2023 (4) TMI 662 - AT - Service Tax

Tribunal grants tax exemption to appellant for 'port service' classification

The Tribunal classified the services provided by the appellant as 'port service' rather than 'cargo handling service,' making them eligible for a service ... Benefit of exemption - handling of agriculture produce by a cargo handling agency - Classification of services - Port Service or cargo handling service? - case of appellant is that the service under the category of “port service” also include the service of “cargo handling service” and since the service provided by them was a cargo handling service - availability of benefit of service tax exemption under notification 10/2002-ST dated 01.08.2002 - HELD THAT:- It is an admitted fact that the noticee has rendered services of supervision over internal shifting of cargo within port area, loading, unloading of cargo and reporting thereof. These services would have been covered under the category of “cargo handling service” if provided outside the port area and therefore it can be construed that the appellant are a cargo handling agency which provide “port services” to M/S Mundra Port and Special Economic Zone Ltd, Mundra. Thus, in the facts of the case it can be safely concluded that the appellant is a cargo handling agency providing cargo handling service within the port area with authorisation from M/S Mundra Port and Special Economic Zone Ltd, Mundra i.e. “a port” but by virtue of definition of port services under Section 65(82) read with Section 65(105)(zn) of the Act, they are classified as “port service” and not “cargo handling service”. It has also been clarified by CBEC vide Circular No. B/11/1/2002-ST, dated 01.08.2002 - the circular states that 'Cargo handling services are provided in the port also. Whether such service will be covered in the category of port services or cargo handling service? In this context it may be mentioned that port services cover any service provided in relation to goods or vessels by a port or a person authorized by the port. This includes the cargo handling service provided within the port premises. Therefore, to this extent there may be an overlap in cargo handling service and the port service. However, since port services cover all the services in relation to goods and vessels and therefore more specific to port, the service provided in a port in relation to handling of goods would be appropriately covered under port service and no separate levy will be attracted under the category of cargo handling agency service. Similar would be the case in respect of service provided for storage of goods in the port premises'. On carefully reading the notification no. 10/2002-ST dated 01.08.2002, it is found that the exemption is provided to handling of agriculture produce by a cargo handling agency and it is not service specific whether for “cargo handling service” or for “port service”. Cargo handling agency can undertake handling of agriculture produce within or outside port. Thus, the appellant were eligible for the benefit of the notification no. 10/2002-ST dated 01.08.2002. Case remanded back the case to the original adjudicating authority to re-determine the demand and decide the case afresh after allowing the benefit of notification no. 10/2002-ST dated 01.08.2002 to the appellant - appeal allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether services rendered by a cargo handling agency within port premises fall exclusively under 'port service' (Section 65(82) and 65(105)(zn)) and are thereby excluded from classification as 'cargo handling service' (Section 65(23) and 65(105)(zr)) for purposes of exemption under Notification No. 10/2002-ST. 2. Whether Notification No. 10/2002-ST dated 01.08.2002 (exempting taxable service provided by a cargo handling agency in relation to agricultural produce or goods intended for cold storage) is available to a cargo handling agency providing services within a port, notwithstanding that such services are also classifiable as 'port service.' 3. Whether the appellant's choice of service-tax registration category (registration as 'port service' despite performing cargo handling activities) precludes entitlement to the exemption under Notification No. 10/2002-ST. 4. Whether, in view of entitlement to the exemption, the matter should be remitted for fresh adjudication and allowance of opportunity to place evidence, including treatment of amounts already deposited and appropriation in the original order. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification: Port Service vs Cargo Handling Service Legal framework: Definitions under the Finance Act - 'port service' (Section 65(82)), 'taxable service' in relation to port services (Section 65(105)(zn)), and 'cargo handling service' (Section 65(23)) together with the definition of cargo handling agency service (Section 65(105)(zr)). CBEC Clarification No. B/11/1/2002-ST (01.08.2002) addresses overlap between port services and cargo handling services. Precedent Treatment: The Tribunal follows the administrative clarification by CBEC which recognises overlap but treats services provided within port premises by a port or person authorised by the port as appropriately covered under 'port service.' Interpretation and reasoning: The Court examined the contract scope and adjudicating authority's findings that the services rendered (supervision, internal shifting, loading/unloading, reporting) were provided within port area and authorised by the port. Given the statutory definitions and the CBEC clarification, the Tribunal accepted that such services, though functionally cargo handling activities, satisfy the conditions of 'port service' because they are rendered by a person authorised by the port in relation to goods/vessels. Ratio vs. Obiter: Ratio - Where cargo handling activities are performed within port premises by a person authorised by the port, they fall within the ambit of 'port service' as defined. Obiter - Observations on how identical activities would be treated outside port premises (they