facts to the department or to communicate to the department that they had ever maintained a bona fide belief against service tax liability. The plea of financial hardships raised by the learned counsel has also been considered. The first appellant is a public sector undertaking and the balance sheet produced by them indicates some losses for the year ended 31-3-2011 - Appellant has no prima facie case on merits - stay granted partly. Demand of service tax from Sub-contractor - Held that - There was a circular of the Board, issued in 1997, which also prompted the second appellant to believe that they would not be liable to pay service tax qua sub-contractor. It was only in 2007 that the Board changed the view and clarified that a sub-contractor would also be liable like the main contractor for payment of service tax in respect of a given work. The period of dispute in this case is October 2002 - March 2007. - Full stay granted in respect of sub-contractor.

Summary

Issues:
1. Waiver of pre-deposit and stay of recovery sought by appellants for adjudged dues.
2. Dispute over demand for service tax under various heads like cargo handling service, management, maintenance or repair service, commercial or industrial construction service, and manpower recruitment or supply agency service.
3. Argument regarding activities falling outside the definition of cargo handling service.
4. Plea of financial hardships and limitation raised by the appellants.
5. Liability of sub-contractor for service tax and impact of agreement with main contractor on liability.
6. Consideration of prima facie case, limitation, and financial aspects for both appellants.

Analysis:
The judgment by the Appellate Tribunal CESTAT Bangalore involved the appellants seeking waiver of pre-deposit and stay of recovery for adjudged dues. The case revolved around demands for service tax under different heads, notably cargo handling service, management, maintenance or repair service, commercial or industrial construction service, and manpower recruitment or supply agency service. The first appellant argued that their activities did not fall under the definition of cargo handling service as they were handling goods within the factory premises, not between different locations. They also disputed the demand under other heads citing lack of evidence and financial hardships. The second appellant, a sub-contractor, contended they had no taxable activity and that any liability should be enforced against the main contractor due to an agreement transferring such liability.

Regarding the first appellant, the Tribunal noted a significant portion of the demand was under cargo handling service. Despite arguments against it, the Tribunal found prima facie evidence that the activities fell within this service definition based on the works description. The Tribunal dismissed arguments on goods versus cargo and transportation involvement, citing lack of voluntary disclosure to tax authorities and no substantiation of bona fide belief against service tax liability. Financial hardships were considered, but the Tribunal directed a pre-deposit amount based on the balance sheet. The payment made by the first appellant was acknowledged but not considered for the main services demand.

For the second appellant, the Tribunal acknowledged their belief in no service tax liability based on the agreement with the main contractor and a Board circular until 2007. The Tribunal found merit in the limitation plea due to the circumstances and beliefs instilled by the main contractor, leading to a prima facie case on limitation grounds. Consequently, the Tribunal directed the first appellant to pre-deposit a specified amount, with a waiver and stay of recovery for penalties and remaining dues. The second appellant was granted total waiver of pre-deposit and stay of recovery for the service tax demand and penalties.