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TMI Blog2025 (2) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... ck 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 adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty based on best judgment assessment under section 72 of the Finance Act. 2. The issue involved in this appeal hinges around the two agreements entered into between the appellant and Container Corporation of India Ltd [CONCOR]. The first agreement is for performing the work of terminal handling of containers at Inland Container Depot, Tughlakabad, New Delhi. The case of the department is that the appellant rendered "cargo handling" service, while the case of the appellant is that it rendered "supply of tangible goods" service. The second agreement is for cargo handling operation in relation to export and import cargo. The case of the appellant is that for handling export cargo, service tax is not leviable, while the case of the department is that no evidence was led by the appellant to substantiate that it had rendered "cargo handling" service for export cargo. FIRST AGREEMENT 3. The appellant entered into an agreement dated 03.08.2007 with CONCOR for performing the work of terminal handling of containers at Inland Container Depot, Tughlakabad, New Delhi at the rates and conditions specified in the Schedule to the agreement. The Schedule of rates for container handling operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clean in all respects. 9.5 The contractor shall give his employees neat and clean uniforms for summer and winter seasons at no extra cost to CONCOR and ensure that all his employees wear laminated Photo-Identity Cards issued by him/CONCOR at contractor's cost. He shall also provide office equipment, communication equipment, etc., as prescribed by CONCOR from time to time for efficient execution of the work. 9.6 The official-in-charge of the ICD, shall be at liberty to object to and require the TO to remove forthwith from the premises any person employed by him if, in opinion of ICD incharge, such person misconducts himself, is incompetent or negligent in proper performance of his duties or whose employment is otherwise considered undesirable. The decision of incharge shall be unquestionable and final and the TO shall be under obligation, to replace such a person. 9.7 All workers and/or personnel employed by the TO shall be engaged by him as his own employees / workmen in all respects implied or expressed. It will be compulsory on the part of the TO to insure all his employees, permanent or temporary, against liabilities of accident, partial or full disability, death, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts 'exim' containers in bonded state. It is responsible to the Customs for the safety of 'exim' cargo during transit and has to furnish a 'continuity bond' of an appropriate amount to the Customs. The contractor will be liable for the element of Customs duty also for any loss or damage to the cargo while the loaded container is in his custody. 11.10 ICD TKD has a local area network (LAN) for transfer and updation of data for maintaining and monitoring of container status on a real time basis. The contractor should be able to deploy suitable staff for data entry operation for the work carried out by the contractor, if desired by CONCOR. 11.11 The contractor shall be liable for all acts of commission or omission of his employees. He shall forthwith discharge any of his employee who is reported by CONCOR to be undisciplined or of poor moral character or incompetent or negligent." 12. PROVISION OF HANDLING EQUIPMENT: 12.1 The Contractor shall ensure that he deploys the specified/required serviceable machinery and plant including handling equipment and equipment of good working condition and manufacturing year as detailed in para 14 below at the Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall ensure that he deploys 2 (two) Loaded Reach Stackers +01 (One) Empty Reach Stacker not older than 2002 model (year of manufacture) in good working condition. The bidder should provide evidence of having required equipments at his disposal either through ownership or hiring/leasing as mentioned in the para no.14. He must indicate the place of its current deployment as on the date of bid to enable CONCOR to ascertain the same. The contractor should also indicate arrangements for hiring/leasing of equipments, which are not owned by him. The contractor should also make necessary arrangements for standby equipments against mechanical and other failures to ensure that the work does not suffer. The arrangements for servicing the equipment dealing with breakdowns etc., should also be made by him. Contractor should also indicate in the tender documents as to how, where and within what time frame, the required Reach stackers will be positioned for operations at ICD. 13.2 Delivery Schedule: The delivery schedule will be as follows: Two (2) Loaded Reach Stackers & One (01) Empty Reach Stacker should be made available fully operational simultaneously within 15 days from the date of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement. The Schedule provides different rates for handling export cargo and import cargo. FACTS 6. The appellant claims that while performing work of terminal handling of containers at ICD, Tughlakabad, it provided "supply of tangible goods" [STG] service, which was made taxable under section 65(105)(zzzzj) of the Finance Act with effect from 16.05.2008 and it discharged service tax liable under this service head from 16.05.2008. According to the department, the appellant rendered "cargo handling" services, as defined under section 65(23) of the Finance Act and made taxable under section 65(105)(zr) of the Finance Act with effect from 16.05.2008 . The appellant contends that it did not discharge service tax on the handling of export cargo as this service is not taxable, but it discharged service tax on the handling of import cargo as it is taxable. 