would be cargo handling service) are explanatory. Conclusion: Cargo handling activities performed within port premises by an authorised agency constitute 'port service' under the statutory scheme and CBEC clarification; both classifications can overlap depending on location and authority. Issue 2 - Applicability of Notification No. 10/2002-ST to Cargo Handling Agency Operating Within a Port Legal framework: Notification No. 10/2002-ST exempts taxable service provided to any person by a cargo handling agency in relation to agricultural produce or goods intended to be stored in a cold storage. The notification is issued under Section 93 read with Section 66 of the Finance Act. Precedent Treatment: The Tribunal relied on the text of the notification and the CBEC clarification which recognises overlap but does not explicitly restrict the exemption to services rendered outside ports. Interpretation and reasoning: The Tribunal analysed the notification language: exemption is granted to 'taxable service provided to any person by a cargo handling agency in relation to agricultural produce ...' and is not expressly limited by the location where the service is rendered or by classification as 'port service.' Since a cargo handling agency may undertake handling of agricultural produce within port premises, the contractual fact of performing cargo handling for agricultural produce by a cargo handling agency brings the activity within the scope of the notification irrespective of its classification as 'port service' under the statutory definitions. Ratio vs. Obiter: Ratio - Notification No. 10/2002-ST applies to cargo handling agencies handling agricultural produce even where the handling occurs within port premises and the activity is also classifiable as 'port service.' Obiter - Discussion of potential policy arguments for limiting exemptions to non-port activities. Conclusion: The exemption under Notification No. 10/2002-ST is available to a cargo handling agency for handling agricultural produce regardless of whether the activity is rendered within port premises and also falls within the definition of 'port service.' Issue 3 - Effect of Registration Category on Entitlement to Exemption Legal framework: Statutory definitions and administrative practice allow overlapping classification; registration under a particular service head ordinarily reflects the taxpayer's view of classification but does not conclusively determine substantive entitlement to exemptions. Precedent Treatment: The Tribunal referred to the CBEC clarification and accepted that registration as 'port service' was chosen by the appellant despite primarily conducting cargo handling activities; administrative registration choice is not determinative of substantive right to exemption when the statutory notification applies. Interpretation and reasoning: The Tribunal observed that the appellant registered under 'port service' in light of CBEC clarification but contended their activities were cargo handling for agricultural produce. Since the notification is service-specific to cargo handling agencies (and not service-label-specific), mere registration under 'port service' does not preclude the appellant from claiming the exemption if the substantive facts (handling of agricultural produce by a cargo handling agency) are established. Ratio vs. Obiter: Ratio - Registration category selected by the taxpayer does not automatically bar application of a notification whose substantive conditions are otherwise satisfied. Obiter - Practical observations on classification choices and administrative consequences. Conclusion: The appellant's registration as 'port service' does not preclude entitlement to Notification No. 10/2002-ST if the appellant, as a cargo handling agency, can establish handling of agricultural produce qualifying under the notification. Issue 4 - Remand, Evidence and Appropriation of Deposited Amounts Legal framework: Principles of adjudication require that entitlement to statutory exemptions be determined on the basis of evidence, with opportunity to produce supporting documents; redetermination is appropriate where legal entitlement was not applied by adjudicating authority. Precedent Treatment: The Tribunal applied standard appellate practice to remit the matter for fresh adjudication to give the appellant an opportunity to produce relevant evidence in support of the exemption claim; the miscellaneous application for additional evidence was disposed of as academic in view of the decision on merits. Interpretation and reasoning: Because the Tribunal concluded that Notification No. 10/2002-ST applies in principle, it is necessary to ascertain factually whether the appellant's services related to agricultural produce or goods for cold storage during the relevant periods. The Tribunal therefore remanded the matter to the original adjudicating authority to re-determine demand, allow production of documents, and decide afresh, including adjustment of amounts already deposited and any consequential interest/penalty implications. Ratio vs. Obiter: Ratio - Remand for factual determination and fresh adjudication is required where legal entitlement to exemption is found in principle but factual proof remains to be adduced. Obiter - Comments on disposal of the application for adducing additional evidence as unnecessary because the legal view was determinative. Conclusion: The matter is remitted for fresh adjudication permitting the appellant to produce evidence in support of the exemption claim; the adjudicating authority must re-determine demand and related consequences (including earlier appropriations) in light of the Tribunal's legal findings. Cross-References - Issue 1 and Issue 2 are interlinked: statutory definitions and administrative clarification explain overlap (Issue 1) but do not exclude the substantive reach of Notification No. 10/2002-ST (Issue 2). - Issue 3 follows from Issues 1-2: classification and registration do not override substantive statutory exemption entitlements; factual proof is decisive (Issue 4).