2018 (11) TMI 1158 - AT - Service Tax

Classification of services - Terminal Charges - whether classified under the head Port services or under Business Auxiliary Services? - Held that - The activity under taken by the appellant for Railways will be appropriately classifiable under the Business Auxiliary Services , and liable to payment of service tax - reliance placed in the case of Chennai Port Trust vs. Commissioner of Central Excise 2017 (6) TMI 686 - CESTAT CHENNAI - the activity under taken by the appellant for Railways will be appropriately classifiable under the Business Auxiliary Services , and liable to payment of service tax. Time Limitation - Held that - Hon ble Supreme Court in the case of Uniworth Textiles Ltd. vs. Commissioner of Central Excise, Raipur 2013 (1) TMI 616 - SUPREME COURT , in which the Hon ble Supreme Court has observed that mere non-payment of duties is not equivalent to collusion or willful mis-statement or suppression of facts - extended period cannot be invoked - the demand for service tax has to be restricted to the normal time limit in respect of the initial show cause notice dated 26.10.2006. Appeal allowed in part.

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of service tax on Terminal Charges.
3. Invocation of extended period of limitation.
4. Applicable penalties and interest.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The appellant, a body corporate under the Major Port Trusts Act, 1963, entered into an agreement with East Coast Railways (ECR) for interconnecting their railway systems and providing various services such as booking of goods, collection of freight, trafficking of goods, maintenance of assets, shunting, and placement of wagons within the port area. The dispute centered on whether these services, particularly the Terminal Charges received from Railways, fell under the category of 'Port Services' as defined under Section 65(82) of the Finance Act, 1994, or 'Business Auxiliary Services.'

2. Applicability of Service Tax on Terminal Charges:
The department contended that since the services were provided within the port area and related to goods, they should be classified under 'Port Services.' However, the appellant argued that the services were related to railway freight and not vessels or goods, referencing a Railway Board circular and a Ministry of Finance memorandum that suggested such services should be classified under 'Business Auxiliary Services.' The Tribunal referenced a similar case involving Chennai Port Trust, where services were deemed 'Business Auxiliary Services,' and concluded that the appellant's activities should also be classified under this category.

3. Invocation of Extended Period of Limitation:
The appellant challenged the invocation of the extended period of limitation for the demand of service tax, arguing that they had a bona fide belief, supported by a Railway Board memorandum, that no service tax was payable on Terminal Charges under 'Port Services.' The Tribunal agreed, citing the Supreme Court's decision in Uniworth Textiles Ltd. v. Commissioner of Central Excise, Raipur, which stated that mere non-payment of duties does not equate to collusion or willful misstatement. Consequently, the Tribunal restricted the demand to the normal time limit for the initial show cause notice dated 26.10.2006.

4. Applicable Penalties and Interest:
The Tribunal upheld the demand for service tax under 'Business Auxiliary Services' for all impugned orders but restricted the demand to the normal time limit for the initial show cause notice. The penalty under Section 78 was set aside, but penalties under Sections 76 and 77 were upheld. The adjudicating authority was directed to re-quantify the matter, and interest under Section 75 was deemed payable.

Conclusion:
The Tribunal concluded that the services provided by the appellant to the Railways should be classified under 'Business Auxiliary Services' and liable to service tax. The demand for service tax was upheld, but the extended period of limitation was not justified. Penalties under Sections 76 and 77 were upheld, while the penalty under Section 78 was set aside. The adjudicating authority was instructed to re-quantify the demand, and interest was deemed payable.

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