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2025 (2) TMI 212 - AT - Service TaxClassification of services - supply of tangible goods services or cargo handing services? - first agreement of performing the work of terminal handling of containers at Inland Container Depot Tughlakabad New Delhi - second agreement of cargo handling operation in relation to export and import cargo - extended period of limitation. First Agreement - Terminal Handling - whether the appellant had provided supply of tangible goods services or cargo handing services to CONCOR? - HELD THAT - The agreement it is seen is for performing the work of handling of containers at ICD Tughlakabad at the rates and conditions specified in the Schedule annexed to the agreement. The rate Schedule clearly shows that an amount of Rs. 8 lakhs is to be paid to the appellant towards hiring of each of the two loaded reach stackers for round the clock operation and Rs. 4.50 lakhs for hiring of one empty reach stacker for round the clock operation. It is therefore clear that CONCOR hired two loaded reach stackers and one empty reach stacker for which the appellant was to receive consideration in terms of money. The rate schedule does not refer to handling of cargo at all and indeed could not have as the agreement is for providing reach stackers to CONCOR - The terms of the agreement clearly show that the appellant rendered supply of tangible goods service to CONCOR. Second Agreement - Cargo Handling - whether the appellant was justified in not paying service tax for handling operations in respect of export cargo? - HELD THAT - The amount received by the appellant for handling of import cargo as also export cargo. This apart as can be seen from the second agreement also the charges to be paid to the appellant for handling of import cargo and export cargo are different - The Court remanded the issue of service tax liability for export cargo handling under the second agreement to the adjudicating authority for fresh consideration allowing the appellant to submit additional evidence. Extended period of limitation - HELD THAT - It is therefore a fit case where the matter needs to be remanded to the adjudicating authority to examine the levy of service tax on handling of export cargo afresh after providing an opportunity to the appellant to substantiate what was contended by the appellant in reply to the show cause notice namely that it had handled export cargo also. The appellant may provides such evidence to the adjudicating authority within a period of six weeks from today. The adjudicating authority shall examine the evidence if submitted. The appellant may also substantiate its submission that the extended period of limitation could not have been invoked in so far as this service is concerned. Conclusion - i) The appellant provided supply of tangible goods services under the first agreement not cargo handling services. ii) The Court remanded the issue of service tax liability for export cargo handling under the second agreement to the adjudicating authority for fresh consideration allowing the appellant to submit additional evidence. iii) It is therefore a fit case where the matter needs to be remanded to the adjudicating authority to examine the levy of service tax on handling of export cargo afresh after providing an opportunity to the appellant to substantiate what was contended by the appellant in reply to the show cause notice namely that it had handled export cargo also. Appeal allowed in part by way of remand.
ISSUES PRESENTED and CONSIDERED
The primary issues considered in this judgment are: 1. Whether the appellant provided "supply of tangible goods" services or "cargo handling" services under the first agreement dated 03.08.2007 with CONCOR. 2. Whether the appellant was justified in not paying service tax for handling operations in respect of export cargo under the second agreement dated 10.11.2003. 3. Whether the extended period of limitation was correctly invoked by the Commissioner for the service tax demands. ISSUE-WISE DETAILED ANALYSIS First Agreement - Terminal Handling The core issue is whether the services provided by the appellant to CONCOR under the first agreement constituted "supply of tangible goods" or "cargo handling" services. The appellant argued that it provided "supply of tangible goods" services, which became taxable from 16.05.2008 under section 65(105)(zzzzj) of the Finance Act. The department, however, contended that the services were "cargo handling" services, taxable under section 65(105)(zr) since 16.08.2002. The relevant legal framework includes section 65(105)(zzzzj) of the Finance Act, which defines "supply of tangible goods" services as providing goods for use without transferring the right of possession and effective control. The Supreme Court's judgment in Adani Gas Ltd. was pivotal, clarifying that "supply of tangible goods" involves enabling the customer's use of goods without transferring possession and control. The Court's interpretation focused on the terms of the agreement, which stipulated that the appellant provided reach stackers to CONCOR for a fee, with no mention of cargo handling. The duties outlined in the agreement further supported the appellant's claim, indicating that the appellant's role was limited to providing equipment and personnel for operating the reach stackers, not handling cargo directly. Based on these findings, the Court concluded that the appellant provided "supply of tangible goods" services, not "cargo handling" services, under the first agreement. Second Agreement - Cargo Handling The issue here was whether the appellant's handling of export cargo was exempt from service tax. The appellant argued that it paid service tax on import cargo but not on export cargo, as the latter was not taxable under section 65(23) of the Finance Act. The Commissioner rejected this claim due to a lack of evidence from the appellant. The appellant provided a Chartered Accountant's certificate, which was not initially submitted to the Commissioner, bifurcating the amounts received for handling import and export cargo. The Court noted that the agreement specified different rates for handling import and export cargo, supporting the appellant's claim. The Court determined that the matter required further examination by the adjudicating authority, allowing the appellant to submit additional evidence to substantiate its claim regarding export cargo handling. Extended Period of Limitation The appellant contested the invocation of the extended period of limitation, arguing that there was no suppression of facts. The Commissioner, however, justified the extended period based on the appellant's failure to provide evidence for export cargo handling. The Court did not make a final determination on this issue, instead remanding it for reconsideration by the adjudicating authority in light of any new evidence submitted by the appellant. SIGNIFICANT HOLDINGS The Court held that the appellant provided "supply of tangible goods" services under the first agreement, not "cargo handling" services. The judgment emphasized that the terms of the agreement and the nature of the services provided were crucial in determining the correct classification of services for taxation purposes. The Court remanded the issue of service tax liability for export cargo handling under the second agreement to the adjudicating authority for fresh consideration, allowing the appellant to submit additional evidence. The Court's decision underscores the importance of clear contractual terms and adequate documentation in disputes over service tax liability. The judgment also highlights the necessity for adjudicating authorities to thoroughly examine evidence and consider the specific context of service agreements when making determinations.
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