2013 (9) TMI 146 - AT - Service Tax

Tribunal quashes tax liability assessment for coal handling services based on legal interpretation and ambiguity argument.

Narayan Builders Versus CCE, Jaipur

The Tribunal ruled in favor of the appellant, quashing the tax liability assessment for coal handling services provided to a thermal power station. The ... Cargo Handling services - Appellant/assessee entered into an agreement with Kota Thermal Power Station, Kota Rajasthan, inter alia for execution of works for smooth operation of coal handling system including clearing under coal handling operation circle for meeting coal consumption requirements of KTPS units stage (I) to (IV) by unloading of coal wagons at WT No. 1 to 5 and others specified operations in relation thereto – Demand made from assessee regarding coal handling service to KTPS involving service tax liability – Held that:- As per the judgement of High Court of Rajasthan in S.B. Construction Company Vs. Union of India [2006 (8) TMI 28 - HIGH COURT OF JUDICATURE FOR RAJASTHAN (JODHPUR)], High Court ruled that since coal is handled/moved from railway wagons to the site of Thermal Power Station with the aid of the wagon tipping system, to be fed in boiler bunkers through a conveyor system; handling of the coal was through mechanical devices and no motor vehicle was involved in the said handling, it was not a case of Cargo Handling Service The Court further held that the Circular dated 1.8.2002 (earlier referred to in this judgement) also supports the assessee’s claim to immunity to service tax under the category of cargo handling agency service. The Rajasthan High Court proceeded to hold that in the case before it the service provided by the appellant under the contract is a distinct activity of transporting coal from wagons to the site of Thermal Power Station by conveyor belt and not by means of any transportation and the service rendered is not cargo handling service, liable to service tax. Further, Full bench of the Hon’ble Tribunal in Madura Coats Vs. CCE [1995 (10) TMI 128 - CEGAT, MADRAS] clarified that where a conflict of decisions among High Courts does not relate to interpretation of statutory provisions or a notification (and not vires thereof) the decision of the jurisdictional High Court which has jurisdiction in respect of the authority which adjudicated the matter initially and of the assessee and has taken a particular view of interpretation or proposition of law, must be followed in cases falling within that jurisdiction - Decision of Orissa High Court in Coal Carriers Vs. CCE - [2011 (2) TMI 1140 - ORISSA HIGH COURT] which is in favor of revenue is not applicable in this case - Since the Rajathan High Court in S.B. Construction has interpreted Section 65(23) of the Act, in favour of the assessee the assessee must succeed Extended period of limitation – Held that:- Supreme Court in Uniworth Textiles Ltd. Vs. CCE [2013 (1) TMI 616 - SUPREME COURT], analysed the scope of Section 28 of the Customs Act, 1962 and having considered several earlier judgements on the appropriateness of invoking the extended period of limitation in the said provision of Customs Act, concluded that the expression ‘willful’ which precedes the phrase ‘mis-statement or suppression of facts’ clearly indicates that there must be an intention on the part of the assessee to evade duty; that mere failure to declare does not amount to wilful suppression of fact nor mere contravention of any provision would be sufficient to legitimise invocation of the extended period of limitation. Held that:- In the facts and circumstances of this case that the assessee was persuaded by the ambiguity of Board’s circular dated 1.8.2002 to assume that it was immune to the liability to service tax, since its contractual activity did not involve onward transportation of the coal unloaded from wagons within the premises of the Kota Thermal Power Plant. In the facts and circumstances of the case, we do not consider it appropriate or necessary to pursue an analysis of whether the petitioner was at all involved in the activity of unloading coal from the rail/wagons as part it is contractual obligation - Appeal must succeed and is accordingly allowed – Decided in favor of Assessee. Issues:1. Assessment of service tax liability for coal handling services provided to a thermal power station.2. Interpretation of Section 65(23) of the Finance Act, 1994 regarding cargo handling services.3. Conflict between judgments of different High Courts on the applicability of service tax to coal handling activities.4. Invocation of extended period of limitation under the Proviso to Section 73(1) of the Act.Analysis:1. The appellant was assessed to a service tax liability for providing coal handling services to a thermal power station. The dispute arose from a Show Cause Notice alleging non-payment of service tax amounting to Rs.7,55,357/- for the period between 22.10.2003 to 14.9.2004. The appellant contested this liability based on a circular that clarified the scope of taxable services under Section 65(23) of the Act.2. The key issue revolved around the interpretation of Section 65(23) of the Act concerning cargo handling services. The appellant argued that their activities of unloading coal wagons at the power station did not fall under the definition of cargo handling service as per relevant legal provisions and precedents. The Revenue, however, relied on a different interpretation based on the judgment of the Orissa High Court in Coal Carriers case.3. The conflict between judgments of various High Courts added complexity to the case. While decisions from the High Court of Rajasthan favored the appellant's position by excluding certain coal handling activities from the purview of cargo handling services, the Orissa High Court's ruling in Coal Carriers case supported the Revenue's stance. The Tribunal had to determine which interpretation of Section 65(23) would apply in this scenario.4. Additionally, the appellant challenged the invocation of the extended period of limitation under the Proviso to Section 73(1) of the Act. They argued that their belief in being exempt from service tax, based on the circular and judicial precedents, justified their non-payment. Citing the Supreme Court's judgment in Uniworth Textiles Ltd. case, the appellant contended that mere failure to declare does not constitute willful suppression of facts, warranting the extended period of limitation.In conclusion, the Tribunal ruled in favor of the appellant, quashing the adjudication order and the appellate order confirming the tax liability. The decision was based on the interpretation of Section 65(23) as per the judgment of the Rajasthan High Court, which had jurisdiction over the matter. The Tribunal also considered the appellant's reasonable belief in their exemption from service tax due to the ambiguity in the circular, thereby allowing the appeal.