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TMI Blog2014 (12) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... cifically include barge charges and handling charges in the transaction value of the imported goods vide Finance Act, 2007 to overcome the adverse decision in the case of Ispat Industries (2006 (9) TMI 181 - SUPREME COURT OF INDIA). Section 14 was substituted "to specifically provide that transaction value of imported goods shall include, in addition to the price, any amount paid or payable for costs and services, including commissions, cost of transportation to the place of importation, insurance, unloading and handling charges to the extent and in the manner specified in the rules made in this regard". If the bills raised for the services rendered indicates the amount charged for cargo handling and transportation separately on actual basis, then the tax would be leviable only on the cargo handling charges. The contracts entered into with the customers show separately the charges towards shipping charges of cargo from Mother Vessel to Dharamtar jetty. Therefore, there is no merit in the contention that transportation charges should be included in the value of taxable services in respect of cargo handling service. Transport of coastal goods and goods transported through inla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Decided in favour of assessee. - Appeal Nos.ST/85933, 86857 to 86859 & 87184/2013-Mum - Final Order Nos. A/1626-1630/2014-WZB/C-I(CSTB) - Dated:- 16-10-2014 - P R Chandrasekharan and Ramesh Nair, JJ. For the Appellant : Shri Naresh Thakkar With Shri P Choudhary, Advs. For the Respondent : Shri K M Mondal, Spl Consultant JUDGEMENT Per: P.R. Chandrasekharan: There are 4 appeals arising out of Order-In-Original No. 100-103/NG/COMMR/Th-II/2012 dated 29/11/2012 passed by the Commissioner of Central Excise, Thane - II disposing of 4 show cause notices dated 23/10/2008, 10/09/2009, 15/10/2010 21/10/2011 respectively covering the period from 01/07/2003 to 31/03/2011. There is a fifth appeal directed against Order-in-Original No.04/NG/COMMR/Th-II/2013 dated 19/02/2013 passed by the Commissioner of Central Excise, Thane-II disposing of show cause notice dated 27/09/2012 covering the period 01/04/2011 to 31/03/2012. By the impugned orders, the Commissioner has held that the services provided by the appellant merit classification under the category of 'Cargo Handling Services'. Accordingly, the Commissioner has confirmed demands of service tax of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; under Section 65(23) r/w Section 65 (105)(zr) of the Finance Act, 1994, besides demanding service tax along with interest from the appellant and proposing imposition of penalties under Sections 75, 76, 77 78 of the Finance Act, 1994. Later on, 4 more periodical show cause notices dated 10/09/2009, 15/10/2010, 21/10/2011 27/09/2012 were issued by the Commissioner of Service Tax, Mumbai covering the period from 01/04/2008 to 31/03/2012 on the same ground. The demands were confirmed and penalties imposed. Hence these appeals by the appellant. 3. The ld counsel for the appellant made the following submissions:- 3.1 At the outset, a tabular summary of the tax position adopted by the Appellant during the impugned period is set out below. PERIOD POSITION IN LAW TAX TREATMENT ADOPTED BY THE APPELLANT Port to Port Transportation Transportation Through barges Charges for handling activities 16.08.2002 To 30.06.2003 Introduction of entry for Cargo Handling Service No Service Tax applicable No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght amount charged to the customer for the barge transportation of goods from the mother vessel to the jetty forms a part of the assessable value of the imported goods, for the purpose of computation of Customs Duty. The inclusion of the freight amount has been explicitly mandated by the amendments effected to Section 14 of the Customs Act, 1962 read with the Customs Valuation (Determination of Price of imported Goods) Rules, 2007. These amendments were made in order to overcome the decision in Ispat Industries Ltd. Vs. Commissioner of Customs, Mumbai [ 2006 (202) E.L.T. 561 (S.C.)] and ensure the position in law which had always been intended by the Legislature, and accordingly, the said position would equally apply for the period prior to 2007. Therefore, the value of the transportation by transhipment is treated as an intrinsic part of the value of a goods transaction, and the said amount therefore cannot attract the levy of Service Tax simultaneously as being in the nature of consideration for provision of services. Reference is made to the decision in Escotel Mobile communications Ltd. vs. Union of India [2004 (177) E.L.T. 99 (Ker)] wherein it was held that, based on the ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... THE CONTRACTS, AND FOR WHICH SEPARATE INVOICES ARE RAISED The Appellant submits that the contracts with its customers always contain a separate scope of work with separately identified consideration for the barge transportation activity and for the cargo handling activity at the ports. Furthermore, the Appellant always raises separate invoices for the transportation and handling activities, in accordance with Circular F.No. B11/1/2002-TRU dated 01.08.2002. The said Circular clarified that if there a composite contract for transportation and cargo handling, no Service Tax is payable on the transportation limb under the entry for Cargo Handling Service so long as separate invoices are raised. This position has also been upheld in various decisions including: - E.V. Mathai CO. vs. Commissioner of Central Excise, Cochin [2003 (157) ELT 101 (Tri-Bang)] - Bhagyanagar Services vs. Commr. Of C.Ex, Hyderabad [ 2006 (4) S.T.R. 22 (Tri-Bang)] - Southern India Corporation Limited vs. CCE, Trichy [ 2011 (22) S.T.R. 70 (Tri-Chennai)] The Appellant also submits that unless the Department can provide evidence to the contrary, agreements between contracting parties are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dominant nature was transportation, on which no tax was payable. 3.6 THE IMPUGNED ACTIVITY DOES NOT MEET THE REQUIREMENTS OF THE TAXING ENTRY FOR CARGO HANDLING: It is submitted that the taxing entry for Cargo Handling Service only covers freight which is incidental to the activity of cargo handling. In present case, this will at most extend to the activity of internal haulage of the goods from the jetty to the storage area within the port (a maximum of a few hundred metres). However, the barge transportation of the goods over distances ranging from 11 to 55 kilometers cannot by any stretch be construed as an activity of freight which is merely incidental to the cargo handling activity. Furthermore, the taxing entry for Cargo Handling Service specifically excludes cargo which is in the export stream. However, in the present facts, in addition to seeking to levy Service Tax on goods in the import stream, the Respondent has also confirmed the demand in respect of goods in the export stream, which cannot sustain in terms of the taxing entry itself. 3.7 NO LIABILITY UNDER 'PORT SERVICE' PRIOR TO 01/07/2010 The Appellant submits that in many instances, the mother ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transportation of Coastal Goods Services . In this regard, the Appellant places reliance on the Speech of the Hon'ble Finance Minister dated 06/07/2009 while introducing Union Budget 2009-10, in which it was specifically stated at Paragraph 132 that up to 31/08.2009, Service Tax was applicable only on the transportation of goods by road and air, and through pipelines and containers, and it was acknowledged that Service Tax was not levied on transportation by waterways. Therefore, in order to bring about parity in taxation, the transportation of coastal goods or through national/inland waterways was made leviable to Service Tax w.e.f. 01/09/2009. The Appellant also places reliance upon the Circular No. D.O.F. NO. 334/13/2009-TRU dated 06/07/2009-TRU dated 06/07/2009 issued by Ministry of Finance wherein it was clarified that this entry marked the first attempt on the part of the Ministry of Finance to levy Service Tax on transportation of coastal goods. In the light of the above, the Appellant submits that the activity of transportation of goods from port to port was liable to tax only w.e.f. 01/09/2009 post which the Appellant duly discharged the tax. Further, where the coastal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, Shri Sunil Sevantilal Parekh, the MD of the appellant firm, while explaining the nature of activities of the appellant company and the services rendered by it, had, inter alia, stated that they arrange stevedoring labour on board the vessel machines for unloading barges, pay loaders for loading of cargo into trucks. They also arrange barges to approach the Mother Vessels for loading and unloading of cargo and back to the Jetty. The question, therefore, is whether the activities undertaken by the appellant are covered by the 'Cargo Handling Service' under Section 65(23) read with Section 65(105)(zr) of the Finance Act, 1994. 