2025 (2) TMI 212 - AT - Service Tax

CESTAT distinguishes equipment supply from cargo handling services, remands case for fresh examination of service tax liability

M/s. B. Ghose & Co. Pvt. Ltd. Versus Commissioner of Service Tax, Delhi-II

M/s. B. Ghose & Co. Pvt. Ltd. Versus Commissioner of Service Tax, Delhi-II - TMI ISSUES PRESENTED and CONSIDEREDThe primary issues considered in this judgment are:1. Whether the appellant provided 'supply of tangible goods' services or 'cargo handling' services under the first agreement dated 03.08.2007 with CONCOR.2. Whether the appellant was justified in not paying service tax for handling operations in respect of export cargo under the second agreement dated 10.11.2003.3. Whether the extended period of limitation was correctly invoked by the Commissioner for the service tax demands.ISSUE-WISE DETAILED ANALYSISFirst Agreement - Terminal HandlingThe core issue is whether the services provided by the appellant to CONCOR under the first agreement constituted 'supply of tangible goods' or 'cargo handling' services. The appellant argued that it provided 'supply of tangible goods' services, which became taxable from 16.05.2008 under section 65(105)(zzzzj) of the Finance Act. The department, however, contended that the services were 'cargo handling' services, taxable under section 65(105)(zr) since 16.08.2002.The relevant legal framework includes section 65(105)(zzzzj) of the Finance Act, which defines 'supply of tangible goods' services as providing goods for use without transferring the right of possession and effective control. The Supreme Court's judgment in Adani Gas Ltd. was pivotal, clarifying that 'supply of tangible goods' involves enabling the customer's use of goods without transferring possession and control.The Court's interpretation focused on the terms of the agreement, which stipulated that the appellant provided reach stackers to CONCOR for a fee, with no mention of cargo handling. The duties outlined in the agreement further supported the appellant's claim, indicating that the appellant's role was limited to providing equipment and personnel for operating the reach stackers, not handling cargo directly.Based on these findings, the Court concluded that the appellant provided 'supply of tangible goods' services, not 'cargo handling' services, under the first agreement.Second Agreement - Cargo HandlingThe issue here was whether the appellant's handling of export cargo was exempt from service tax. The appellant argued that it paid service tax on import cargo but not on export cargo, as the latter was not taxable under section 65(23) of the Finance Act. The Commissioner rejected this claim due to a lack of evidence from the appellant.The appellant provided a Chartered Accountant's certificate, which was not initially submitted to the Commissioner, bifurcating the amounts received for handling import and export cargo. The Court noted that the agreement specified different rates for handling import and export cargo, supporting the appellant's claim.The Court determined that the matter required further examination by the adjudicating authority, allowing the appellant to submit additional evidence to substantiate its claim regarding export cargo handling.Extended Period of LimitationThe appellant contested the invocation of the extended period of limitation, arguing that there was no suppression of facts. The Commissioner, however, justified the extended period based on the appellant's failure to provide evidence for export cargo handling.The Court did not make a final determination on this issue, instead remanding it for reconsideration by the adjudicating authority in light of any new evidence submitted by the appellant.SIGNIFICANT HOLDINGSThe Court held that the appellant provided 'supply of tangible goods' services under the first agreement, not 'cargo handling' services. The judgment emphasized that the terms of the agreement and the nature of the services provided were crucial in determining the correct classification of services for taxation purposes.The Court remanded the issue of service tax liability for export cargo handling under the second agreement to the adjudicating authority for fresh consideration, allowing the appellant to submit additional evidence.The Court's decision underscores the importance of clear contractual terms and adequate documentation in disputes over service tax liability. The judgment also highlights the necessity for adjudicating authorities to thoroughly examine evidence and consider the specific context of service agreements when making determinations.