Commissioner of Central Goods and Service Tax Vs Bhaiya Lal Infrastructure Pvt Ltd. (CESTAT Delhi)
Summary: The appeal was filed by the department against the Order-in-Appeal dated 29.01.2018, whereby the Commissioner (Appeals) had set aside the service tax demand confirmed against Bhaiya Lal Infrastructure Pvt Ltd. The respondent-assessee, a partnership firm providing services to projects of M/s. Northern Coalfield Ltd., was alleged to have provided Cargo Handling Services by deploying tipping trucks for loading coal into contractor’s tipping trucks using contractor’s pay loaders. For the period April 2008 to March 2013, the department worked out total receipts of Rs.17,96,07,795/-, of which Rs.16,14,98,657/- was treated as taxable value, and proposed service tax of Rs.1,81,09,138/- through Show Cause Notice No. 99/2013 dated 22.10.2013, along with interest and penalties. The original demand was confirmed by Order-in-Original dated 22.03.2017 but was subsequently set aside by the Commissioner (Appeals).
The department contended that the disputed period included the post-negative-list period from 01.07.2012 to 31.03.2013, when classification of services was no longer relevant for determining taxability. It also challenged the reliance placed by the Commissioner (Appeals) on the decision in Commissioner of Central Excise, Raipur Vs. Singh Transporters, Civil Appeal No. 7460/2017, and argued that the liability in the circumstances rested upon Northern Coalfield Ltd. The respondent submitted that the activity was essentially transportation of coal by road and that loading and unloading were merely incidental to transportation. Reliance was placed on Singh Transporters Vs. Commissioner of Central Excise, Raipur, reported as 2012 (27) STR 488 (Tri-Delhi), and Singh Construction Vs. Commissioner of Customs, Central Excise & Service Tax, Jabalpur, reported as 2023 (5) TMI 337-CESTAT New Delhi. The respondent also relied upon Circular No. 186/5/2015 dated 05.10.2015, submitting that a composite service should be treated as a single service based upon its principal service and that Northern Coalfield Ltd. had already discharged the liability under Reverse Charge Mechanism.
For the pre-negative-list period, the Tribunal examined Section 65(23) of the Finance Act, 1994, defining “Cargo Handling Service”, and the corresponding taxable-service provision under Section 65(105)(zr). The Tribunal emphasised the distinction between “goods” and “cargo”. It noted that the statutory definition concerned cargo and specifically excluded mere transportation of goods. The Tribunal considered dictionary meanings and observed that goods become cargo when they are loaded into a ship, aircraft, vehicle or railway wagon and transported to another place. It further observed that the Legislature had deliberately used the expressions “Goods” and “Cargo” in different taxable-service definitions and that the scope of Cargo Handling Services could not be extended to mere goods or materials handling activities.
The Tribunal relied upon the decision in Singh Transporters and the principles concerning transportation of coal from coal mines to tippers or trucks. It held that transportation of goods was distinct from Cargo Handling Services and that transportation of coal from the coal mines to tippers/trucks was not Cargo Handling Service but transportation of goods by road. The Tribunal also noted that Northern Coalfield Ltd., the service recipient, had already discharged the service tax liability under Reverse Charge Mechanism. The demand for the pre-negative-list period was therefore correctly dropped by the Commissioner (Appeals).
For the post-negative-list period, the Tribunal examined Section 66D of the Finance Act, 1994. It noted that Section 66D(p) covered services by way of transportation of goods, including transportation by road except services of a Goods Transport Agency or courier agency. The Tribunal found no evidence that the respondent was a Goods Transport Agency and no consignment note was placed on record. Consequently, it held that there was no tax liability on the impugned activity even for the post-negative-list period and that the demand for this period was also rightly dropped by the Commissioner (Appeals).
The Tribunal separately considered the invocation of the extended period of limitation under Section 73 of the Finance Act, 1994. The Show Cause Notice was based upon the respondent’s own documents, and the department was aware that Northern Coalfield Ltd. had discharged the service tax liability under Reverse Charge Mechanism. The Tribunal found no evidence of suppression or mala fide intent on the part of the respondent to evade payment of tax. It therefore held that the department was not entitled to invoke the proviso to Section 73. Since the activity was held to be transportation of coal within the mines rather than Cargo Handling Service, and the demand was also barred by limitation, the Tribunal found no infirmity in the impugned Order-in-Appeal. The department’s appeal was accordingly dismissed and the order under challenge was upheld.
