TaxTMI 
TaxTMI 
2025 (2) TMI 212
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....he period 2011-12, the Commissioner has confirmed the demand of service tax amounting to Rs. 82,51,187/- with interest and penalty based on best judgment assessment under section 72 of the Finance Act. 2. The issue involved in this appeal hinges around the two agreements entered into between the appellant and Container Corporation of India Ltd [CONCOR]. The first agreement is for performing the work of terminal handling of containers at Inland Container Depot, Tughlakabad, New Delhi. The case of the department is that the appellant rendered "cargo handling" service, while the case of the appellant is that it rendered "supply of tangible goods" service. The second agreement is for cargo handling operation in relation to export and import cargo. The case of the appellant is that for handling export cargo, service tax is not leviable, while the case of the department is that no evidence was led by the appellant to substantiate that it had rendered "cargo handling" service for export cargo. FIRST AGREEMENT 3. The appellant entered into an agreement dated 03.08.2007 with CONCOR for performing the work of terminal handling of containers at Inland Container Depot, Tughlakabad, Ne....
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....ndling equipment should also be provided by him at ICD, TKD so that the work is not hampered at the terminal. 9.4 The TO will be required to keep its workshop area in the premises neat and clean in all respects. 9.5 The contractor shall give his employees neat and clean uniforms for summer and winter seasons at no extra cost to CONCOR and ensure that all his employees wear laminated Photo-Identity Cards issued by him/CONCOR at contractor's cost. He shall also provide office equipment, communication equipment, etc., as prescribed by CONCOR from time to time for efficient execution of the work. 9.6 The official-in-charge of the ICD, shall be at liberty to object to and require the TO to remove forthwith from the premises any person employed by him if, in opinion of ICD incharge, such person misconducts himself, is incompetent or negligent in proper performance of his duties or whose employment is otherwise considered undesirable. The decision of incharge shall be unquestionable and final and the TO shall be under obligation, to replace such a person. 9.7 All workers and/or personnel employed by the TO shall be engaged by him as his own employee....
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....R, within 2 months of the receipt of such notice. 11.8 CONCOR shall not pay any additional amount for any expenses which the TO may be required/ compelled to incur while crossing any gate, manned by Customs/CISF/Security agencies of any type. 11.9 CONCOR transports 'exim' containers in bonded state. It is responsible to the Customs for the safety of 'exim' cargo during transit and has to furnish a 'continuity bond' of an appropriate amount to the Customs. The contractor will be liable for the element of Customs duty also for any loss or damage to the cargo while the loaded container is in his custody. 11.10 ICD TKD has a local area network (LAN) for transfer and updation of data for maintaining and monitoring of container status on a real time basis. The contractor should be able to deploy suitable staff for data entry operation for the work carried out by the contractor, if desired by CONCOR. 11.11 The contractor shall be liable for all acts of commission or omission of his employees. He shall forthwith discharge any of his employee who is reported by CONCOR to be undisciplined or of poor moral character or incompetent or....
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....ermission of the Terminal Incharge. Any violation on this account will attract a penalty of Rs.1000/- on each occasion. 12.9 The Contractor will be required to base equipments at TUGHLAKABAD and to start the work. The job orders for start of the work will be given by the Terminal Incharge. 13. DEPLOYMENT OF EQUIPMENTS: 13.1 The contractor shall ensure that he deploys 2 (two) Loaded Reach Stackers +01 (One) Empty Reach Stacker not older than 2002 model (year of manufacture) in good working condition. The bidder should provide evidence of having required equipments at his disposal either through ownership or hiring/leasing as mentioned in the para no.14. He must indicate the place of its current deployment as on the date of bid to enable CONCOR to ascertain the same. The contractor should also indicate arrangements for hiring/leasing of equipments, which are not owned by him. The contractor should also make necessary arrangements for standby equipments against mechanical and other failures to ensure that the work does not suffer. The arrangements for servicing the equipment dealing with breakdowns etc., should also be made by him. Contractor should also ind....
