2017 (10) TMI 1186 - AT - Service Tax

Cargo Handling Service - loading and transportation of fly ash in terms of contracts with Prism Cement, Satna - The appellants are put to service tax liability only on the ground that the agreement mentions loading as one of the item of work under the scope of contract. Further, unloading charges @ 10 Per MT is separately mentioned - Held that - Admittedly the distance involved in movement of cargo is about 300 KM. In these factual circumstances, we find that allegation and finding that the amount of ₹ 450 Per MT is attributable mainly to cargo handling and incidentally to the transportation is not factually sustainable - Even considering the unloading charges separately mentioned as ₹ 10 Per MT, we find that the contract is overwhelmingly for the work of transporting the cargo of fly ash over a long distance of about 300 KM and unloading charges of about 2% of the transportation charges will not make the contract and the consideration, primarily meant for cargo handling services. There is no factual support for such inference. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the services rendered by the appellant to the client are liable for service tax under the category of 'Cargo Handling Service'?
2. Whether the loading and transportation of fly ash by the appellant constitute cargo handling service subject to service tax liability?

Analysis:
1. The appeal challenged an order confirming service tax liability against the appellant for loading and transportation of fly ash. The appellant contended that they were primarily engaged in transportation, not cargo handling, as per their agreement with the client. The appellant argued that the loading process was mechanized at the supplier's plant, and they were not involved in labor or equipment for loading. The appellant strongly relied on the terms of the agreement and statutory definition to support their position.

2. The Revenue argued that the appellant was engaged in handling cargo at both loading and unloading points, justifying the service tax liability. The contract specified loading as part of the work, along with liaisoning and transportation. The Revenue contended that the appellant's involvement in loading and unloading activities subjected them to service tax. However, the appellate tribunal analyzed the facts and found that the transportation charges were the primary consideration, with unloading charges being a small percentage. The tribunal noted that the loading was mechanized, and the appellant's role was limited to transportation over a significant distance of 300 KM. The tribunal concluded that the service tax liability based on cargo handling services was not factually sustainable and set aside the impugned order.

3. The tribunal emphasized that the contractual agreement focused on transportation, with loading being a minor aspect. The tribunal highlighted that the loading process was mechanized, and the appellant's contribution was limited to transportation. Considering these factors, the tribunal concluded that the service tax liability under cargo handling services was not justified. Therefore, the appeal was allowed, and the impugned order was set aside.