2025 (1) TMI 430 - AT - Service Tax

Levy of service tax - GTA service or cargo handling service - services provided by the appellant under separate contracts for loading, unloading, shifting, and transportation of iron ore - composite service or not - HELD THAT - the appellant is basically carrying out the activity of loading of iron ore and shifting the same as per the direction of their client, and unloading the same at the other end. The major portion of the contract is towards transportation of the goods. Admittedly, the appellant has been given two different contracts towards loading/shifting and towards transportation of the iron ore - However, it is seen that this arrangement is more in the nature of a convenience so as to make the payments part by part to the appellant for the activities undertaken by them. By such different contracts themselves, the Revenue cannot come to the conclusion that the entire activity would amount to cargo handling service. This Bench in the case of M/S MAA KALIKA TRANSPORT PRIVATE LIMITED VERSUS COMMISSIONER OF CGST CENTRAL EXCISE, ROURKELA, ROURKELA 2023 (7) TMI 435 - CESTAT KOLKATA has gone through a similar issue and has held ' We observe that the contract is a composite contract primarily for the purpose of transportation of coal beyond 180 to 200 KM. The activities like loading, unloading, obtaining delivery orders etc. are incidental or ancillary to the transportation service. The contract has not provided any separate charges for these activities. The composite contract cannot be vivisected to arrive at the value of service for each activity artificially.' It is found that for the period from 2010-11 to 2011-12, the Ld. Commissioner (Appeals) has got the documents verified and has found that the goods in question were actually exported by M/s. Rungta Mines Ltd. Accordingly, he has set aside the demands for the said period - the confirmed demand does not survive. Time limitation - HELD THAT - There are substantial force in the appellant s claim that the confirmed demand for the extended period is hit by time-bar. The appellant is duly registered with the Service Tax Department and admittedly, have been paying Service Tax as well as filing their S.T.-3 Returns. Even the data towards turnover on account of these activities has come to light only on the basis of the Income Tax Returns and P L Account maintained by the appellant. This shows that there has been no attempt on the part of the appellant to suppress any fact - the appellant genuinely believed that no Service Tax was required to be paid on this service. Therefore, they were neither charging the same on their client nor collecting the same and nor paying the same to the Service Tax Department. In view of this factual evidence brought in by the appellant, it is found that the confirmed demand for the extended period is legally not sustainable, on account of time bar - the confirmed demand set aside in respect of the extended period on account of time bar also. Conclusion - The composite contract cannot be vivisected to arrive at the value of service for each activity artificially. Revenue cannot come to the conclusion that the entire activity would amount to cargo handling service. There has been no attempt on the part of the appellant to suppress any fact, demand not sustainable on the ground of time bar also. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the services provided by the appellant under separate contracts for loading, unloading, shifting, and transportation of iron ore should be classified under "cargo handling service" or "goods transport agency (GTA) service".
• Whether the appellant's activities constitute a single composite service primarily for transportation, thereby affecting the service tax liability.
• Whether the invocation of the extended period for demand of service tax is justified.
• Whether the appellant is liable to service tax for services related to export cargo, which are typically exempt.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Services

• Relevant Legal Framework and Precedents: The classification of services is guided by the principles outlined in various Board Circulars, notably Circular No. 104/7/2008-S.T. and Circular No. 186/05/2015-S.T., which clarify that ancillary services provided in the course of transportation by road should be classified under GTA service if they are incidental to the main service.
• Court's Interpretation and Reasoning: The court found that the appellant's activities, although contracted separately, were essentially part of a composite service primarily for transportation. The court relied on the precedent set in M/s. Maa Kalika Transport Pvt. Ltd., which held that such composite contracts should not be artificially divided into separate services.
• Key Evidence and Findings: The court noted that the contracts were structured for convenience in payment and that the major portion of the service was transportation, with loading and unloading being ancillary.
• Application of Law to Facts: The court applied the principles of composite service classification, determining that the appellant's services should be classified under GTA service, thereby affecting the tax liability.
• Treatment of Competing Arguments: The Revenue argued for separate classification under cargo handling, but the court found this approach inconsistent with the nature of the contract and the established legal framework.
• Conclusions: The court concluded that the services should be classified under GTA, not cargo handling, aligning with the appellant's primary service of transportation.

Issue 2: Invocation of Extended Period for Demand

• Relevant Legal Framework and Precedents: The extended period for demand can be invoked in cases of suppression, misrepresentation, or fraud. The court referred to the case of Ugam Chand Bhandari, which emphasized the need for clarity and lack of suppression for invoking such provisions.
• Court's Interpretation and Reasoning: The court found no evidence of suppression or intent to evade tax by the appellant, as the appellant was registered and regularly filed returns.
• Key Evidence and Findings: The court noted that the appellant had not charged or collected service tax from clients, indicating a genuine belief of non-liability.
• Application of Law to Facts: The court determined that the extended period was unjustified due to the lack of suppression and the appellant's transparency in dealings.
• Treatment of Competing Arguments: The Revenue's claim of evasion was unsupported by evidence of suppression, leading the court to reject the extended period invocation.
• Conclusions: The court set aside the demand for the extended period, finding it time-barred.

Issue 3: Tax Liability on Export Services

• Relevant Legal Framework and Precedents: Services related to export cargo are typically exempt from service tax.
• Court's Interpretation and Reasoning: The court accepted evidence of export-related services, aligning with the exemption provisions.
• Key Evidence and Findings: The court considered certificates from a Chartered Accountant confirming the services were for export cargo.
• Application of Law to Facts: The court applied the exemption for export services, negating the tax liability for the appellant.
• Treatment of Competing Arguments: The Revenue's position did not effectively counter the documented evidence of exports.
• Conclusions: The court concluded that the appellant was not liable for service tax on export-related services.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The composite contract cannot be vivisected to arrive at the value of service for each activity artificially." This principle underscores the court's reasoning in classifying the services as a single composite service.
• Core Principles Established: The judgment reinforces the principle that services should be classified based on their primary nature, not on ancillary components, and that genuine belief and transparency negate the invocation of the extended period for tax demands.
• Final Determinations on Each Issue: The court determined that the appellant's services fall under GTA, not cargo handling, that the extended period for demand was unjustified, and that the appellant was not liable for service tax on export-related services.

The judgment ultimately allowed the appeal, setting aside the impugned order and confirming the appellant's eligibility for consequential relief as per law.