AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (11) TMI 525
X X X X Extracts X X X X
X X X X Extracts X X X X
....ces rendered for export cargo by mis-classifying it under 'Cargo Handling Services' (CHS) instead of (i) 'Airport Services' (APS) and(ii) 'Storage and Warehousing Services' (SWS), certain details were called for by the Department. After receiving a list of details of activities of the Appellant and on further enquiry, the Department felt that various services provided by the Appellant were partly falling under SWS and partly under APS and not under CHS, as claimed by them. In view of the same, SCN dated 02.04.2012 was issued demanding service tax under APS and SWS. The breakup is as under: Service Tax demanded for the period March 2008 to June 2010 (in Rs.) On Services Under proposed category Rs. 1,88,64,466/- Screening & Unitization/Build-up Airport Services Rs. 1,07,35,260/- Terminal Storage-Processing Charges Storage & Warehouse Services 3. The Adjudicating Authority, after going through detailed submissions made by the Appellants, came to the conclusion that activities and services rendered by the Appellants were not in the nature of CHS, rather these were in the nature of APS and SWS. Accordingly, the classification proposed in the SCN was held to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ara 4 above for the outgoing/export cargo. It is an admitted fact that they have been charging 'Terminal processing charges' from exporters and importers for services covered from S.No. 1-7 and screening, unitization/buildup charges from Airlines in respect of S.No.8 & 9. 7. Learned Commissioner also observed that apart from processing export cargo, they are also acting as custodian to Customs, and for the said services, they are collecting 'Terminal processing charges' and 'Demurrage charges' and therefore, having regard to Para 7 of the Board's Circular dated 01.08.2002, the Terminal storage-processing charges and export demurrage charges collected by the Appellant are classifiable under SWS. As regards APS, he relied on Board Circular No. 80/10/2004-ST dated 17.09.2004 and came to the conclusion that services provided to Airlines as well as cargo handling i.e., unitization/build-up and screening of export cargo, was rightly classifiable under APS. He, therefore, confirmed the demand by upholding the classifications proposed in the SCN. 8. For correct appreciation of proper classification of services in respect of activities undertaken by the Appellant, the scope of rival s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd Warehousing' includes storage and warehousing services for goods, including liquids and gases but does not include any service provided for storage of agricultural produce or any service provided by a cold storage. 9. Learned Counsel for the Appellant have tried to explain the nature of services and its classification holding that the activities undertaken by them and as enumerated in the SCN and OIO are not disputed. What is being disputed is whether it is CHS or it is a combination of two different services viz., SWS and APS. They have mainly contended that they are providing full scope of CHS encompassing physical handling as well as documentation services and certain other services such as general supervision, tracing any irregularity management, customs interface, etc. On receipt of cargo which is meant to be exported, the Appellant receives the same in the terminal storage area, which is meant for processing (customs clearance) of cargo in designated area, and thereafter the processed cargo is screened after which the same is built-up together (unitized) consignment wise, and loaded to the Aircraft. 10. They are also charging demurrage for clearance, beyond 72 Hrs on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity or any authorized Cargo Handling Agency for the use of cargo terminal facilities or its services and other expenses incurred including loading and unloading, storage in warehouses or processing cargo goods, etc. and includes electricity charges, insurance premium, security charges, Terminal Charges Electronic Data Interchange and Electronic Data Interchange service centre charges, Value Added Network service charges, surcharge for heavy cargo and cargo requiring special care such as hazardous, perishable, live animals, valuables and express cargo, etc., and License fee." 14. For the 'demurrage charges', the Department contended that, Appellant will also fall under SWS, as in this case there is storage involved. The Department felt that certain services being provided by the Appellants are clearly falling under APS. Keeping in view the Board Circular dated 10.09.2004, the Department felt that Unitization and Screening/X-ray service, has got nothing to do with CHS and in fact, they are classifiable as APS, as the said services include cargo handling, transit facilities, security service, etc. Further, these services are provided after cargo is stored, moved, screened, readied ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....S on the grounds that they are not in the business of Storage and Warehousing, and they are not a 'Storage and Warehouse keeper'. In order to fall under this category, they had to be a storage or warehouse keeper. Therefore, considering their activities which are mainly related to processing of cargo, till the time they are loaded, cannot be considered as SWS or APS. They have relied on the case law of Modi Construction Co., [2008 (12) STR 34 (Tri- Kol)], wherein, the Tribunal, inter alia, held that, event of levy under CHS arises when service relating to or in relation to handling of cargo is provided by Cargo Handling Agency, irrespective of the mode of the transport used for movement of such cargo. It is also observed that the following activities are contemplated to be taxed as CHS. "4.5 Combined reading of provisions of Sections 65(105)(zr) and 65(23) of the Act throw light that cargo handling agencies are taxable entities. Cargo handling service provided by such entities attract the levy of service tax. Section 65(23) has a wide amplitude and has brought all like nature activities to its fold expressly and by inclusion of such like nature activities under the class '....