2018 (1) TMI 501 - HC - Service Tax

Classification of services - Cargo Handling Service or Goods Transport Agency Service? - Circular B11/1/2002-TRU dated 1.8.2002 - Circular 186/5/2015-S.T. dated 5th October, 2015 - Negative List - abatement - Held that - From the nature of the services rendered by the petitioners as emerging from the record, in essence and substance, the contract is a contract for transport of goods from the place of the consignor to the place of the consignee or to the port in South India from where the consignee picks up the goods. The petitioners do not carry on any activity of packing and unpacking of goods - Insofar as loading and unloading of goods is concerned, the consignor loads the goods into the container and the consignee unloads the same. It is only when the container reaches the port that it has to be unloaded and loaded on the ship, which is done by the shipping company or a cargo handling agency, which renders such services to the petitioners who act on behalf of the customers - insofar as the service of loading and unloading at the port and shipping of goods from one port to the other is concerned, the petitioners are the recipients of such service from the shipping line and/or the cargo handling service on behalf of the customers. In the facts of the present case, while the petitioners provide the service of transportation, they do not provide any service of packing which is an essential ingredient of cargo handling service when transportation is a component thereof - in terms of the definition of cargo handling service as amended with effect from 16.5.2008, transportation was brought within its ambit, but only when transportation was in conjunction with packing (packing being the principal element) that it amounted to cargo handling service . In the facts of the present case, when the petitioners satisfy the ingredients of the goods transport agency as defined under the Finance Act, there is no question of placing the petitioners under the amorphous category of cargo handling service which is no longer defined under that Act - if a service meets with a specific description, such specific description has to be given a preference over a general description - In the present case, when the service provided by the petitioner falls within the specific description of goods transport agency , the same has to be given preference over the general description of cargo handling service, which is not defined under the Finance Act after the introduction of the negative list regime. Insofar as the applicability of sub-section (3) of section 66F of the Finance Act is concerned, the same is applicable where taxability of bundled service is involved. The entire SCN is based upon a fallacious premise that even if the service provided by the petitioners is mainly goods transport agency, even if any ancillary service of loading or unloading is provided, the transaction would fall within the ambit of cargo handling service. Petition allowed.

Issues Involved:
1. Jurisdiction and maintainability of the writ petition.
2. Classification of services under "Cargo Handling Services" vs. "Goods Transport Agency".
3. Applicability of CBEC circulars and statutory provisions.
4. Principles of interpretation of bundled services under Section 66F of the Finance Act.
5. Validity of the show cause notices issued to the petitioners.

Detailed Analysis:

1. Jurisdiction and Maintainability of the Writ Petition:
The respondents raised a preliminary objection to the maintainability of the writ petition on the grounds that it was filed against show cause notices and involved a classification dispute, which should be adjudicated by the appropriate authorities. The court, however, held that the petitioners were entitled to invoke the writ jurisdiction of the High Court under Article 226 of the Constitution of India because the show cause notices were contrary to binding CBEC circulars and statutory provisions. The court cited the Supreme Court's decision in Deputy Commissioner of Central Excise v. Sushil & Company, which allowed writ petitions when no disputed questions of fact were involved and legal issues were to be decided based on admitted facts.

2. Classification of Services:
The core issue was whether the services provided by the petitioners should be classified under "Cargo Handling Services" or "Goods Transport Agency" (GTA). The petitioners argued that their services fell under GTA, which involves transportation of goods by road and issuance of consignment notes. The respondents contended that the services included elements of cargo handling, thus falling under "Cargo Handling Services," which would attract a higher tax liability.

The court examined the nature of services provided by the petitioners, which primarily involved transportation of goods by road, with ancillary services like loading and unloading being performed by shipping lines or other service providers. The court concluded that the petitioners' services were essentially those of a GTA and not "Cargo Handling Services," as the latter would require an element of packing together with transportation, which was not present in this case.

3. Applicability of CBEC Circulars and Statutory Provisions:
The court referred to various CBEC circulars, including Circular No. B11/1/2002-TRU and Circular No. 104/7/2008-S.T., which clarified that mere transportation of goods does not fall under "Cargo Handling Services." The court noted that the petitioners' services were consistent with the definition of GTA, which remained unchanged even after the introduction of the negative list regime in 2012. The circulars emphasized that a composite service should be treated as a single service based on the main or principal service, which in this case was transportation by road.

4. Principles of Interpretation of Bundled Services under Section 66F:
The respondents argued that under Section 66F(3) of the Finance Act, the taxability of bundled services should be determined based on the service resulting in the highest tax liability. The court, however, held that this provision applies only when a single service provider offers multiple services. In this case, the petitioners provided only GTA services, while other services were rendered by different service providers. Therefore, the principle of bundled services was not applicable.

5. Validity of the Show Cause Notices:
The court found that the show cause notices were based on an incorrect premise that the petitioners' services constituted "Cargo Handling Services." The court held that the services provided by the petitioners did not fall within the ambit of "Cargo Handling Services" as defined under the Finance Act, 1994, either before or after the introduction of the negative list regime. Consequently, the show cause notices were quashed as they were contrary to legal provisions and binding CBEC circulars.

Conclusion:
The High Court quashed the impugned show cause notices dated 8.10.2015 and 30.9.2015, ruling that the services provided by the petitioners fell under "Goods Transport Agency" and not "Cargo Handling Services." The court upheld the maintainability of the writ petition and emphasized the binding nature of CBEC circulars on the classification of services. The court also rejected the respondents' civil application challenging the maintainability of the petition.

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