Cases Discussed
- Commissioner of Central Excise, Raipur Vs. Singh Transporters, Civil Appeal No. 7460/2017.
- Singh Transporters Vs. Commissioner of Central Excise, Raipur, 2012 (27) STR 488 (Tri-Delhi), dated 23.01.2012.
- Singh Construction Vs. Commissioner of Customs, Central Excise & Service Tax, Jabalpur, 2023 (5) TMI 337-CESTAT New Delhi, dated 03.04.2023.
FULL TEXT OF THE JUDGMENT/ORDER OF CESTAT, DELHI
The present appeal has been filed by the department against Order-in-Appeal No. 632-17-18 dated 29.01.2018. The facts in brief are as follows:
1.1 The respondent-assessee being a partnership firm is engaged in providing services to various projects of ‘M/s. Northern Coalfield Ltd.’. Based on an intelligence, the department observed that the respondent-assessee is providing services of cargo handling to the projects of Northern Coalfield Ltd. by deploying the tipping trucks, for loading of coal into contractor’s tipping trucks by contractor’s pay loaders. Since these activities covered under the definition of ‘Cargo Handling Services’ defined under Section 65(23) of the Finance Act, 1994 that the respondent-assessee was alleged liable to pay service tax on the taxable value received by them from those different projects. It was observed that the respondent-assessee received a total some of Rs.17,96,07,795/- for the works performed by them since April 2008 to March 2013, out of which Rs.16,14,98,657/- has been worked out to be the taxable value. On this value service tax of Rs.1,81,09,138/- is proposed to be recovered from the respondent vide Show Cause Notice No. 99/2013 dated 22.10.2013 along with the proportionate interest and the appropriate penalties. The said proposal was initially confirmed vide Order-in-Original No. 68/2016-17 dated 22.03.2017. The said order has been set aside by Commissioner (Appeals). Being aggrieved of the said order, the department is before this Tribunal
2. We have heard Ms. Jaya Kumari, learned Authorized Representative for the department and Shri A.K. Batra, learned Chartered Accountant for the respondent.
3. Learned Departmental Representative for the department has submitted that the disputed period includes the period from 01.07.2012 to 31.03.2013 i.e. the post negative list period where categorization of services has no relevance for taxability. It is submitted that dropping the demand even for this period denying the impugned activity of the respondent to be that of Cargo Handling Services is apparently wrong finding. The order is liable to be set aside on this ground itself. It is mentioned that the Commissioner (Appeals) has wrongly relied upon the decision of Hon’ble Supreme Court in the case of Commissioner of Central Excise, Raipur Vs. Singh Transporters in Civil Appeal No. 7460/2017 wherein it has been held that the transportation of coal from the pit-head to the railway siding within mining area is more appropriately classifiable under Section 65(105)(zzp) of the Act, i.e., under the head “Transport of Goods by Road Services” and that the activity does not involve any service in relation to “mining of mineral, oil or gas”. Commissioner (Appeals) has also committed an error while holding that liability to pay service tax in the given circumstances, rests on the recipient i.e. Northern Coalfield Ltd. The demand has wrongly been dropped noticing that M/s. Northern Coalfield Ltd. has already discharged the services. With these submissions, the order challenge is prayed to be set aside and the appeal is prayed to be allowed.
4. While rebutting these submissions, learned Chartered Accountant for the respondent has reiterated the findings arrived at by Commissioner (Appeals). It is submitted that original adjudicating authority rather had committed an error in concluding that the services provided by the respondent are covered under the taxable category of Cargo Handling Services. The activity is rightly being held to be that of transportation of coal by road. The loading and unloading of coal is mentioned to be incidental to such transportation. Learned Chartered Accountant has relied upon the following decisions:
(i) Singh Transporters Vs. Commissioner of Central Excise, Raipur reported as 2012 (27) STR 488 (Tri-Delhi) dated 23.01.2012.
(ii) Singh Construction Vs. Commissioner of Customs, Central Excise & Service Tax, Jabalpur reported as 2023 (5) TMI 337-CESTAT New Delhi dated 03.04.2023.
4.1 It is further submitted that a composite service even if consists of more than one service, it should be treated as s single service and tax should be levied based on the principal service as is apparent from the Circular No. 186/5/2015 dated 05.10.2015. Keeping in view that the principal service is that of transportation of coal by road, the service tax is to be paid by the service recipient under Reverse Charge Mechanism. The service recipient i.e. M/s. Northern Coalfield Ltd. has already discharged the said liability. Hence, the demand of the same amount from the respondent is liable to be set aside.
