2019 (4) TMI 1417 - AT - Service Tax

Classification of services - Cargo Handling services or otherwise? - handling of iron and steel products at the later stockyard - HELD THAT - The appellant shall take delivery of all the consignments meant for the Company and stacked them in the stockyard in orderly manner and arrange for the delivery of the goods. The agreement outlined four measure operations viz. unloading, transportation (both external and internal) stacking and ExYard delivery - On examination of the agreement, it is observed that the appellant for the purpose of transportation from the platform to the stockyard of the appellant has undertaken the job of loading and unloading operation. Transportation is the main activity for which loading and un-loading are performed. Transportation of the goods would incidentally include loading and unloading, but these activities cannot be covered by the definition of Cargo Handling Services. Board s Circular dated 01.08.2002, clarifies that mere transportation of goods is excluded from the purview of cargo handling services. In the instant case, the payment was made for the performance of cranes, machinery and trucks for undertaking transportation of the goods by the above machinery and trucks, wherein loading and unloading is incidental activity. The payment received by the appellant is not under head of Cargo Handling Services , but for Hire charges on such machineries. It is pertinent to note that the agreement was executed on 8th December, 2000, and the cargo handling service has been notified w.e.f. 16.08.2002. The activity undertaken by the appellant is of transportation of goods and the activities of loading and un-loading are clearly incidental to the main activity of transportation of goods - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the appellant's activities under the agreement with M/s SAIL are liable for payment of service tax under "Cargo Handling Service"?
- Whether the demand for service tax on Cargo Handling Services is justified?
- Whether the demand is time-barred?
- Whether penalty is leviable against the appellant?

Analysis:

Issue 1: Liability for Payment of Service Tax Under "Cargo Handling Service"
The appellant had entered into an agreement with M/s SAIL for handling iron and steel products, involving activities like delivery, transportation, packing, and loading of materials. The Department contended that these activities fell under "Cargo Handling Service" liable for service tax. The appellant argued that transportation and packing were not connected to cargo handling and cited precedents where similar activities were not taxed as cargo handling. The Tribunal analyzed the agreement and activities, concluding that transportation was the main activity, with loading and unloading incidentally involved. The payment received was for machinery hire, not cargo handling services. The Tribunal referenced previous decisions supporting the appellant's position, ultimately ruling that the activities were transportation, not cargo handling.

Issue 2: Justification of Demand for Service Tax on Cargo Handling Services
The Revenue justified the demand based on the agreement's clauses and activities undertaken by the appellant. They argued that all activities were related to handling iron and steel materials, falling within the definition of "Cargo Handling Service." The Revenue opposed the appellant's time bar argument, stating non-registration and non-payment of service tax during the relevant period. However, the Tribunal found that the activities were primarily transportation, not cargo handling, and thus set aside the impugned order.

Issue 3: Time-Barred Demand
The appellant raised the issue of time limitation for the demand, contending that the demand was hit by the time bar. However, the Revenue argued that the appellant's failure to register and pay service tax during the relevant period justified the demand. Despite this, the Tribunal ruled in favor of the appellant, emphasizing that the activities did not constitute cargo handling services, leading to the appeal being allowed.

Issue 4: Penalty
The appellant also argued against the imposition of penalties. However, the Tribunal's decision to set aside the demand for service tax under cargo handling services rendered the question of penalty moot, as the activities were deemed to be transportation services, not subject to penalties related to cargo handling services.

In conclusion, the Tribunal set aside the impugned order, allowing the appellant's appeal and emphasizing that the activities undertaken were transportation services, not cargo handling services subject to service tax.