4(c) The definitions of 'Cargo Handling Service' and 'Taxable Service' under Section 65(23) read with 65(105) (zr) of the Finance Act, 1994, were as follows: w.e.f. 16/08/2002 Cargo handling service means loading, unloading, packing or unpacking of cargo and includes, cargo handling services provided for freight in special containers or for non-containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and cargo handling service incidental to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice) or for goods meant to be stored in cold storage have been exempted from the levy of service tax. (See Notification No. 10/2002-S.T.). 4. A point has been raised as to what would be the value of service tax in a case where transport and cargo handling service is provided in a composite manner. The measure of tax is the gross amount charged by the cargo handling agency from the customer. Therefore, if lumpsum amount is charged for both transportation and cargo handling, the tax will be payable on the entire amount. On the other hand, if the bill indicates the amount charged for cargo handling and transportation separately on actuals basis (verifiable by documentary evidence), then the tax would be leviable only on the cargo handling charges. 5. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Whereas USL has agreed to perform stevedoring/barging/transportation, from the Mother Vessel for the jetty, storing the material and loading on CR trucks at plot for final delivery. CR had agreed to grant the contract for above job to USL as set out under: - CR agrees to engage and USL agrees to perform all services necessary for successful discharge of cargo from the Mother Vessel, handling, storage upto loading onto CR trucks: - SCOPE OF WORK (I) A) SHIPPING:- - Shipping charges of sulphur cargo from Mother Vessel to Dharamtar jetty. B) REIMBURSEMENT OF CHARGES: - Reimbursement of expenses incurred at port for wharfage, transshipment and jetty usage charges. C) PORT SERVICES: - On board stevedoring at Mumbai Floating Light/Inner anchorage of Mumbai Port Trust - Unloading of barges of PNP jetty and loading into trucks - Loading of trucks for final dispatch - Weighment of cargo (once) at Dharamtar port - Deployment of security services for your cargo - Transportation to storage areas. - Free storage period upto 30 days from the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rusal: 15. Combined reading of provisions of section 65(105)(zr) and 65(23) of the Act throw light that cargo handling agencies are taxable entities. Cargo handling service provided by such entities attract the levy of service tax. Section 65(23) has a wide amplitude and has brought all like nature activities to its fold expressly and by inclusion of such like nature activities under the class 'cargo handling services'. However classification of service under this category is subject to two exceptions/exclusions: viz.,: (1) handling of export cargo or passenger baggage and (2) mere transportation of goods. These two activities are beyond the scope of such class from taxation for rationale behind them. Accordingly, cargo handling services provided in respect of domestic cargo only are liable to tax. Event of levy arises when service relating to or in relation to handling of cargo is provided by a cargo handling agency irrespective of mode of transport used for movement of such cargo. Precisely, following activities which are contemplated to be taxed as cargo handling service are: (1) By express terms: (A) Loading, unloading, packing or unpacking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice tax. It would amount to double taxation under the Customs Act, 1962 and the Finance Act, 1994. 4(j) It appears that transport of cargo by barges from the Mother Vessels had taken place when the Motor Vessels were at Mumbai Floating Light/Inner Anchorage of Mumbai Port Trust, i.e. when the vessels were already in India. Therefore, there does not appear any legal bar to levy service tax on the services provided in relation to the cargo transported by the barges from the Mother Vessels to the Jetty. It would also not be correct to say that it would amount to double taxation. The levy of customs duty and service tax are under two separate enactments. Therefore, both the levies are permissible simultaneously. In the case of CST, Bangalore V/s. Lincoln Helios (India) Ltd. - 2011 (23) STR 112 (Kar), the Hon'ble High Court has held that excise duty is levied on the aspect of manufacture and service tax is levied on the aspect of services rendered. Therefore, it will not amount to payment of tax twice. 