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TMI Blog2018 (2) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... er for the period in dispute mining was not a taxable service. In any case, the activity of movement of sand from warehouse to bunker cannot be considered as mining activity. From the terms of the contract it is apparent that the prime purpose of the contract is to bring the sand from the riverbed/ warehouse to the bunker. The loading or unloading are merely necessary requirements to complete activity of movement of the sand. The contract is primarily intended for the purpose of transportation of sand and the activity of loading/unloading is merely incidental. No tax under the head of Cargo Handling Service can be levied in these circumstances. Appeal allowed - decided in favor of appellant. - Appeal No. ST/252/08 & ST/365/10 - A/85004-85005/2018 - Dated:- 11-1-2018 - Shri Ramesh Nair, Member ( Judicial ) And Shri Raju, Member ( Technical ) Shri V.Sridharan Sr. Advocate with Shri Vinay Jain, Advocate, Sr. No.1 and Shri P.V. Sadavarte Advocate Sr. No.2 for Appellants Shri M.K. Sarangi, Jt. Commr. (A.R) for respondent ORDER Per : Raju These appeals have been filed by M/s. Khandelwal Transport and M/s Khandelwal Earth Movers against orders confirming de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntially a transportation contract. Loading/unloading does not give an essential character to the said activity. Ld. Counsel relied on the Circular No.104/7/2008-ST dated 06.08.2008 to assert that where intermediate and ancillary services like loading/unloading, packing/unpacking are provided in the course of transportation of goods, the same should be treated as single composite service and should be taxed under the category of GTA service. The relevant paragraphs are extracted below:- 3.....Clarification.........The composite service may include various intermediate and ancillary services provided in relation to the principal service of the road transport of goods. Such intermediate and ancillary services may include services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc., which are provided in the course of transportation by road. These services are not provided as independent activities but are the means for successful provision of the principal service, namely, the transportation of goods by road. 2.2. Ld. Counsel argued that the loading is merely ancillary to the transportation service and cannot be taxed separately.The same c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellants contracts are primarily undertaking the activity of transportation of coal. The activity of loading or unloading is undertaken by them to be able to provide the principal service of transportation. Thus, even if such activity is classifiable as Cargo Handling Service, the same is nature of self service for the benefit of appellants themselves and hence is not taxable. 2.4. Ld. Counsel argued that only Handling of cargo is covered under the scope of taxable service. Activities undertaken on goods will be outside the scope of the levy. 3.1 Cargo Handling service has been defined in Section 65(23) of the Finance Act, 1994 as: 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, service provided by a container freight terminal or any other freight terminal, for all modes of transport and cargo handling services incidental to freight but does not include handling of export cargo or passenger baggage or mere transportation of goods. ...Emphasis Supplied He pointed out that the definition was later amended w. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of the aforesaid definitions it can be seen that:- (i) The commercial understanding of the term cargo is the same as freight. (ii) Transportation is the essential criteria in order to term any goods as cargo. (iii) Only goods aboard a vessel, airplane of vehicle would be termed as cargo. 2.7. He argued that cargo can only refer to the goods in transit. Once they are in transit they are cargo. However, once the transport comes to an end, these goods lose the character of cargo and revert to being goods simpliciter. It is important to note that while the transport is halted for a stopover or for a break in the journey, the goods still remain cargo. The key test is thus whether or not the goods are in transit. If yes, then they are cargo. He pointed out that the expression loading U/s 65(23) does not correspond to initial loading of goods but subsequent loading of Cargo by the Cargo Handling Agents when the goods have become cargo. Initial loading at mines are material/goods handling activity and not cargo handling activity. He relied on the decision in case of Signode India Ltd. vs. CCE, 2017-TIOL0-126-SC-ST, wherein Hon ble Supreme Court has drawn a clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harkhand High Court at 2011 (23) STR 6 . In this regard, in para 4 of the said decision of the Hon ble High Court, it was held that the activity of shifting the goods both finished and unfinished goods within the factory premises could not come within the definition of Cargo Handling Service. The said paragraph is extracted below:- 4. In that view of the matter, since the activity of shifting the goods finished and unfinished goods within the factory premises could not come within the definition of cargo handling service and, therefore, this kind of service activity could not be termed as service activity. He argued that the movement of goods within a mining or the factory premises is not covered by the category of Cargo Handling Service. 2.9. Ld. Counsel argued that Cargo handling Services must necessarily be provided by a Cargo Handling Agency. He relied on the definition of the taxable service in the case of Cargo Handling Servicein Section 65(105)(zk) of the Finance Act, 1994 which reads as under :- Taxable service means any service provided to any person, by a Cargo Handling Agency in relation to cargo handling services. (Emphasis Supplied) H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (e) minor minerals means building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other mineral which the Central Government may, by notification in the Official Gazette, declare to be a minor mineral; Thus, he argued that any extraction/excavation of sand will also be covered by scope of mining service w.e.f. 1.6.2007. Hence, no demand can be raised on the entire consideration received from WCL on such mining activity. 