2024 (7) TMI 689 - AT - Service Tax

Container handling services by non-authorized persons outside port area don't qualify as taxable port services

CESTAT Ahmedabad held that appellant's container handling services did not qualify as port services under service tax classification. The tribunal found ... Classification of services - Terminal Handling Charges or Port Service - engaging port authorities for getting containers of import and export cargo handled by the port authorities - HELD THAT:- It can be seen that container has been handled by M/s. Mundra International Cargo Terminal and the invoice has been raised on the appellant, in this invoice even Service Tax has been charged by the Port Authority namely M/s. Mundra International Cargo Terminal. This very fact makes it clear that actually the service of terminal handling has been provided by the port namely MICT and appellant is the service recipient in this case on behalf of his client. As it can be seen from the definition of port service, that it is imperative that port service has to be within port by port authorities or by any person authorized by the port. Since, it is very apparent from the record of the appeal that the appellant was not authorized person within port area, the activity undertaken by them does not fall under the category of port service. Reliance placed on the decision of this Tribunal on this issue in case of VELJI P. & SONS (AGENCIES) P. LTD. VERSUS COMMISSIONER OF C. EX., BHAVNAGAR [2007 (8) TMI 35 - CESTAT, AHMEDABAD] where it was held that 'activities undertaken by the appellant does not fall under the category of Port Services. Thus, the activities under taken by the appellant during the period of demand does not fall under the category of port service - the impugned order set aside - appeal allowed. Issues Involved:1. Classification of 'Terminal Handling Charges' under 'Port Service' or 'Cargo Handling Service'.2. Authorization by the port for the appellant to render services.3. Applicability of extended time proviso under Section 73(1) of the Finance Act, 1994.4. Penalty and interest provisions under Sections 75, 76, 77, and 78 of the Finance Act, 1994.Detailed Analysis:1. Classification of 'Terminal Handling Charges':The primary issue was whether 'Terminal Handling Charges' collected by the appellant should be classified under 'Port Service' as defined in Section 65(82) of the Finance Act, 1994, or under 'Cargo Handling Service' as defined in Section 65(23) of the Finance Act, 1994. The appellant argued that their activities did not fall under 'Port Service' because they were not authorized by the port to render such services. Instead, they claimed that their activities were more appropriately classified under 'Cargo Handling Service,' which includes loading, unloading, packing, or unpacking of cargo.The Tribunal noted that the definition of 'Port Service' at the relevant time required that the service must be rendered by the port or any person authorized by the port. Since the appellant was not authorized by the port, their activities could not be classified under 'Port Service.' The Tribunal referred to previous decisions, including Velaji P & Sons and Konkan Marine Agencies, which supported the appellant's contention that authorization by the port was a necessary condition for classification under 'Port Service.'2. Authorization by the Port:The appellant contended that they were not authorized by the port to render any service within the port area. The Tribunal agreed, noting that the terminal handling work of the containers was actually done by the port authorities, such as Kandala Port Trust or Mundra International Terminal, and the appellant was merely a service recipient. The Tribunal emphasized that for a service to be classified under 'Port Service,' it must be rendered by the port or a person authorized by the port, which was not the case here.3. Applicability of Extended Time Proviso:The appellant argued that there was no element of fraud, mis-statement, or mis-representation with the intent to evade Service Tax, and therefore, the invocation of the extended time proviso under Section 73(1) of the Finance Act, 1994, was not justified. The Tribunal did not find sufficient grounds to support the department's claim of extended time proviso applicability.4. Penalty and Interest Provisions:Given the Tribunal's decision to set aside the classification of the appellant's activities under 'Port Service,' the penalties and interest provisions under Sections 75, 76, 77, and 78 of the Finance Act, 1994, were also deemed inapplicable. The Tribunal concluded that since the activities did not fall under the taxable category of 'Port Service,' the demand for Service Tax, along with penalties and interest, was not sustainable.Conclusion:The Tribunal allowed the appeal, setting aside the impugned Order-In-Appeal, and concluded that the activities undertaken by the appellant did not fall under the category of 'Port Service.' Consequently, the demand for Service Tax, along with penalties and interest, was dismissed. The Tribunal's decision was pronounced in the open court on 11.07.2024.