7. The first show cause notice dated 18.04.2012 was issued to the appellant for the period 2006 to 2011 alleging short payment of service tax. It mentions that during the course of audit, copy of the agreement dated 03.08.2007 was provided by the appellant when it was noticed that the appellant had not paid any service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and loading of export cargo and, therefore, the appellant did not pay any service tax as "export cargo" did not fall within the definition of "cargo handling" service. The appellant also pointed out that the extended period of limitation could not have been invoked in the facts and circumstances of the case. 10. The Commissioner did not accept the version of the appellant and confirmed the demand of service tax with penalty and interest. 11. In regard to the first agreement, the Commissioner observed as follows: "12.4 On carefully sifting through the terms of reference given in the said contract dated 03.08.2007, I find that the CONCOR, inter-alia, manages and operates Inland Container Depot (ICD), Tughlakabad (TKD), and the contractor to be appointed shall be the Terminal Operator contractor responsible for handling of containers at ICD, TKD. The Noticee being a terminal operator contractor is required to undertake handling operation of loading and unloading of containers at the location adjoining export/import/bonded warehouse/rail side/ import stacks/export stacks and new HMS yard. For carrying out the contractual work the Noticee is under obligation to have required num ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of export cargo without any supporting documents is exigible to tax. The SCN-I alleges that though the definition of Cargo Handling Service excludes activity relating to export cargo but the Noticee could not provide evidence thereof. Therefore, service tax demand of Rs.1,39,86,381/-for the period 2006-07 to 2010-11 has been raised against the Noticee. For subsequent period 2011-12, service tax demand of Rs.35,25,460/- has also been issued vide SCN-II dated 18.10.2012. 13.2 In this context, I find that the definition of Cargo Handling Service defined under erstwhile Section 65(23) of the Finance Act, 1994 excludes the activities of handling of export cargo. Factually the Noticee did not provide any evidence in course of audit for the amount received during the period 2006-07 to 2010-11 from the CONCOR evidencing that it was on account of services relating to handling of export cargo. The submissions made by the Noticee in this regard are noteworthy which are re-produced below: "We hired Reach stackers to CONCOR. Besides that, we stuffed and de-stuffed export and import cargo that landed in CONCOR's premises. CONCOR refused to pay service tax on some stuffing and destuffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishing that the said amount received by them from CONCOR are related to handling of export cargo. Accordingly, I hold that the Noticee is liable to pay service tax as demanded." (emphasis supplied) 13. This appeal has been filed to assail this order dated 28.11.2016 passed by the Commissioner. 14. Shri Gurdeep Singh, learned counsel for the appellant assisted by Shri Anil Kumar made the following submissions: (i) It is clear from the first agreement dated 03.08.2007 that the appellant provided "supply of tangible goods" service, which service became taxable under section 65(105)(zzzzj) of the Finance Act with effect from 16.05.2008 and the appellant discharged service tax liability under this service head; (ii) The Commissioner committed an error in holding that the appellant provided "cargo handling" service as defined under section 65(23) of the Finance Act and made taxable under section 65(105) (zr) of the Finance Act; (iii) In respect of the second agreement relating to cargo handling operations at ICD, Tughlakabad, no service tax is leviable on handling of export cargo. The appellant provided services relating to handling of both export cargo and import cargo a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws: "4.4 SUPPLY OF TANGIBLE GOODS FOR USE: 4.4.1 Transfer of the right to use any goods is leviable to sales tax/VAT as deemed sale of goods [Article 366(29A)(d) of the Constitution of India], Transfer of right to use involves transfer of both possession and control of the goods to the user of the goods. 4.4.2 Excavators, wheel loaders, dump trucks, crawler carriers, compaction equipment, cranes, etc., offshore construction vessels & barges, geo-technical vessels, tug and barge flotillas, rigs and high value machineries are supplied for use, with no legal right of possession and effective control. Transaction of allowing another person to use the goods, without giving legal right of possession and effective control, not being treated as sale of goods, is treated as service. 