2.10. Ld. Counsel also challenged the Quantification of demand as incorrect. He pointed out that show cause notice observed that in absence of bifurcation of transportation value or rate for loading and unloading, the gross payment of ₹ 11,49,38,025/- received by the Appellants from WCL shall be considered to be appropriate and proper on account of services provided in relation to Cargo Handling Services. He argued that in absence of any machinery for determination of value of taxable service, the contract cannot be vivisected to tax. However, in any case, even if appropriation has to be made, it has to be limited to loading and unloading portion of the consideration and not on the transportation char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not relevant to the factum of the present case as the demand in the said case laws was also only on the loading portion as separate heads were given for the loading and the transportation activity. However in the present case composite trade has been given and thus, the said case laws relied upon by the department are factually distinguishable. Ld. Counsel for the Khandelwal Earthmovers relied on the same arguments as above. 3. Ld. AR argued that as per the contract the appellants are involved in loading/unloading and transportation of sand , and getting paid on basis of quantum of sand loaded, hence it is a purely service contract in relating to loading and unloading of sand. 3.1. He argued that the contention that transportation is main activity has been considered by the authority in Para.17.16 of OIO. He argued that loading of sand is the main activity and transportation is incidental. They used to load sand with help of pay loaders into Truck/tippers from river to mines and from mines to another specified area , hence transportation is not main activity. 3.2. Ld. AR pointed out that the contention of the appellant that they have not recovered any amount from WCL t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.07)as recipient of transporters service as no consignment note issued by Transporter. In this case Tribunal followed its earlier decision in case of South Eastern Coalfields , 2017-47-STR-93-T-Del/28.7.16. Hence as the said activity cannot be classified as GTA, it has to be classified as CHS. 3.5. Ld AR argued that the contention of the appellant that the major part of service activity pertains to transportation is not supported by evidence, as rate of loading , unloading and transportation of sand not shown separately. 3.6. Ld AR argued that the demand pertains to period 01.04.03 to 31.10.07, during which there was no controversy, hence plea of bonafide is not correct. He also pointed out that the services rendered were not mentioned in the ST-3 return.He relied on the following decisions ; Lakhan Singh Vs CCE, 2016-46-STR-297-T-Del ( Para.10,11,22) Pratyusha Associate , 2015-36-STR-1145-T-Bang Vodafone Digilink Ltd , 2013-29-STR-229-Raj Touraid Travels Services, 2014-35-STR-234-All 4. We have gone through rival contentions. The activity on which service tax under the head of Cargo Handling Service is sought to be levied is as follows i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different Railway sidings of MCL. Other contractors of MCL transport coal from different parts of the mines and dump at the Railway sidings. The Pay Loaders hired out by the appellant are used for loading of coal from Railway sidings dumps into the Railway Wagons. After loading, the Railway Wagons are dispatched by MCL to their respective customers. The Pay Loaders are owned by the appellant and are supplied to MCL along with operators. The appellant itself undertakes operation, maintenance and upkeep of the Pay Loaders. The control and possession of the Pay Loaders always remains with the appellant throughout the execution of the contract. 7. It is stated that the appellant was awarded contract vide Work Order No. MCL/CG/L/LKPA/SO(M)/Pay Loaders/2-3/17, dated 14/17-12-2002 by MCL for Hiring of Pay Loader for Mechanical transfer of Coal Wagon at MGR Siding No. 5 Lakhanpur Area for transfer of 56 lacs tonnes of coal over a period of two years for a contract value of ₹ 142.24 lacs payable @ ₹ 2.54 per tonne of coal transferred/loaded. Under the contract the appellant had to transfer/load 1800.000 MT. of coal per hour. 8. It is stated that the appellant was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g extraction of coal pillars. Different materials have been used for Backfilling, which is commonly known as stowing, provides stability of ground by preventing land subsidence, reducing mine fire backfilling in underground mine voids such as river sand, fly ash, mine tailing and waste foundry sand (WFS). Thus the purpose of the entire activity is to fill the voids created by the coal mining activity by using sand mined from the riverbed. This activity is done by the appellants is to assist in movement of sand for this purpose from river bed to stockyard/bunker in the premises or from stockyard to bunker. Loading and unloading done during this process of movement of sand in these circumstance becomes only an ancillary activity. In this regard the Circular No. 104/7/2008-ST dated 06.08.2008 issued with reference to GTA service becomes relevant. The relevant paragraphs are extracted below:- 3..Clarification..The composite service may include various intermediate and ancillary services provided in relation to the principal service of the road transport of goods. Such intermediate and ancillary services may include services like loading/unloading, packing/unpacking, transshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from stockyard of Bunker No:10 and Bunker No:12 to Bunker No:10 Bunker No:12 respectively at Nandgaon Incline. (a) Stockyard of Bunker No:10 to Bunker No:10, Lead : 0-1 Km. 45,000 Cumt. Rs.20.50 per Cumt. Rs.9,22,500/- Daily quantity of sand to be transported : 375 Cumt. (b) Stockyard of Bunker No.12 to Bunker No.12 Lead : 0-1 Km. 45,000 Cumt. Rs.20.50 per Cumt. Rs.9,22,500/- Total: 90,000 For Job No.2 Rs.18,45,000/- It can be seen that the contract describes it to be a contract for excavation from riverbed, transportation from riverbed to warehouse and transportation from warehouse to bunker. Rates have been quoted for both on per MT basis but the rate changes with the distance between the origin and destination. In these circumstances we have to examine if the activity is primarily an activity of transportation or of cargo handling. There is no doubt that the activ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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