Case Law Details
As regards terminal charges on export cargo, we find that these activities are undertaken in relation to storage of baggage and export cargo. These charges are correctly includible in the value taxable under “Storage and Warehousing.”
As regards the charges collected @20 paise per kg for facilitating X-raying of cargo by customer airlines at the premises of the appellants, we find that the activity would be taxable under renting of immovable property. KSIE pays service tax on renting of space. These charges @ 20 paise per Kg is collected only for providing air-conditioned space where the customer airlines install and operate their x-ray machines. Therefore, the demand in respect of this activity is in order as short payment of tax on renting of immovable property. We uphold this demand confirmed against KSIE.
The assessee did not file ST-3 returns declaring the correct taxable value as prescribed. We find that the Joint Commissioner had held that the assessee was not liable to pay service tax on demurrage and handling charges with respect to export cargo/baggage in appellants’ own case. The Commissioner has refrained from confirming the demand for extended period. The circumstances clearly show that the appellant had not attempted to evade service tax due. Moreover, the liabilities confirmed followed interpretation of provisions which could also accommodate the view held by the appellants. We find that the appellants were not guilty of contumacious conduct and had not acted in defiance of statutory provisions with intention to evade service tax. We find that the Apex Court in the case of Hindustan Steel Ltd., Vs State of Orissa [1978(2) ELT(J159)SC] has held that in the absence of malafide conduct, on the part of the assessee, it is not necessary to impose penalty on a person, even if the statute provides for the same. In the circumstances, we remand the penal liability of the appellant under Section 76 of the Act to the adjudicated afresh considering the provisions of Section 80 of the Act. The appeal is otherwise rejected.
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, BANGALORE
Service Tax Appeal No. 156/2009
Arising out of Order-in-Appeal No. 02/2008 Service Tax Dated: 15.01.2008
Passed by the Commissioner of Central Excise, Customs & Service Tax (Appeals) Cochin
Service Tax Appeal No. 256/2009
Arising out of Order-in-Original No. 18/2008-ST Dated: 31.12.2008
Passed by the Commissioner of Central Excise, Customs & Service Tax, Trivandrum
Date of Decision: 8.9.2010
M/s KERALA STATE INDUSTRIAL ENTERPRISES LTD
Vs
COMMISSIONER OF SERVICE TAX, TRIVANDRUM
Per: P Karthikeyan:
This are appeals filed by M/s. Kerala State Industries Enterprises Ltd. (KSIE for short). M/s. KSIE are appointed custodians of import and export cargo at the air-cargo complex Trivandrum. Appellant is a State Govt. Undertaking and are registered with the department as a provider of taxable services falling under the category of ‘Storage and Warehousing’. The appellants collected terminal charges for various services rendered in respect of air cargo for which KSIE is the custodian, pending their clearance for home consumption or export.
Appeal No. E/156/2009
2. During the period August 2002 to September 2004, KSIE rendered services such as stacking, unloading, repacking, facilitation for X-raying etc. of the export cargo collectively termed as terminal charges. After due process of law, the original authority found that KSIE had short-paid service tax to the tune of Rs.14,38,692/- on terminal charges taxable under “Storage and Warehousing Service.” He demanded applicable interest on the above amount of service tax. He also imposed penalties of equal amounts as the tax demanded under Sections 76 & 78 of the Finance Act 1994 (the Act).
2. Vide the impugned order, the Commissioner (Appeals) remanded the dispute to the original authority with a direction that the original authority shall re quantify the liability of the assessee after excluding the charges relatable to storage and warehousing of agricultural products accepting the plea in this regard made by the assessee. The original authority was to compute the liability correcting the arithmetical errors that had crept in and pointed out by the appellants. He also vacated the penalty imposed on the appellants.
3. In the appeal filed before the Tribunal, the appellants have taken the following grounds. The Commissioner had failed to decide the issue of limitation while remanding the matter to the original authority. The Commissioner had observed that the dispute in the impugned case was of technical nature, hence there was no scope for imposition of penalty in view of a number of Supreme Court judgements. In view of this finding, there was no legal sanction for invoking extended period. The demand had to be confined to the period July 2004 to September 2004. The impugned order is assailed also on merits pointing out that the finding that terminal charges should be treated as storage charges was incorrect. At the time of hearing, the learned counsel for the appellants relied on Circular F.No. B/11/02-TRU dated 1.8.2002 to argue that export cargo and passenger baggage were excluded from the ambit of service tax. We have also heard learned DR who reiterates the reasoning and finding contained in the impugned order.
4. We observe that the demand relates to terminal charges collected from the members of the trade undertaking export of cargo who entrust the consignments to the care of KSIE appointed as custodian at the Air Cargo Complex, Trivandrum. The exporters pay the appellants charges for services such as stacking, unloading and facilitation for X-raying of the export cargo. The relevant entry Section 65(102) of the Act reads as follows-
‘Storage and warehousing includes storage and warehousing services for goods including liquids and gasses but does not include any service provided for storage of agricultural products or any service provided for cold storage from any of the entry.”