4.4.3 Proposal is to levy service tax on such services provided in relation to supply of tangible goods, including machinery, equipment and appliances, for use, with no legal right of possession or effective control. Supply of tangible goods for use and leviable to VAT/sales tax as deemed sale of goods, is not covered under the scope of the proposed service. Whether a transaction involves transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sub-clause (zzzzj), the ingredients that have to be fulfilled are: (i) The provision of a service; (ii) The service is provided by a person to another person; (iii) The service is provided in relation to the supply of tangible goods, including machinery, equipment and appliances; (iv) There is no transfer of the right of possession; (v) Effective control over the goods continues to be with the service provider; and (vi) The goods are supplied for use by the recipient of the service. xxxxxxxxxx 26. Under Section 65(105)(zzzzj), the taxable service is provided or to be provided in relation to the supply of tangible goods for the use of another, without transferring the right of possession and effective control. xxxxxxxxxx 27. The expression "use" does not have a fixed meaning. The content of the expression must be based on the context in which the expression is adopted. The use of an article may or may not result in a visible change in its form or substance. Moreover, the nature of use is conditioned by the kind of article which is put to use. Section 65(105) of the Finance Act, 1994 envisages myriad interpretations of the expression "use", in a vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. The judgment of the Bombay High Court in Indian National Shipowners' Association and Anr. vs. Union of India and Others [2009 (14) S.T.R. 289 (Bom.)] also examined the provisions of section 65(105)(zzzzj) of the Finance Act and this judgment was referred to by the Supreme Court in Adani Gas. The observations of the Bombay High Court are as follows: "38. Entry (zzzzj) is entirely a new entry. Whereas Entry (zzzy) covers services provided to any person in relation to mining of mineral, oil or gas, services covered by Entry (zzzzj) can be identified by the presence of two characteristics namely (a) supply of tangible goods including machinery, equipment and appliances for use, (b) there is no transfer of right of possession and effective control of such machinery, equipment and appliances. According to the members of the 1st petitioner, they supply offshore support vessels to carry out jobs like anchor handling, towing of vessels, supply to rig or platform, diving support, fire fighting etc. Their marine construction barges support offshore construction, provide accommodation, crane support and stoppage area on main deck or equipment. Their harbour tugs are deployed for pilot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to carry out minimum of twelve moves per working hour taking which a penalty could be imposed upon the appellant. The aforesaid terms of the agreement clearly show that the appellant rendered "supply of tangible goods" service to CONCOR. Second Agreement dated 10.11.2003 - Cargo Handling 25. The issue that arises for consideration in regard to the second agreement is as to whether the appellant was justified in not paying service tax for handling operations in respect of export cargo. 26. It is not in dispute that the Schedule to the agreement provides for different rates for handling import cargo and export cargo. The appellant contents that it paid service tax for handling of import cargo but did not pay service tax for handling of export cargo for the reason that this does not fall in the definition of cargo handling. The Commissioner has not accepted the contention of the appellant for the reason that the appellant did not provide any evidence and, therefore, could not establish that the amount received by the appellant from CONCOR related to handling of export cargo. According to the appellant, CONCOR did not pay service tax to the appellant on handling of export cargo a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erusal of these documents and the relevant provisions applicable during the concerned period, we hereby certify the following: (i) That the Company had duly paid service tax on handling of import cargo in view of the definition of "Cargo Handling Service" as provided under Section 65(23) of the Finance Act, 1994.; and (ii) That the Company has not paid any service tax on handling export cargo as it is not liable to pay the same during the period 2006-07 to 2011-12, in view of the specific definition of 'Cargo Handling Service' as provided under Section 65(23) of the Finance Act, 1994. (iii) That the Amount shown in Exports is the amount received towards Handling of Export cargo and not amount billed. (iv) That due to inadvertent mistake export amount was missed in the returns of year 2011-12 and the company via letter dated 10.10.2012, Ref-C.No. DL-II/ST/R-XI/SCN/B. Ghose & Co./98/2012/1136 has shown the export amount to the Department. We have also given the tabular presentation of the details of cargo handling services (both import and export), which is enclosed with this certificate and marked as Annexure - A. This certificate has been issued at the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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