2023 (4) TMI 1325 - AT - Service Tax

Goods transport contracts from factory to depots, job workers or customers held transportation, not 'Cargo Handling Service'; tax demand set aside.

The dominant issue was whether contracts for movement of goods by road/rail/sea from a manufacturer's premises to depots, job workers, or customers ... Classification of services - Cargo Handling Services or not - movement of goods from the premises of M/s Essar Steel Ltd. to Essar Steel Ltd.‟s Depot/ Job workers/ premises of their customers - Demand of service tax - Cargo Handling Service - sea freight and rail freight components - Extended period of Limitation - Suppression of facts or not. Classification of services - Cargo Handling Services or not - movement of goods from the premises of M/s Essar Steel Ltd. to Essar Steel Ltd.‟s Depot/ Job workers/ premises of their customers - HELD THAT:- The statutory definition of cargo handling service makes it clear that loading, unloading, handling of cargo for all modes of transport and any other service incidental to freight would be covered by the definition of “cargo handling”. The definition also very clearly specifies that mere transportation of goods will not be considered as cargo handling service. The definition itself clarifies that if the activity is only of transportation, then the said activity cannot be called as cargo handling service. The activities undertaken by the appellants under the disputed contract and discussed by the Learned Commissioner in impugned order primarily involves transportation of goods via Road/ Rail/ Sea. The activities incidentally even if involve some loading and unloading of goods while carrying out the principal activities under the contracts, such incidental activities of loading and unloading undertaken by the appellant cannot give the entire contracted activities the character of „cargo handling services‟. As such, the activities undertaken by the Appellant are primarily in the nature of transportation. Also, this Tribunal in COMMISSIONER OF SERVICE TAX, RANCHI VERSUS M/S HEC LTD. [2018 (3) TMI 19 - CESTAT KOLKATA] on a similar issue has held that 'The activities carried out by the assessee-respondents are primarily transportation of goods and loading & unloading, etc., which are incidental to the transportation of goods. Such activities cannot be covered within the services of „Cargo Handling‟ as has been rightly held by the lower authorities.' Demand of service tax - Cargo Handling Service - sea freight and rail freight components - HELD THAT:- In the present matter revenue could not satisfactorily establish that the disputed activity of appellant is covered under the head of “Cargo Handling Service” - the impugned order passed by the Commissioner deserves to be set aside. Extended period of Limitation - Suppression of facts or not - HELD THAT:- There is no suppression or wilful misstatement on the part of the Appellant. The Appellant in the present matter also provided all the details/documents/records related to the disputed activity before department, which were statutorily maintained and existed all the time as per statutory requirement under the various taxation laws such as Income Tax, Companies Act etc. In these circumstances charge of suppression or wilful misstatement does not survive against the Appellant. Thus extended period of limitation is also not invokable in the present matter. The impugned order is set aside - appeal allowed. Issues Involved:1. Classification of services provided by the appellant.2. Applicability of service tax under the category of 'Cargo Handling Services'.3. Legitimacy of service tax demand on sea freight and rail freight components.4. Invocation of the extended period of limitation.Summary:1. Classification of Services Provided by the Appellant:The appellant was engaged in the transportation of goods using multiple modes (road, rail, sea) and charged a composite rate. The revenue alleged that the services should be classified as 'Cargo Handling Services' u/s 65(23) of the Finance Act, 1994. However, the appellant contended that the services were primarily transportation services, with any handling being incidental.2. Applicability of Service Tax under 'Cargo Handling Services':The Tribunal noted that the essence of the appellant's contract was transportation, not cargo handling. The statutory definition of 'Cargo Handling Services' excludes mere transportation. The Tribunal referenced previous cases, including *Hira Industries Ltd.* and *HEC Ltd.*, which supported the view that incidental loading/unloading does not transform transportation services into cargo handling services.3. Legitimacy of Service Tax Demand on Sea Freight and Rail Freight Components:The Tribunal found the demand for service tax on sea and rail freight components to be prima facie wrong. Service tax on transportation by sea and rail was only levied from 01.09.2009. The Tribunal held that the appellant's activities were primarily transportation and not cargo handling, thus service tax could not be demanded under 'Cargo Handling Services' for periods before 01.09.2009.4. Invocation of the Extended Period of Limitation:The Tribunal concluded that the issue involved was one of legal interpretation, and there was no evidence of mala fide intent or suppression of facts by the appellant. The appellant had disclosed all relevant details to the authorities, and audits had not previously found any issues. Consequently, the extended period of limitation was not invokable.Conclusion:The Tribunal set aside the impugned order, holding that the appellant's services did not qualify as 'Cargo Handling Services' and that the demand for service tax was unsustainable. The appeal was allowed with consequential relief as per law.