TaxTMI 
TaxTMI 
2026 (9) TMI 194
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....demands under the categories of "Cargo Handling Services" (CHS), "Business Auxiliary Services" (BAS) and "Transport of goods by Waterways" (TGW), together with interest and penalties. Appeal no. ST/21205/2015 has been filed by the Revenue against that part of the impugned order, whereby the Adjudicating Authority refrained from imposing penalty under Section 76 of the Finance Act, 1994. 3. The fact, in brief, is that the appellant M/s Sarat Chatterjee & CO. Pvt Ltd., is engaged, inter alia, in providing port logistics, stevedoring, clearing and forwarding, coastal shipping, inland logistics and warehousing. M/s Andhra Pradesh Power Generation Corporation Ltd., (APGENCO) awarded a contract to the appellant for movement of coal from the collieries of MCL/Talcher to the power stations of APGENCO through a Rail-cum-Seacum-Rail route involving Paradeep Port and Kakinada Port. 4. The movement contemplated under the contract involved several distinct stages. The appellant monitored loading at the collieries and at the railway sidings, transportation by rail up to Paradeep Port was undertaken by Indian Railways; unloading at Paradeep and loading into vessels was undertaken by the app....
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....t activity and loading/unloading is merely incidental to transportation. Reliance is placed, inter alia, on United Shippers Ltd., Vs CCE, Thane-II [2015 (37) STR 1043 (Tri-Mum)], affirmed in the case of Commissioner Vs United Shippers Ltd., [2015 (39) STR J369 (SC)] and Arkay Logistics Ltd., Vs CCE & ST, Appeal No. ST/10961/2013, Final Order No. A/10796/2023 dated 03.04.2023. It is submitted that where transportation and cargo handling are separately identifiable and separately priced, the entire consideration cannot be subjected to tax under Cargo Handling Service. 10. In respect of the demand under Business Auxiliary Service, it is contended that M/s Jaldhi Overseas, was engaged under a charter party/contract of affreightment on a principal-to-principal basis. M/s Jaldhi Overseas rendered transportation service to the appellant and not "on behalf of" the appellant to a third party. There was neither any agency relationship nor any third-party agreement as contemplated under the relevant limb of Business Auxiliary Service. 11. It is further argued that coastal transportation of goods was specifically brought into the service tax net only with effect from 01.09.2009 and, ther....
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....received under the APGENCO contract can be subjected to service tax under Cargo Handling Service; (ii) Whether payment made to M/s Jaldhi Overseas prior to 01.09.2009 are taxable under Business Auxiliary Service; (iii) Whether the demand under Transport of Goods by Waterways is sustainable, particularly in view of limitation and revenue neutrality; (iv) Whether the extended period under the proviso to Section 73(1) is invocable; and (v) Whether the Department's appeal for imposition of penalty under Section 76 deserves to be allowed. Cargo handling service: 18. The first and most important feature of the APGENCO contract is that the consideration is not an indivisible lum-sum consideration for an undefined bundle of activities. The Schedule of Rates itself separately identifies and quantifies the consideration relatable to different activities. Ocean freight is specifically fixed at Rs. 579 PMT, while the activities at the two ports are separately priced. The material placed before us further shows that separate invoices were raised for statutory charges, non-statutory charges and ocean transportation. 19. Equally significant is the fact....
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....a has to be treated as Port services alone and principle of classification under section 65A cannot be applied. Hence, any service provided within the port area is to be treated under port services only and not CHS or any other service. 23. Merely because all these activities ultimately facilitated movement of coal from the originating point to the destination, it cannot follow that every activity loses its individual character and the entire consideration becomes consideration for Cargo Handling Service. The taxable event has to be determined with reference to the true nature of the service rendered and the consideration attributable thereto. 24. The Mumbai Tribunal in the case of United Shippers Ltd., supra, held that where transportation services and cargo handling services under a contract have separate rates, service tax cannot be levied on the entire consideration under the single category of Cargo Handling Service, the Tribunal's decision was carried out in appeal to the Hon'ble Supreme Court and the Revenue's Civil Appeal was dismissed by the Hon'ble Supreme Court. 25. The same principle has subsequently been applied where transportation is the principal activity a....
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....h APGENCO or for M/s V.S. Dempo does not convert M/s Jaldhi Overseas into an agent of the appellant. 31. The expression "provision of service on behalf of the client" necessarily contemplates something more than performance of a service for the client. In the normal principal-to-principal sub-contracting arrangement, the subcontractor performs its own contractual obligations for the contracting party; it does not thereby act as an agent of such contracting party. 32. The jurisprudence under Business Auxiliary Service has consistently recognised the relevance of a third-party element where the alleged service is said to have been rendered "on behalf of" a client. The Tribunals have also recognised that a principal-to-principal purchase and sale of freight/cargo space and the margin arising therefrom do not, merely for that reason, constitute consideration for Business Auxiliary Service. 33. There is a further and independent reason why the demand relating to coastal transportation prior to 01.09.2009 cannot be sustained. The very same activity, namely carriage of goods by Sea between Indian Ports, was specifically brought within the Service Tax net under "Transport of Goods....
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....er argued that even if it was to be paid by them on RCM basis, it would have been available to them as credit for discharge of service tax paid by them on the same activity therefore it is a revenue neutral situation. Moreover, they have pointed out that by paying on a forward basis on the said activity they had paid more than the demand made by the Department for the same activity where the demand has been made after allowing the abatement of 25% from the value in terms of notification 1/2006 as amended by 16/2011. Whereas, they had discharged the entire service tax on the service of TGW on full value received by them from M/s APGENCO. Transportation of Goods by Waterways: 37. The demand of Rs. 5,26,84,238/- relates to the period from 01.09.2009 to 30.09.2011. The Show Cause Notice was issued on 24.10.2013. Thus, even taking the enhanced normal limitation period applicable during the relevant time, the entire demand under this category falls beyond the normal period and can survive only upon a valid invocation of the extended period. Even otherwise, demand for the period prior to 01.09.2009 would not sustain on merit as said service was specifically brought under tax net wit....
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....ellant's reliance on various judgments including Jay Yushin Ltd., Vs Commissioner of Central Excise, New Delhi [2000 (119) ELT 718 (Tri-LB)], Amco Batteries Ltd., Vs Collector of Central Excise, Bangalore [ 2003 (153) ELT (SC)]. Revenue neutrality by itself may not, in every case, extinguish the substantive levy, but it is a relevant and important circumstance while examining an allegation of deliberate suppression with intent to evade tax. 41. We also note that the appellant has referred to three earlier Show Cause Notices issued in relation to substantially the same activities/contract. The principle laid down by Hon'ble Supreme Court in the case of Nizam Sugar Factory Vs CCE [2006 (197) ELT 465 (SC)], is that once the relevant facts are within the knowledge of the Department through earlier proceedings, invocation of the extended period in a subsequent notice on the same factual foundation requires careful scrutiny. 42. In the facts before us, we find no positive evidence, establishing deliberate withholding of information with intent to evade service tax. On the contrary, the dispute substantially concerns the proper classification and tax treatment of disclosed contractu....