Quality Services Vs C.C.E. & S.T. – Rajkot (CESTAT Ahmedabad)
CESTAT Ahmedabad held that supplying labour doesn’t qualify as ‘Cargo Handling Services’. The goods do not become cargo as any movement of goods within the factory does not make it a cargo.
Facts- the appellant had entered into an contract with Rajkot Dairy for the work of dispatch of their products namely, Gopal Milk, Gopal Ghee, Amul Milk, Amul Ghee, Amul Flavoured Milk etc. The activity of dispatch comprises various items like unloading of milk cans and bottles crates from various incoming vehicles, dumping milk in weighment vessels, cleaning of cans, plastic crates, and bottles, putting milk pouch in creates, putting bottles/ pouch in crates, cleaning of pre-pack machine, loading the crates in the vehicle for dispatch, etc. The revenue had sought to classify the service provided by them under the category of ‘Cargo Handling Service’ during the period 2004-2005 to 15.06.2005 and under the category of BAS during the period 2005-2006 (w.e.f. 16.06.2005) and 2006-2007.
This appeal has been filed by quality services against confirmation of demand of service tax and imposition of penalty under Section 77 and 78 of the Finance Act, 1994. However penalty under Section 77 was set aside by the impugned order on the ground that issue is of pure interpretation.
Conclusion- Held that the appellant is supplying labour to their clients and the charges are based on individual item of work given in the table in the work order. It is seen that all the activities are conducted within the factory premises. All the seven activities listed in the table above do not individually quality as ‘Cargo Handling Service’. The appellant in only providing labour on piece rate basis and at no stage it is the appellant who has taken the custody of goods. The goods do not become cargo as any movement of goods within the factory does not make it a cargo.
We notice that the contracts are not in the nature of ‘Cargo Handling’ but are in the nature of labour contract on piece rate basis. Thus, classification of these services under ‘Cargo Handling Service’ cannot be sustained.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
This appeal has been filed by quality services against confirmation of demand of service tax and imposition of penalty under Section 77 and 78 of the Finance Act, 1994. However penalty under Section 77 was set aside by the impugned order on the ground that issue is of pure interpretation.
1.1 The order of original adjudicating authority not imposing penalty under Section 76 was sustained by the impugned order and the Revenue appeal on that ground was dismissed.
2. Learned counsel for the appellant pointed out that they are in appeal against demand of service tax and interest on services provided by them to M/s Rajkot Dist. Co. Op. Milk Prod. Union Ltd. (hereinafter referred to as Rajkot Dairy) and imposition of penalty under Section 78 of the Finance Act, 1994. He pointed out that the appellant had entered into an contract with Rajkot Dairy for the work of dispatch of their products namely, Gopal Milk, Gopal Ghee, Amul Milk, Amul Ghee, Amul Flavoured Milk etc. The activity of dispatch comprises various items like unloading of milk cans and bottles crates from various incoming vehicles, dumping milk in weighment vessels, cleaning of cans, plastic crates, and bottles, putting milk pouch in creates, putting bottles/ pouch in crates, cleaning of pre-pack machine, loading the crates in the vehicle for dispatch, etc. The revenue had sought to classify the service provided by them under the category of ‘Cargo Handling Service’ during the period 2004-2005 to 15.06.2005 and under the category of BAS during the period 2005-2006 (w.e.f. 16.06.2005) and 2006-2007.
2.1 Learned counsel pointed out that the appellant was registered under the category of Manpower Recruiment and Supply Agency Service and Business Auxiliary Service and was discharging service tax liability under the said heading and was also filing returns accordingly. The audit party sought to classify the services provided by them under the head of ‘Cargo Handling Service’ and raised an objection, which culminated in the present proceedings.
2.2 Learned Counsel relied on the decision of Hon’ble Apex Court in the case of Sushil & Company reported in 2016 (42) STR 625. He argued that in the instant case, the appellant was providing labour to work on the machines of the service recipient which is like the facts in the case of Sushil & Company (supra). He also relied on the decision of Tribunal in the case of Gaytri Construction Co. Reported in 2012 (25) STR (259) to hold that where the entire scope of work is movement of goods within the factory premises, then it does not come under the scope of ‘Cargo Handling Service’. He also relied on the decision of Tribunal in the case of P.R. Nayak Associates reported in 2019 (26) GSTL 91, wherein it has also been held that where goods are moved within the factory, they do not get covered in the scope of service of Cargo Handling.
2.3 He further pointed out that Commissioner (Appeals) has clearly held that the issue involved is of interpretation, and therefore, he has set aside the penalty under Section 76 and 77. He pointed out that on the same ground the benefit of limitation may be allowed to the appellant.
3. Learned Authorized Representative relied on the impugned order. He relied on the following decisions:
