2023 (6) TMI 304 - AT - Service Tax

Classification of services - single work order for carrying out the services - Trucking, loading and unloading of dolomite boulders from mines to crusher plant - Haulage of Dolomite from stock-pile/washery through trucks - Loading of dolomite into all types of railway wagons by machine/manual labour, with separate rate for each activity, was entered between the appellant and M/s TISCO - to be classified under the category of transportation within mines as contended by the Appellant or cargo handling services as alleged by the Revenue? HELD THAT - The essence of the service to be provided by the Appellant is of transportation of dolomite within various locations in the mining area and its final loading into railway wagon which is evident from the scope of services. This constitutes a single taxable service for transportation of dolomite within different locations of the mining area involving incidental loading and unloading and finally loading the same at the railway siding. It is certainly not a case that five separate taxable services have been provided under a single work order. The scope of the work order has to be read and interpreted in the context in which it has been awarded and the specification of separate rates for each sub-activity would not render each sub-activity to be a different taxable service. Therefore, separate rates for the various intermediate activities for carrying out this composite service have been provided in the work order - stand of the Revenue is flawed in treating each sub-service/activity as a separate taxable service, based on separate rates for each of them, without ascertaining the essence of the contract. Essential character of this composite service involving transportation and loading - HELD THAT - Once it is found that the services are composite and has elements fitting into the definitions of both the services, recourse is to be taken to Section 65A.We note that Sub-section (2) clause (b) is relevant considering the facts of the case which provides that in case of composite service consisting of a combination of different services which cannot be classified in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, in so far as this criterion is applicable - there must be no doubt in holding that the primary and predominant service which gives the essential character to this composite service is the service of transportation. The Ld. Chartered Accountant for the Appellant has relied on the judgment of the co-ordinate Bench of this Tribunal in the case of COMMISSIONER OF SERVICE TAX, KOLKATA VERSUS M/S. TYCOONS INDUSTRIES (P) LTD. VICE-VERSA 2019 (4) TMI 1418 - CESTAT KOLKATA which is on identical facts as the Appellant in that case had been providing identical services within mines of TISCO and the demand was confirmed under the service category of cargo handling. The Co-ordinate Bench in Para 11 of its order, after examining the terms of agreement held that the essence of the contract is one for transportation of mineral within mining area and thereafter determined the classification of service in accordance with provisions of Section 65A of the Finance Act 1994. Time Limitation - HELD THAT - The show cause notice was issued beyond the normal period of limitation which was one year at that relevant point of time. The issue in the present appeal is one involving interpretation of law. It is further noted that the issue of classification between the services of transportation and cargo handling was a vexed and disputable issue. It is a settled law that invocation of extended period cannot be sustained in such cases. Thus, the demand is not sustainable on the ground of limitation also. The appeal filed by the appellant is allowed on merits as well as on limitation.

Summary

Issues:
The appeal challenges the demand of Service Tax under cargo handling services classification.

Facts:
A single work order involved various services related to dolomite transportation within mines. Show Cause Notice proposed demand under cargo handling services for specific activities. Appellant argued services were for transportation within mines, not cargo handling.

Appellant's Arguments:
Appellant's Chartered Accountant argued services were primarily for transportation based on work order specifications and relevant legal provisions and decisions. Contested the invocation of extended limitation period.

Revenue's Arguments:
Revenue's Authorized Representative relied on judgments to support classification under cargo handling services for the contested activities.

Judgment:
The issue was whether services were transportation within mines or cargo handling. Only specific activities were alleged to be cargo handling. The Tribunal found the essence of the service was transportation within mining areas, with loading and unloading being incidental. The primary service was transportation, not cargo handling.

Precedent:
The Tribunal referred to a similar case where services were classified based on the essential character of the service, leading to a decision favoring transportation classification.

Limitation Issue:
The Tribunal noted the interpretation of law and the disputable nature of the classification issue, concluding that the demand was not sustainable due to the extended limitation period.

Distinguishing Precedent:
A precedent cited by the Revenue involved contracts primarily for loading and unloading, leading to a cargo handling classification. The Tribunal distinguished this case from the current appeal where transportation was the predominant activity.

Conclusion:
The appeal was allowed on merits and limitation grounds, providing consequential relief as per law.