2026 (4) TMI 149 - AT - Service Tax

Cargo Handling Service classification upheld for loading of goods, but penalties deleted on bona fide belief and reasonable cause.

Loading of cut iron goods onto trucks for onward transport to buyers was treated as Cargo Handling Service on the facts found, including for the period ... Loading of cut iron goods on trucks for onward transport to the buyer's premises - Cargo Handling Service Or Transport of service by road - Penalty waiver on reasonable cause and bona fide belief. Whether in this case, the activity of loading of cut iron etc., on the truck for transportation to customer’s premises would be covered within the ambit of Cargo Handling Service (CHS) in the given factual matrix. - HELD THAT:- The goods which were loaded on to the truck were clearly in the nature of cargo as they were intended for transportation to the destination of the buyer and therefore this plea is not tenable and said activity has been rightly classified under cargo handling service, even for the period prior to 2008. We have also examined the case laws cited by the appellant. In the case of M/s HEC Ltd. [2018 (3) TMI 19 - CESTAT KOLKATA], it was, inter alia, held that these activities were related to transportation of goods by road service and that is not the issue in the present appeal. Similarly, in the case of M/s Narendre Civil Line Project & Contractor (P) Ltd. [2022 (8) TMI 470 - CESTAT NEW DELHI], is clearly distinguished as the activities weren’t considered as taxable, being this mining area. In the case of Arkay Logistics Ltd. [2023 (4) TMI 213 - CESTAT AHMEDABAD], again the same activities were happening within the factory premises and hence held that it cannot be taxed, which is not the case in the present appeal. Even in the case of M/s Hindustan Steelworks Construction Ltd., M/s Visakha Constructions [2025 (11) TMI 1443 - CESTAT HYDERABAD]. The decisions cited by the appellant were found distinguishable, as those matters concerned transportation service, mining activity, or handling within factory or plant premises, unlike the present activity of loading for onward transportation to customers. The demand on loading charges was therefore sustainable on merits both before and after the amendment in the definition of CHS. [Paras 8] The demand of service tax on loading charges was upheld on merits. Section 80 - Reasonable cause - Waiver of penalty - HELD THAT: - The Tribunal accepted that the appellant entertained a bona fide belief that loading of the material on trucks was not separately taxable under CHS, particularly when the activity was viewed by them as incidental to sale and when there were decisions supporting the view that mere loading of goods was not covered under CHS. It also noted that the appellant was already registered for transport service and that the controversy itself furnished sufficient basis for such belief. Applying the principle underlying Section 80, the Tribunal held that reasonable cause stood established and, consequently, penalties under Sections 77 and 78 could not be sustained. [Paras 9] Penalty under Sections 77 and 78 was set aside in terms of Section 80. Final Conclusion: The Tribunal upheld the service tax demand on loading charges by treating the activity as Cargo Handling Service in the facts of the case. However, it set aside penalties under Sections 77 and 78 on the ground of reasonable cause under Section 80, and the appeal was partly allowed. Issues: (i) Whether loading of cut iron goods on trucks for onward transport to the buyer's premises was classifiable as Cargo Handling Service under Section 65(23) of the Finance Act, 1994 for the period before and after the 2008 amendment. (ii) Whether penalty could be waived under Section 80 of the Finance Act, 1994 on the ground of reasonable cause and bona fide belief.Issue (i): Whether loading of cut iron goods on trucks for onward transport to the buyer's premises was classifiable as Cargo Handling Service under Section 65(23) of the Finance Act, 1994 for the period before and after the 2008 amendment.Analysis: The loaded goods were intended for transportation to the customer and were therefore in the nature of cargo. The factual setting did not match the cited decisions relied upon by the appellant, which turned on different situations such as transportation service, mining area activities, or handling within factory premises. On the facts found, the loading activity was treated as falling within the scope of Cargo Handling Service even for the period prior to 2008.Conclusion: The loading charges were liable to Service Tax under Cargo Handling Service, and the demand was upheld on merits in favour of Revenue.Issue (ii): Whether penalty could be waived under Section 80 of the Finance Act, 1994 on the ground of reasonable cause and bona fide belief.Analysis: The appellant was already registered for road transport services and entertained a bona fide belief that separate tax was not payable on the loading activity, supported by competing views in judicial decisions and the surrounding business circumstances. On that basis, reasonable cause for non-payment was accepted for the relevant period, making the penalty provisions inapplicable by virtue of Section 80.Conclusion: Penalty under Sections 77 and 78 was set aside in favour of the assessee.Final Conclusion: The tax demand was sustained, but statutory penalties were deleted, resulting in partial relief to the assessee.Ratio Decidendi: Loading of goods intended for immediate transport to the buyer may constitute Cargo Handling Service on the facts of the case, while penalty can be waived where non-payment occurred under a bona fide belief amounting to reasonable cause under Section 80 of the Finance Act, 1994.