4.2 With respect to the demand for the post negative list period, it is mentioned that the show cause notice since has wrongly classified the services as Cargo Handling Service and is also silent about charging Sections i.e. 66B and 65B (44) of the Finance Act, 1994 as are relevant for post negative list period, the demand for this period is also liable to be set aside. Otherwise also, the most of the period of demand is beyond the period of limitation. There is no suppression nor any mala fide intent on part of the respondent to evade the payment of tax. The demand for the extended period is therefore liable to be set aside. With these submissions, the order under challenge is prayed to be upheld and appeal is prayed to be dismissed.
5. Having heard the rival contentions and perusing entire records, we observe and hold as follows:
5.1 The period in dispute is April 2008 to March 2013, thus the period w.e.f. July 2012 to March 2013 is the period post introduction of Section 66D (negative list) in the Finance Act, 2012. Vide this amendment the concept of classification of services was done away. Hence, the findings are pre and post negative list period wise are as follows:
6. Pre Negative List Period
6.1 The activity is alleged to be that of Cargo Handling Services. The service is defined under Section 65(23) of Finance Act, 1994 which reads as follows:
“cargo handling service” means loading, unloading, packing or unpacking of cargo and includes,—
(a)cargo handling services provided for freight in special containers or for non containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and cargo handling service incidental to freight, but does not include, handling of export cargo or passenger baggage or mere transportation of goods”
From the above definition, it can be seen that loading, unloading, packing or unpacking of cargo falls within the “Cargo Handling Service”.
6.2 It is also clear that the provisions of this Section read with Section 65 (105) (zr) of the Finance Act is limited to handling of ‘Cargo’ and not of ‘goods’. The term cargo is not defined under Finance Act. Hence, the dictionary meaning is to be taken into consideration. As per dictionary meanings only “goods” which are being “carried”, “conveyed” or “transported by any means of transportation and have become load of the ship/truck/wagon, etc. “cargo” while in the instant case the coal loaded into the Railway Wagons were part and partial of the MCL stock of coal lying in the Railway siding Inside the mines which had not yet started their journey, hence, handling thereof, if any, cannot be termed as cargo handling activity. Further, in trade parlance the term “Cargo” has a definite connotation and mere handling of goods cannot be termed as cargo handling activity. As per various dictionaries, “Cargo” means as follows:
(i) Freight or loading of a ship, shipload – Shorter Oxford English Dictionary.
(ii) The load or freight of a ship, air plane or vehicle, load – New Webster’s Dictionary.
(iii) Cargo or a ship or plane, the goods that it is carrying – Collins English Dictionary.
(iv) Goods carried by a ship or aeroplane, any load to be carried – Chambers English Dictionary.
(v) The goods transported by a vessel, air plane or vehicle; freight – Black’s Law Dictionary.
(vi) Ships” Load – Webster’s New Dictionary & Thesaurus.
(vii) Cargo is the goods or merchandise conveyed in a ship, aeroplane or vehicle – Mitra’s Legal & Commercial Dictionary Edition.
The said dictionary meanings have used the expression “load”, “ship’s load”, “carried”, “Carrying”, “transported” clearly shows that it is in past tense or present perfect tense which dearly indicates that goods becomes “Cargo” only after it is loaded into the ship or aeroplane or vehicles even Railway wagon and transported to another place. Before that it remains “Goods”.
6.3 It is further observed that the Legislature has drawn clear distinction between the terms “Goods” and “Cargo”. The intention of the Legislature can be gathered from definition of different services under the Act itself. Wherever Legislature intended to tax services relating to “Goods” it has unequivocally stated so and wherever Legislature intended to tax services relating to “Cargos”, it has used the term “Cargo” to limit the scope of levy. For instance, under “Transport of goods by road services” as defined u/s 65(50b), the expression “Goods” is used while under ‘Cargo Handling Services’ defined u/s 65(23), the expression “Cargo” is used which clearly indicates that legislature while bringing the services under the tax net has clearly laid down its scope by deliberately using the expression “Cargo” and to define the scope of the levy. Undoubtedly, the use of the expression “Cargo” by the Legislature is a deliberate act with a intention to restrict the scope of the levy only to “Cargo Handling Services” rendered only by Cargo Handling Agents and not to extend it to goods/materials handling activities. The intention of the Legislature can also be gathered from the new definition of Cargo Handling Services under Section 65(23) substituted by Finance Act, 2008 with effect from 16-5-2008. The issue is otherwise no more res integra. it was decided by this Tribunal in the case of Singh Transporters Vs. Commissioner of Central Excise, Raipur reported as 2012 (27) S.T.R. 488 (Tri.-Del.)
