2017 (9) TMI 791 - AT - Service Tax

Classification of services - Cargo Handling Service - Site Formation Services - CBEC through Circular No. 104/07/2008-ST dated 06.08.2008 - Held that - in the contracts executed by the appellant loading and unloading was incidental and transportation was the essential feature for the contract. The transportation of coal was mostly within the mining area. For the purpose of transportation and loading unloading was undertaken - in the present case transportation of coal was main activity and loading and unloading was incidental to the same. Further there was no activity of packing or unpacking. Therefore, in view of definition of GTA service and Cargo Handling Service and in view of Circular of CBEC dated 06.08.2008, the services rendered by the appellant covered under the above stated show cause notices did not qualified to the definition as Cargo handling Service - Further, the service which was described as site formation service was not in respect of preparation for construction. Therefore, the service which was proposed by Revenue to be covered by Site Formation Service was not eligible to be called Site Formation Service - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Classification of services provided as "Cargo Handling Services" or "Transportation Services."
2. Classification of services provided as "Site Formation Services."
3. Applicability of service tax under GTA and the issue of double taxation.
4. Invocation of extended period for issuing show cause notice.
5. Imposition of penalties and interest.

Detailed Analysis:

1. Classification of Services as "Cargo Handling Services" or "Transportation Services":
The appellants were engaged in transportation and handling of coal within mining areas, including activities like loading, unloading, and manual breaking of coal. Revenue contended that these activities fell under "Cargo Handling Services" as defined in Section 65(23) of the Finance Act, 1994, which includes loading, unloading, packing, or unpacking of cargo. The appellants argued that their primary service was transportation of coal, with loading and unloading being incidental. They cited CBEC Circular No. B.11/1/2002-TRU, which clarified that mere transportation of goods is not covered under cargo handling services. The Tribunal agreed with the appellants, stating that transportation was the essential feature, and loading/unloading were incidental, thus not qualifying as "Cargo Handling Services."

2. Classification of Services as "Site Formation Services":
Revenue claimed that activities like excavation, drilling, and site preparation for mining fell under "Site Formation Services." The appellants countered that these activities were part of mining operations and not for construction purposes. The Tribunal found that the services provided did not qualify as "Site Formation Services" since they were not related to preparation for construction but were part of mining activities.

3. Applicability of Service Tax under GTA and Issue of Double Taxation:
The appellants contended that their services were liable to service tax under "Goods Transport Agency" (GTA) services, where the service recipient is responsible for tax payment. They provided evidence that service recipients like KCIL and IGL had already paid the service tax, arguing that the current demand resulted in double taxation. The Tribunal accepted this argument, noting that the primary service was transportation, covered under GTA, and the service recipients had discharged their tax liabilities.

4. Invocation of Extended Period for Issuing Show Cause Notice:
Revenue invoked the extended period under proviso to Section 73(1) of the Finance Act, 1994, alleging deliberate evasion of duty by the appellants. The appellants argued that the show cause notices were time-barred and that similar notices for subsequent periods were dropped by the Commissioner and Assistant Commissioner. The Tribunal found merit in the appellants' argument, noting that the extended period was not justifiable as the appellants had not concealed material facts.

5. Imposition of Penalties and Interest:
The Original Authority had imposed penalties under Sections 77 and 78 of the Finance Act, 1994, along with interest. Given the Tribunal's findings that the services did not qualify as "Cargo Handling Services" or "Site Formation Services," and considering the double taxation issue, the penalties and interest imposed were set aside.

Conclusion:
The Tribunal set aside the Orders-in-Original dated 30.08.2011 and 20.12.2013, allowing the appeals and entitling the appellants to consequential relief. The services provided by the appellants were classified under GTA, not "Cargo Handling Services" or "Site Formation Services," and the extended period for issuing the show cause notice was not applicable. The imposition of penalties and interest was also overturned.

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