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.... his own cost." (emphasis supplied) SECOND AGREEMENT 5. The appellant also entered into an agreement dated 10.11.2003 with CONCOR for undertaking cargo handling operations at ICD, Tughlakabad. This agreement relates to performing work of loading/unloading of export/import cargo and its stuffing/de-stuffing from freight containers at the rates and under the conditions specified in the Schedule to the agreement. The Schedule provides different rates for handling export cargo and import cargo. FACTS 6. The appellant claims that while performing work of terminal handling of containers at ICD, Tughlakabad, it provided "supply of tangible goods" [STG] service, which was made taxable under section 65(105)(zzzzj) of the Finance Act with effect from 16.05.2008 and it discharged service tax liable under this service head from 16.05.2008. According to the department, the appellant rendered "cargo handling" services, as defined under section 65(23) of the Finance Act and made taxable under section 65(105)(zr) of the Finance Act with effect from 16.05.2008 . The appellant contends that it did not discharge service tax on the handling of export cargo as this service is not ta....
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....d placing containers and the amount that was received by the appellant was for hiring of reach stackers and not for handling cargo. The appellant, therefore, provided supply of "tangible goods" service, which service became taxable from 16.05.2008, and the appellant discharged service tax liability for this service with effect from 16.05.2008. The appellant also pointed out that service tax was not payable on unloading and loading of export cargo and, therefore, the appellant did not pay any service tax as "export cargo" did not fall within the definition of "cargo handling" service. The appellant also pointed out that the extended period of limitation could not have been invoked in the facts and circumstances of the case. 10. The Commissioner did not accept the version of the appellant and confirmed the demand of service tax with penalty and interest. 11. In regard to the first agreement, the Commissioner observed as follows: "12.4 On carefully sifting through the terms of reference given in the said contract dated 03.08.2007, I find that the CONCOR, inter-alia, manages and operates Inland Container Depot (ICD), Tughlakabad (TKD), and the contractor to be appoi....
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....pply of Tangible Goods Service' as claimed by the Noticee. Accordingly, I hold that the Noticee is liable to pay service tax under the Cargo Handling Service for the period covered by SCN-I & II." (emphasis supplied) 12. In respect of the second agreement, the Commissioner recorded the following findings: "13.1 The next issue for determination is that whether the income received from activity claiming to be from handling of export cargo without any supporting documents is exigible to tax. The SCN-I alleges that though the definition of Cargo Handling Service excludes activity relating to export cargo but the Noticee could not provide evidence thereof. Therefore, service tax demand of Rs.1,39,86,381/-for the period 2006-07 to 2010-11 has been raised against the Noticee. For subsequent period 2011-12, service tax demand of Rs.35,25,460/- has also been issued vide SCN-II dated 18.10.2012. 13.2 In this context, I find that the definition of Cargo Handling Service defined under erstwhile Section 65(23) of the Finance Act, 1994 excludes the activities of handling of export cargo. Factually the Noticee did not provide any evidence in course of audit ....
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....lden to CONCOR for such documents. Therefore, few of the invoices now produced to buttess their case being not free from suspicion considering the peculiarity of the circumstances cannot be taken at its face due. The Supreme Court in the case of M/s Mysore Metal Industries Vs. CC, Bombay - 1988(36)ELT 369 (SC) has held that burden to prove eligibility to exemption is on the claimant. Therefore, I am of the considered view that the Noticee has miserably failed in establishing that the said amount received by them from CONCOR are related to handling of export cargo. Accordingly, I hold that the Noticee is liable to pay service tax as demanded." (emphasis supplied) 13. This appeal has been filed to assail this order dated 28.11.2016 passed by the Commissioner. 14. Shri Gurdeep Singh, learned counsel for the appellant assisted by Shri Anil Kumar made the following submissions: (i) It is clear from the first agreement dated 03.08.2007 that the appellant provided "supply of tangible goods" service, which service became taxable under section 65(105)(zzzzj) of the Finance Act with effect from 16.05.2008 and the appellant discharged service tax liability under this s....
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....ny person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipments and appliances would be taxable. 19. For the purpose of clarification, the Department of Revenue issued a Circular dated 29 February, 2008. The said Circular clarified the applicability of section 65(105)(zzzzj) vis-a-vis article 366(29A)(d) of the Constitution. The relevant portions of the Circular are as follows: "4.4 SUPPLY OF TANGIBLE GOODS FOR USE: 4.4.1 Transfer of the right to use any goods is leviable to sales tax/VAT as deemed sale of goods [Article 366(29A)(d) of the Constitution of India], Transfer of right to use involves transfer of both possession and control of the goods to the user of the goods. 4.4.2 Excavators, wheel loaders, dump trucks, crawler carriers, compaction equipment, cranes, etc., offshore construction vessels & barges, geo-technical vessels, tug and barge flotillas, rigs and high value machineries are supplied for use, with no legal right of possession and effective control. Transaction of allowing another p....