6.4 The Hon’ble High Court of Kolkata had upheld the decision of the Tribunal reported in 2009 (13) S.T.R. 138 (Tri. – Kolkata). Tribunal in that case had observed as under:
15. Combined reading of provisions of section 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 ‘cargo handling services’. However classification of service under this category is subject to two exceptions/exclusions: viz., : (1) handling of export cargo or passenger baggage and (2) mere transportation of goods. These two activities are beyond the scope of such class from taxation for rationale behind them. Accordingly, cargo handling services provided in respect of domestic cargo only are liable to tax. Event of levy arises when service relating to or in relation to handling of cargo is provided by a cargo handling agency irrespective of mode of transport used for movement of such cargo. Precisely, following activities which are contemplated to be taxed as cargo handling service are:
(1) By express terms:
(A) Loading, unloading, packing or unpacking of cargo;
(2) By inclusive terms:
(B) Handling service relating to cargo:
(i) Provided for freight in special containers or for non-containerised freight;
(ii) Provided by a container freight terminal or, by any other freight terminal; and
(3) Cargo handling service provided which is incidental to freight.
16. What that appears to be necessity of law for taxation under the class cargo handling service is that the service provided should be relating to or in relation to cargo handling by a cargo handling agency. The service provided should be integrally or inseparably connected with handling of cargo or attributable thereto without being a mere activity of transportation of such cargo since transport service independent of cargo handling is an exception under the scheme of levy by Section 65(23) of the Act. Thus it can be said that loading, unloading, packing or unpacking of cargo and handling of cargo for freight in special containers or non-containerized freight and service provided by container freight terminal or other freight terminal for all modes of transport are subject matter of taxation under the class “cargo handling service”. That apart, any activity incidental to freight of cargo is also liable to be taxed under such class. Mode of transport is irrelevant for incidence of levy once the service provided meets the test of handling of cargo in the manner envisaged by law. It is also not necessary that the cargo should only be meant for transport either by vessel in ships or aircrafts.
Thus we hold that the issue of transportation of goods is different from cargo handlings transportation of coals from the coal mines to the tippers/trucks is no more res integra as it stands decided that the activity is not a Cargo Handling Service but is that of transportation of goods by road. The service recipient is liable to pay service tax on this activity under Reverse Charge Mechanism. Apparently and admittedly M/s. Northern Coalfield Ltd., the service recipient has already discharged the same. These observations are sufficient for us to hold that the demand for this partial period has rightly been dropped by Commissioner (Appeals).
7. Post negative List period
7. No doubt, for this period, any activity which is not specifically mentioned in any of the clauses to Section 66D of the Finance Act 2012 is a taxable service. Sub-clause (p) of Secion 66D also records services by way of transportation of goods. It reads as follows:
(p) services by way of transportation of goods –
(i) by road except the service of –
(A) a goods transportation agency; or
(B) a courier agency;
There is no evidence on record that respondent-assesse is a Goods Transport Agency nor any consignment note is placed on record. Thus in terms of Section 66B, there is no tax liability on the impugned activity even for the post negative period. The demand for this period is also rightly dropped by Commissioner (Appeals).
8. Finally coming to the issue of invocation of extended period of limitation, we observe from the show cause notice that the demand has been proposed based upon the respondent’s own documents. It is also clear that the fact of discharge of the impugned service tax liability by the service recipient/Northern Coalfield Ltd. under Reverse Charge Mechanism was also brought to be notice of the department. We do not find any act of alleged suppression on part of the respondent-assessee. The department rather has failed to take into consideration the submissions of the assessee-respondent at the time of issuing the show cause notice. In absence of any such evidence which may prove the mala fide intent with the assessee to evade payment of tax, we hold that department was not entitled to invoke the proviso to Section 73 of Finance Act, 1994. Above all, as discussed above, respondent is held not liable to pay tax for “Cargo Handling Service” as it is held to have rendering activity of transporting goods (coal) within the mines of the M/s. Northern Coalfield Ltd. The show cause notice is therefore held to be barred by time. In light of the entire above discussion, we do not find any infirmity in the order under challenge/Order-in-Appeal. The same is hereby upheld. Consequent thereto, the department’s appeal is hereby dismissed.
[Order pronounced in the open court on 08.01.2025]
