Service tax demand set aside for handling empty containers not stored or warehoused

CESTAT NEW DELHI set aside service tax demand on handling of empty containers. The tribunal allowed cum tax benefit on ground rent services after remand. However, regarding storage and warehousing services, the tribunal distinguished between handling containers within storage areas versus handling containers before reaching storage facilities. Following Circular No. 60/9/2003-ST, handling empty containers constitutes taxable storage and warehousing services only when containers are actually stored or warehoused. Since the disputed activity involved handling containers never stored or warehoused, it fell outside taxable storage and warehousing services. The activity also couldn't be classified as cargo handling service per Circular No. B11/1/2002-TRU, which excludes empty containers from cargo definition. Appeal allowed.

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Issues involved:
The issues involved in the judgment are non-payment of service tax on ground rent of empty containers and handling charges of empty containers under the category of Storage and Warehousing Services.

Issue 1: Non-payment of service tax on ground rent of empty containers:
The appellant failed to pay service tax on the value of services rendered for ground rent of empty containers during a specific period, resulting in non-payment of Rs.1,02,416. A Show Cause Notice was issued proposing recovery of this amount along with interest and penalty. The order confirming this proposal was initially passed, and subsequent appeals were made against it. The Tribunal remanded the matter for re-adjudication, considering the cum tax value and the benefit thereof. Eventually, the demand for this issue was dropped after granting the cum tax benefit to the appellant.

Issue 2: Handling charges of empty containers under Storage and Warehousing Services:
The appellant was found to have not paid service tax on handling charges of empty containers during a certain period. The authorities initially confirmed this demand, leading to appeals and subsequent remand by the Tribunal for re-adjudication. The Order-in-Original dated 13.12.2016 granted cum tax benefit to the appellant for handling of empty containers, resulting in the correct payment of service tax. However, the demand for this issue was confirmed as the activity was deemed to be Storage and Warehousing Services. The appeal against this confirmation was disposed of, upholding the findings of the original adjudicating authority except for the penalty. The appellant challenged this order before the Tribunal, arguing that the activity was not covered under taxable service of storage and warehousing of empty containers.

Judgment Summary:
The Tribunal considered the arguments presented by both parties regarding the activity of handling empty containers under Storage and Warehousing Services. The appellant contended that the impugned activity was not covered under this taxable service, citing specific scenarios involving the movement of empty containers. The Departmental Representative, however, relied on Circulars to support the inclusion of handling empty containers within the scope of Storage and Warehousing Services.

Upon deliberation, the Tribunal observed that the Circulars mentioned by the Departmental Representative required the containers to be stored or warehoused before handling, which was not the case for the disputed demand. Therefore, the Tribunal concluded that the service tax on handling non-stored empty containers was wrongly demanded and confirmed. Additionally, it was noted that the activity could not be classified as Cargo Handling Service as empty containers did not qualify as merchandise.

Consequently, the Tribunal held the order under challenge as unsustainable and set it aside, allowing the appeal in favor of the appellant.

[Pronounced in the open court on 22.03.2024]

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