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the case of ITW India Ltd [2007 (8) STR 490 (Tri-Kol)]. In this case, the Tribunal, inter alia, held that CHS covers 'packing of cargo'. It was also held that expression 'packing of cargo' was wide enough to cover the activities such as unitizing, straping, packeting or packing the impugned goods into cargo for subsequent movement by trucks and/or rail. They have also relied on the case of Kerala State Industrial Enterprises Ltd [2012 (28) STR 574 (Ker)] wherein, the Hon'ble High Court has held in detail as to what would constitute and cover under the category of CHS. This case was in the context of the Appellants maintaining air cargo terminal where 'air cargo' for export and passenger baggage for transport by air, were brought and thereafter unloaded and transported to the plane. The Appellants were providing terminal facility for X-raying, security check and completion of customs formalities and short duration retention of goods for transit to the plane. The relevant paras are reproduced below: "4. Admittedly Section 65(23) under which cargo handling service is brought under service tax, specifically excludes export cargo and passenger baggage from liability. Therefore....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Act. 5. The contention raised by Standing Counsel that goods are not physically handled by appellant's employees by itself does not mean that appellant is not handling the goods in the terminal building. X-ray unit is in appellant's terminal and customs formalities including inspection are carried out in the said building. The unloading of goods, X-raying, customs inspection and reloading amount to handling of goods in transit in the course of export, whether it be as cargo or as passenger baggage. What the appellant charges is for the facilities provided in the terminal building for security check, Xraying and for completion of customs formalities. The department can levy service tax only if any part of the charges levied by the appellant falls within the description of "storage and warehousing" referred to in Section 65(102) of the Act. Storage and warehousing obviously is storing the goods for a duration of time providing safe custody to goods. Nobody sends the cargo or passenger baggage to appellant's terminal building for storage because goods are sent there only for shipment by air. It so happens that there is a time lag between the arrival of the goods in appella....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by the Order of the Original Authority, as also the submissions made by both the sides, it is apparent that activities from S.No.1-7 would be in relation to handling of cargo in the cargo terminal, for which the services are being provided to exporter/freight forwarder/agent in relation to export-bound cargo. 19. Further, Firstly, Some of the activities like short term storage due to a specific condition, Customs examination, documentation, etc., are the activities which are incidental to their main activity of handling of cargo. The main activity, by virtue of just charging and naming the charges as 'terminal charges' cannot become SWS, in view of the fact that the terminal where the export cargo is stored is not meant principally for storage and warehousing, rather for processing of cargo before it is loaded on aircraft for export. In fact there are specific storage and warehouse facility, either public or private, under customs provisions itself, which can be inside cargo terminal or outside, where the goods can be stored subject to certain condition(s). In this case it has not been alleged that they are operating any such warehouse. Therefore, the activities being provided....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... easy movement of cargo and its loading and unloading in the Aircraft. These two activities are neither charged to the customers using the terminals, nor are these directly related to the activities concerning CHS. Here, the amount is being collected from the Airlines to whom specific services are being provided as per their requirement. The scope of APS as it existed even prior to its amendment in 2010, includes services provided to Airlines as well as for cargo and passenger baggage handling such as security, transit facilities, landing charges, parking charges etc. It is an admitted fact that services are provided to the Airlines on their specific request and not at the behest of the exporter/freight forwarder/agent. Therefore, these services appear to be classifiable under the category of APS. 23. However, we find that prior to 01.07.2010, when proviso was added to Sec 65(105)(zzm), Airport service is read as - service provided to any person, by Airport authority or by any other person, in any airport or civil enclave. Further, prior to 01.07.2010, we find that Cargo Handling service as defined under Sec 65(23) of the Finance Act includes also activities like loading, packin....