We find that the tax applies to storage and warehousing of all goods except agricultural products and goods kept in cold storage. The CBEC Circular cited applies to ‘cargo handling service’. We find that the impugned order has directed the original authority to allow relief in respect of tax demanded on charges collected for storage of agricultural products. As per the assessee, this accounted for Rs 1.10 crores of a total demand of Rs 1.35 crores wrongly adopted as Rs 1.99 crores. We observe that the terminal charges are collected for services rendered by the appellants incidental to the provision of storage of cargo by it as a custodian. We hold that the levy applies to these amounts even if the duration of storage is brief and cargo is in transit prior to its removal for export.
5. The other main contention raised in the appeal is that the Commissioner had vacated penalties imposed by the original authority finding that the dispute involved was of technical nature and in such cases, penalty was not imposable in the light of several judgements of the Apex Court. After having found the assessee not liable to penalty for not paying service tax, extended period could not have been validly invoked to confirm the impugned demand against them. There is merit in this argument. We find that though this plea of limitation was raised before the Commissioner (Appeals), he has not dealt with the same in the impugned order. In the circumstances we order that the demand shall be restricted to normal period. The appeal is thus allowed in part.
APPEAL NO ST/256/2009
6. KSIE has collected various charges, namely warehousing, demurrage, handling charges for import cargo and unaccompanied baggage, terminal charges for export, fork lift charges, x-ray charges, facilitation charges, cold room charges etc., from persons engaged in international trade and use the airport as gateway port. After issue of show cause notice, and after hearing the appellants also on its failure to discharge service tax liability on certain services by short declaring the value of service rendered under the category “Storage and Warehousing” during the period 1.10.2006 to 31.03.2007, the Commissioner passed the impugned order. The appellant had collected demurrage charges for storing unaccompanied baggage in the appellants’ warehouse for storage beyond the free period. The Commissioner held that these charges formed part of the value assessable under “Storage & Warehousing.” He also held that handling charges collected by KSIE for loading, unloading and stacking of goods in the storage area were associated with the storage of goods and also formed part of the taxable value under “Storage and Warehousing.” He rejected the claim of the appellant that export cargo and passenger baggage were excluded from service tax relying on Circular F.No B-11/1/02 TRU dated 1.8.2002 on cargo handling services. He also rejected the assessee’s claim relying on CBEC Circular 89/7/06-ST dated 8.12.2006 which had clarified that the fee collected by sovereign/public authorities under the provisions of law were in the nature of statutory obligation and were excluded from the service tax levy. The Commissioner held that the custody of cargo by private bonded warehouse licensees could not be considered as a statutory function. The charges collected by KSIE as custodian of the warehouse was exigible to service tax. Yet another liability confirmed against KSIE is towards terminal charges, comprising stacking, unloading, repacking and facilitation for x-raying of export cargo, storage and warehousing. He held that terminal charges are liable to service tax.
7. The impugned order also confirmed demand of 20 paise per Kg collected by KSIE from various airlines which used the airport and had installed x-ray machines, in the premises owned by the appellants. These charges were additional consideration received from the client airlines for renting out these premises. The Commissioner held that facilitation charges @ 20 paise per Kg for X-raying cargo and baggage, collected from various airlines was includible in the taxable income under rent. Accordingly, the Commissioner confirmed an amount of Rs 37,24,545/-towards storage of unaccompanied baggage and an amount of Rs 1,00,592/- towards terminal charges for the period 1.10.2006 to 30.09.2007 and another amount of Rs 90,575/- towards facilitation for x-ray of cargo by client airlines. He also demanded applicable interest and imposed penalty @ Rs 200/- per day or 2% of service tax in arrears whichever was higher under Section 76 of the Act.
8. KSIE has contested the demand and penalty in this appeal filed before the Tribunal. As regards the demurrage and handling charges, with respect to passenger baggage/export cargo, it is argued that the same was clearly outside the purview of service tax as clarified in Circular No F.No B/11/1/02-TRU dated 1.8.2004. This view has also been accepted by the Joint Commissioner of Service Tax in his order dated 03.01.2007 in the appellants’ own case. While deciding it’s liability on terminal charges, the Commissioner erred in holding that the said circular did not apply to unaccompanied passenger baggage. The appellants had not incurred any liability to service tax for demurrage and handling charges in respect of unaccompanied baggage and export cargo. As regards export cargo, the main service rendered was that of cargo handling. Therefore, the same could not be subjected to service tax under any other category. As regards collection of facilitation charges @ 20 paise per kg collected from different customer airlines for using the appellant’s space, appellant had not rendered any service. It could be considered if the same fell under cargo handling service under which head export cargo was exempted. Commissioner had found that there was no question of invoking extended period and dropped the demand for the longer period. Therefore, the penalty imposed was illegal and untenable.
