2023 (4) TMI 662 - AT - Service Tax

Benefit of exemption - handling of agriculture produce by a cargo handling agency - Classification of services - Port Service or cargo handling service? - case of appellant is that the service under the category of port service also include the service of cargo handling service and since the service provided by them was a cargo handling service - availability of benefit of service tax exemption under notification 10/2002-ST dated 01.08.2002 - HELD THAT - It is an admitted fact that the noticee has rendered services of supervision over internal shifting of cargo within port area, loading, unloading of cargo and reporting thereof. These services would have been covered under the category of cargo handling service if provided outside the port area and therefore it can be construed that the appellant are a cargo handling agency which provide port services to M/S Mundra Port and Special Economic Zone Ltd, Mundra. Thus, in the facts of the case it can be safely concluded that the appellant is a cargo handling agency providing cargo handling service within the port area with authorisation from M/S Mundra Port and Special Economic Zone Ltd, Mundra i.e. a port but by virtue of definition of port services under Section 65(82) read with Section 65(105)(zn) of the Act, they are classified as port service and not cargo handling service . It has also been clarified by CBEC vide Circular No. B/11/1/2002-ST, dated 01.08.2002 - the circular states that Cargo handling services are provided in the port also. Whether such service will be covered in the category of port services or cargo handling service? In this context it may be mentioned that port services cover any service provided in relation to goods or vessels by a port or a person authorized by the port. This includes the cargo handling service provided within the port premises. Therefore, to this extent there may be an overlap in cargo handling service and the port service. However, since port services cover all the services in relation to goods and vessels and therefore more specific to port, the service provided in a port in relation to handling of goods would be appropriately covered under port service and no separate levy will be attracted under the category of cargo handling agency service. Similar would be the case in respect of service provided for storage of goods in the port premises . On carefully reading the notification no. 10/2002-ST dated 01.08.2002, it is found that the exemption is provided to handling of agriculture produce by a cargo handling agency and it is not service specific whether for cargo handling service or for port service . Cargo handling agency can undertake handling of agriculture produce within or outside port. Thus, the appellant were eligible for the benefit of the notification no. 10/2002-ST dated 01.08.2002. Case remanded back the case to the original adjudicating authority to re-determine the demand and decide the case afresh after allowing the benefit of notification no. 10/2002-ST dated 01.08.2002 to the appellant - appeal allowed by way of remand.

Summary

Issues:
The issues involved in the judgment are the classification of services provided by the appellant under "Port Service" or "Cargo Handling Service," eligibility for service tax exemption under notification no. 10/2002-ST, and the correct determination of tax liability.

Classification of Services:
The appellant, engaged in providing services under the category of "Port Service," challenged the tax demand based on the argument that they were actually providing "cargo handling service" and thus eligible for a service tax exemption under notification 10/2002-ST. The appellant contended that their services included supervision of cargo, survey of bulk cargo, and handling of both agriculture and non-agriculture produce. The appellant registered themselves under "Port Service" despite primarily being Cargo Handling Agents. The Tribunal noted that while the services provided by the appellant could be classified as "cargo handling service" if outside the port premises, they were classified as "port service" due to being authorized by the port, as per Section 65(82) and Section 65(105)(zn) of the Act. The Tribunal found that the appellant was eligible for the benefit of the notification no. 10/2002-ST dated 01.08.2002.

Eligibility for Service Tax Exemption:
The appellant argued that they were entitled to a tax liability of Rs. 39,88,858/- from 2006-07, having already paid Rs. 81,09,567/-. The appellant contended that the excess amount paid rendered the demand in the impugned order infructuous. The Departmental representative maintained that the appellant's services fell under "port service" and not "cargo handling service," thus disqualifying them from the benefit of the service tax exemption under notification no. 10/2002-ST. However, the Tribunal found that the appellant, as a cargo handling agency providing services within the port area, was indeed eligible for the exemption under the said notification.

Determination of Tax Liability:
The impugned order confirmed a service tax demand of Rs. 77,22,854/- against the appellant, along with interest and penalties under various sections of the Finance Act, 1994. The appellant had failed to discharge their tax liability for certain periods and had suppressed taxable value, leading to the demand. The Tribunal remanded the case back to the adjudicating authority to re-determine the demand, taking into account the benefit of the aforementioned service tax exemption notification. The appellant was granted an opportunity to provide necessary documents in support of their claim, and a miscellaneous application for additional evidence was disposed of accordingly.