2018 (11) TMI 33 - AT - Service Tax

Classification of services - loading, transport and unloading of coal from mining - whether classified under Goods Transport Agency Services or under the head Cargo Handling Services? - reverse charge mechanism - Held that - In terms of 65A (2)(b), that the classification in the case of combined service is to be decided by analyzing the fact as to which service gives essential character to the service being performed - As can be seen from the contract that the essential character of the service for which contract has been entered by the service provider is that the service received are for transportation of coal for mining area to the railway siding and the activity of loading/ unloading mechanically or otherwise is only incidental to the activity of transportation of the cargo in these cases - the service provided by the appellants have rightly been classified in the Goods Transportation Agency service. Tis issue has already been examined by the Hon ble Supreme Court in their decision in the case of CCE & ST Raipur Vs Singh Transporters 2017 (7) TMI 494 - SUPREME COURT wherein the Hon ble Supreme Court has held that activity undertaken by the assessee of transporting of coal from the pithead of the mines to railway siding is more appropriately classifiable under service head of Transport of Goods by road services. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of services - Goods Transport Agency Services vs. Cargo Handling Services

Analysis:
The case involved the appellants providing taxable services categorized as "Goods Transport Agency Services" to a company during a specific period. Show Cause Notices were issued alleging that the services fell under "Cargo Handling Services." The main issue was whether the services provided should be classified as cargo handling services or if the service tax was correctly paid by the recipient under Goods Transportation Agency service on a reverse charge basis.

The Tribunal examined sample contracts to determine the nature of services provided. The contracts indicated that the rates were primarily based on transportation distance and were subject to escalation based on fuel price changes, emphasizing that the rates were predominantly for transportation rather than cargo handling.

Referring to Section 65A of the Finance Act, 1994, the Tribunal analyzed the classification of taxable services. It was noted that in cases of combined services, the essential character of the service should determine the classification. In this case, the essential character was deemed to be transportation of coal, making it appropriate for classification under Goods Transportation Agency service.

The Tribunal also cited a previous Supreme Court decision where it was held that transporting coal from mines to railway sidings falls under "transport of goods by road service" rather than services related to mining activities. This precedent supported the Tribunal's classification of the services provided by the appellants.

Consequently, the Tribunal ruled in favor of the appellants, setting aside the impugned order and allowing the appeal with any consequential relief.