9. We have heard both sides and perused the records. Ld. Counsel for the appellants sought to vacate the impugned order on the basis that the demand related to passenger baggage. As per Circular F. No. B/11/1/02-TRU dated 1.8.2002, services provided in relation to export cargo and passenger baggage were excluded from tax net. On perusal of this Circular, we find that the Circular dealt with the scope of cargo handling service. The Circular explained as to what all activities were covered by cargo handling service. In that context, it was clarified that passenger baggage did not come under the levy. It cannot be held that clarification was to the effect that any other service involving passenger baggage was also excluded from levy under the Act. Yet another argument advanced is that the passenger baggage does not remain in their custody for long. The duration of storage may be a few hours or a day or a couple of days. We find that the entry ‘storage and warehousing’ reads as follows:-
“storage and 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”
From the language of the taxable entry, we find that the tax applies to ‘storage and warehousing’ of all goods except agricultural produce and goods kept in cold storage. Obviously, passenger baggage is not excluded from the tax. The duration of storage or warehousing is not material to determine the liability to tax under this heading.
9.1. The main plank of the challenge to the demand is that since the passenger baggage was specifically excluded from the entry ‘cargo handling service’, passenger baggage could not be subjected to tax under any other entry. The learned counsel relied on decision of the Tribunal in the case of Federal bank Ltd. Vs. Commissioner of Central Excise, Customs & Service Tax (Appeals), Cochin reported in [2009 (15) S.T.R. 279 (Tri. – Bang.)] in support of this plea. The appellants therein was engaged in cash management service (CMS). These included (i) maintenance of accounts of CMS clients; (ii) all types of transactions including receipt and payment of cash in such accounts, collection of cheques; and (iii) payment of invoices on behalf of the clients. Vide order impugned before the Tribunal, the Commissioner (Appeals) had confirmed demand of Rs. 28,38,030/- under heading ‘Business Auxiliary Service’ along with interest. The Tribunal accepted the arguments of the appellants that cash management service excluded from the relevant ‘banking and other financial service’ during the material period could not be subjected to tax under the category ‘business auxiliary service’.
9.2. Ld. Counsel submits that since passenger baggage was specifically excluded from levy under the category ‘cargo handling service’, passenger baggage could not be taxed under ‘storage and warehousing service’. We are not able to accept this argument. In Federal Bank Ltd. case cited by the appellants, the activity of cash management was excluded from ‘banking and other financial service’ during the period when the Revenue sought to subject the said activity to tax under ‘business auxiliary service’. We find that an activity was found to be excluded from a particular service and the Tribunal found that the same activity during the same period could not be taxed under another category. It is not the case here. There is no dispute that passenger baggage is not covered by ‘cargo handling service’. We find that ‘storage and warehousing’ of passenger baggage is not exempted for the reason that ‘cargo handling service’ does not apply to passenger baggage. In the circumstances, we find no merit in this plea by M/s Kerala State Industries Enterprises Ltd. We dismiss the appeal.
10. As regards terminal charges on export cargo, we find that these activities are undertaken in relation to storage of baggage and export cargo. These charges are correctly includible in the value taxable under “Storage and Warehousing.”
10.1. As regards the charges collected @20 paise per kg for facilitating X-raying of cargo by customer airlines at the premises of the appellants, we find that the activity would be taxable under renting of immovable property. KSIE pays service tax on renting of space. These charges @ 20 paise per Kg is collected only for providing air-conditioned space where the customer airlines install and operate their x-ray machines. Therefore, the demand in respect of this activity is in order as short payment of tax on renting of immovable property. We uphold this demand confirmed against KSIE.
10.2. As regards penalty imposed under Section 76 of the Act, we find that this section reads as under:
“SECTION [76. Penalty for failure to pay service tax. – Any person, liable to pay service tax in accordance with the provisions of section 68 or the rules made under this Chapter, who fails to pay such tax, shall pay, in addition to such tax and the interest on that tax in accordance with the provisions of section 75, a penalty which shall not be less than two hundred rupees for every day during which such failure continues or at the rate of two per cent of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax:
Provided that the total amount of the penalty payable in terms of this section shall not exceed the service tax payable.”
11. We find that the assessee did not file ST-3 returns declaring the correct taxable value as prescribed. We find that the Joint Commissioner had held that the assessee was not liable to pay service tax on demur-rage and handling charges with respect to export cargo/baggage in appellants’ own case. The Commissioner has refrained from confirming the demand for extended period. The circumstances clearly show that the appellant had not attempted to evade service tax due. Moreover, the liabilities confirmed followed interpretation of provisions which could also accommodate the view held by the appellants. We find that the appellants were not guilty of contumacious conduct and had not acted in defiance of statutory provisions with intention to evade service tax. We find that the Apex Court in the case of Hindustan Steel Ltd.,Vs State of Orissa [1978(2) ELT(J159)SC] has held that in the absence of malafide conduct, on the part of the assessee, it is not necessary to impose penalty on a person, even if the statute provides for the same. In the circumstances, we remand the penal liability of the appellant under Section 76 of the Act to the adjudicated afresh considering the provisions of Section 80 of the Act. The appeal is otherwise rejected.
(Pronounced in open Court on 8.9.2010)