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....d to a 'deemed sale' under Article 366(29A)(d). xxxxxxxxxxx 20. The taxable service is defined as a service which is provided or which is to be provided by any person to another "in relation to supply of tangible goods". The provision indicates that the goods may include machinery, equipment or appliances. The crucial ingredient of the definition is that the supply of tangible goods is for the use of another, without transferring the right of possession and effective control "of such machinery, equipment and appliances". Hence, in order to attract the definition of a taxable service under sub-clause (zzzzj), the ingredients that have to be fulfilled are: (i) The provision of a service; (ii) The service is provided by a person to another person; (iii) The service is provided in relation to the supply of tangible goods, including machinery, equipment and appliances; (iv) There is no transfer of the right of possession; (v) Effective control over the goods continues to be with the service provider; and (vi) The goods are supplied for use by the recipient of the service. xxxxxxxxxx 26. Under Section 65(105....
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....ot accompanied by control and possession. 'Use' in the context of SKID equipment postulates the utilization of the equipment for the purpose of fulfilling the purpose of the contract. Section 65(105)(zzzzj) does not require exclusivity of use. The SKID equipment is an intrinsic element of the service which is provided by the respondent, acting pursuant to the GSA, as a supplier of natural gas to its buyers. xxxxxxxxx 30. Thus, we are of the view that the supply of the pipelines and the measurement equipment (SKID equipment) by the respondent, was of use to the customers and is taxable under Section 65(105)(zzzzj) of the Finance Act, 1994." (emphasis supplied) 22. The judgment of the Bombay High Court in Indian National Shipowners' Association and Anr. vs. Union of India and Others [2009 (14) S.T.R. 289 (Bom.)] also examined the provisions of section 65(105)(zzzzj) of the Finance Act and this judgment was referred to by the Supreme Court in Adani Gas. The observations of the Bombay High Court are as follows: "38. Entry (zzzzj) is entirely a new entry. Whereas Entry (zzzy) covers services provided to any person in relation to mining of mineral, ....
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....R. They provide that the appellant must have his own requisite trained personnel and requisite number of reach stackers for performance of the contract; have the necessary inventory for consumables and critical components required for handling the reach stacker; exercise due care and take all precautions while handling containers to avoid any damage or loss to the container; to ensure proper closure of doors of the containers at the time of stacking/loading/shifting; ensure deployment of specified serviceable machinery and plant for execution of the proposed work; ensure that two loaded reach stackers and one empty reach stacker are deployed in good working condition; and that the reach stackers should be able to carry out minimum of twelve moves per working hour taking which a penalty could be imposed upon the appellant. The aforesaid terms of the agreement clearly show that the appellant rendered "supply of tangible goods" service to CONCOR. Second Agreement dated 10.11.2003 - Cargo Handling 25. The issue that arises for consideration in regard to the second agreement is as to whether the appellant was justified in not paying service tax for handling operations in respect o....
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....BCB1936CST001] under 'Cargo Handling Service' falling under Section 65(105)(zr) of the Finance Act, 1994. That we have been specifically requested by the Company to verify the service tax payable/paid on handling of import and export of cargo during the period 2006-07 to 2011-12. In this regard, we have verified the Books of Accounts, Service Tax Returns, Invoices, agreement executed with Container Corporation of India Limited ["CONCOR"] [i.e., Agreement for Acting as Contractor for Cargo Handling Operations at Inland Container Depot, Tughlakabad for Container Corporation of India Limited] ["Agreement"] dated 10.11.2003 and other relevant records, accounts and documents. That on a perusal of these documents and the relevant provisions applicable during the concerned period, we hereby certify the following: (i) That the Company had duly paid service tax on handling of import cargo in view of the definition of "Cargo Handling Service" as provided under Section 65(23) of the Finance Act, 1994.; and (ii) That the Company has not paid any service tax on handling export cargo as it is not liable to pay the same during the period 2....