4(k) Total 5 show cause notices have been issued. The 1st Show cause notice dated 23/10/2008 covers the period from 01/07/2003 to 31/03/2008. This show cause is partly within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It would appear to us that the import of goods into India would commence when the same cross into the territorial waters but continues and is completed when the goods become part of the mass of goods within the country; the taxable event being reached at the time when the goods reach the customs barriers and the bill of entry for home consumption is filed. Thus when the goods are being transported by the barges from the mother vessel to the jetty onshore, that activity is part of the import transaction of bringing the goods into India from a place outside India. The question of rendering any service in respect of such goods by way of cargo handling or otherwise can take place only after the customs transaction is completed. Therefore, the question of levying to service tax the transportation by barges from the mother vessel to the jetty onshore, would not arise at all since the said activity is part of the import transaction leviable to import duty and we hold accordingly. 5.3 This is also evident from the fact that section 14 of the Customs Act, 1962 relating to determination of value of import goods for the purposes of levy of customs duty and the Customs Valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Inland Container Depot or Container Freight Station, the cost of freight incurred in the movement of container from the port of entry to the Inland Container Depot or Container Freight Station shall not be included in the cost of transport referred to in clause (a). Explanation.- The cost of transport of the imported goods referred to in clause (a) includes the ship demurrage charges on charted vessels, lighterage or barge charges . These amended provisions came into force with effect from 10/10/2007. The CBEC has also clarified vide circular 34/2009 dated 30/11/2009 that the issue of includibility of barge charges in the value (of imported goods) will be governed by the provisions of section 14 of the Customs Act, 1962 read with the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 for the assessment arising in the period from October 10, 2007 onwards. Thus the question of demand of service tax on barge charges and the handling charges connected therewith would not arise at all with effect from 10/10/2007 as they form an integral part of the transaction value for levy of customs duty. Even for the period prior 10-10-2007, the same position wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the amount charged for cargo handling and transportation separately on actual basis, then the tax would be leviable only on the cargo handling charges. The contracts entered into with the customers show separately the charges towards shipping charges of cargo from Mother Vessel to Dharamtar jetty. Therefore, there is no merit in the contention that transportation charges should be included in the value of taxable services in respect of cargo handling service. 5.5 The next issue for consideration is whether coastal transportation of goods could be levied to service tax under cargo handling service prior to 06/07/2009. Transport of coastal goods and goods transported through inland water came under the purview of service tax levy vide Finance Act, 2009, with effect from 06/07/2009. Vide notification No. 30/2009-ST dated 31/08/2009 transport of coastal goods in respect of items specified in the Table annexed thereto were exempt from service tax. The appellant herein undertook coastal transportation of fertilizers, which is one of the items specified in the notification as eligible for exemption. Revenue is seeking to confirm service tax demand under the category of cargo handling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not. The Tribunal observed that the nature of activity carried out by the appellant therein was to load the cargo into Railway wagons and therefore, it was held that the activity was taxable under cargo handling service. In the Lincoln Helios case, the only question of law considered by the hon'ble High Court was whether setting aside the penalty by the Tribunal was correct when the demand of service tax and interest was upheld and the assessee did not contest the levy. These are not the issues before us nor is there any remote connection with the facts of the case before us. It is a settled position in law as held by the hon'ble apex Court in Al Noori Tobacco Products India Ltd. case [2004 (170) ELT 175 (SC)] that the ratio of a decision can be applied only if the facts are identical. A slight or a material change in the facts could lead to an entirely different conclusion. 6. To conclude, we find that the impugned orders classifying the services rendered by the appellant under cargo handling service and confirming the service tax demands accordingly are clearly unsustainable in law. Accordingly we set aside the same and allow the appeals with consequential relief, if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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