2023 (1) TMI 547 - HC - Service Tax

High Court rules in favor of Contractor in service tax dispute, highlights need for clarity in classification

Commissioner of GST & Central Excise, Rourkela Commissionerate Versus K.D. Sharma Proprietor

The High Court upheld the CESTAT order setting aside the service tax demand against the Assessee, a Raising & Transporting Contractor engaged in ... Monetary amount involved in the appeal - Para-2 of the Circular dated 17th August, 2011 - Whether the expression Monetary limit would essentially refer to the excise duty involved and would not include the penalty or interest amount? - appropriate forum - HELD THAT:- Para-2 of the Circular dated 17th August, 2011 clarifies that the expression “Monetary limit” would essentially refer to the excise duty involved and would not include the penalty or interest amount. Since the basic duty involved is below Rs.1Crore, the appeal is certainly below the monetary limit. Further, whether the service carried out by the Appellant is Cargo Handling Services or mining service is essentially a classification dispute. Consequently, following the Judgment of the Karnataka High Court in COMMISSIONER OF SERVICE TAX VERSUS SCOTT WILSON KIRKPATRICK (INDIA) (P.) LTD. [2011 (4) TMI 500 - KARNATAKA HIGH COURT], the Court holds that the appeal against the order of the CESTAT would lie if at all only to the Supreme Court of India. The Court declines to interfere in the present appeal, leaving it open to the Department if it so chooses to avail any other remedy available to it in accordance with law. The appeal is disposed of. Issues:1. Appeal against CESTAT order setting aside service tax demand.2. Classification dispute: Cargo Handling Services vs. Mining Services.3. Maintainability of appeal based on monetary limit.4. Interpretation of substantial question of law for appeal.Analysis:1. The appeal before the High Court stemmed from a CESTAT order dated 14th July, 2017, which set aside the service tax demand raised by the Department against the Assessee's Service Tax Appeal. The Assessee, a Raising & Transporting Contractor engaged in mining activities, was initially alleged to be providing 'Cargo Handling Services' under the Finance Act, 1994. The Tribunal ruled in favor of the Assessee, stating that the work performed was primarily related to mining, and thus, the demand for service tax was deemed unsustainable in law.2. The crux of the issue revolved around the classification dispute between Cargo Handling Services and mining services. The Court referenced a judgment of the Karnataka High Court to establish that such classification disputes should be appealed to the Supreme Court of India. This classification dispute was crucial in determining the applicability of the service tax and formed a significant part of the legal argument.3. A preliminary objection was raised regarding the maintainability of the appeal based on the monetary limit. The Respondent argued that since the tax effect fell below the threshold of Rs. 1 Crore, the appeal was not maintainable. However, the Department contended that when including the penalty amount, the monetary limit exceeded Rs. 1 Crore. The interpretation of the monetary limit in light of the Central Board of Indirect Taxes & Customs (CBITC) instructions was a key point of contention.4. The interpretation of what constitutes a substantial question of law for appeal was also deliberated upon. The Department argued that the appeal involved a substantial question of law, as per the CBITC instructions. Reference was made to a previous order by the Court regarding the classification of services, which was later recalled. This aspect added complexity to the determination of whether the appeal met the criteria for a substantial question of law. Ultimately, the Court declined to interfere in the appeal, leaving the Department with the option to pursue other legal remedies available to them.