Transportation services bundled with other activities do not fall under cargo handling services for tax

Calcutta Industrial Supply Corporation Vs Commissioner of CGST & Excise (CESTAT Kolkata)

In the case of Calcutta Industrial Supply Corporation Vs Commissioner of CGST & Excise, the central issue revolved around whether the services provided by the assessee fell under “Cargo Handling Service” or “Transportation Service.” The appellant had secured work orders for transporting coal and ash to specific locations outside mining areas, with ancillary services like loading and unloading. The Revenue Department argued that the services provided were more than mere transportation, and thus should be classified under “Cargo Handling Service,” subjecting them to service tax. However, the appellant contended that these services were primarily transportation, with ancillary services bundled as part of the transportation activity, and thus should not be taxed separately.

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Kolkata referred to prior rulings and circulars issued by the Central Board of Indirect Taxes and Customs (CBIC). These established that a composite service, which includes intermediary or ancillary services like loading and unloading, should be classified based on the principal service—here, transportation. The Tribunal ruled in favor of the assessee, stating that the services provided were transportation in nature and that any ancillary services were naturally bundled with the primary service. Therefore, the service tax demands raised by the adjudicating authority under “Cargo Handling Service” were not sustainable. This judgment clarified that transportation services bundled with other activities do not fall under cargo handling services for tax purposes.

FULL TEXT OF THE CESTAT KOLKATA ORDER

Both sides are in appeal against the impugned order demanding of service tax against the assessee under the categories of “Cargo Handling Service” to the tune of Rs.13,77,44,657/- and “Mining Service” to the tune of Rs.10,18,98,846/-.

2. The Assessee is aggrieved against confirmation of Service Tax demand of Rs.13,77,44,657/- under the categories of “Cargo Handling Service” and “Mining Service” of Rs.10,18,98,846/- and against tax demand of Rs.3,58,15,811/- on differential value between Profit & Loss A/c and ST-3 returns.

2.1 The Department is in appeal against dropping of service tax demand of Rs.14,92,41,316/- under the category of “Cargo Handling Service” on activities of “Transportation of Ash upto distance of 25 km./31 km. with incidental Loading of Ash (evacuation of Ash)” from Ash Ponds of Thermal Power Plant.

WORK ORDERS – TAXED UNDER “CARGO HANDLING SERVICE”.

 2.2 The Assessee executed Four Work Orders dated 01-04-2008 & 27-02-2008 awarded by M/s Rungta Projects Ltd, work order dated 29- 06-2009 awarded by M/s A.K. Transport and work order dated 25-09- 2009 awarded by M/s Sainik Mining & Allied Services Ltd for “Transport of Coal upto the distance of 11km to a place outside the mines with incidental loading”.

2.3 The Assessee further executed contracts for “Transportation of Ash” generated from Mejia Thermal Power Station (MTPS) and Durgapur Thermal Power Station (DTPS) of Damodar Valley Corporation (DVC) and NTDS SAIL Power Company Ltd., Ranchi. Under the said contracts, the Assessee was obliged to load the Ash and transport the same to specified location upto a distance of 25 km/31 km (approx.) where it is automatically unloaded. The said activity of “Transportation of Ash” was sought to be classified under the category of “Cargo Handling Service” in the Show Cause Notice however, the Ld. Commissioner by the impugned Order has dropped service tax demand of Rs.14,92,41,316/- accepting contention of the Assessee that the said contract is essentially for “Transportation of Ash”. Against said dropping of demand department is in Appeal.

WORK ORDERS TAXED UNDER “MINING SERVICE”.

2.4 The Assessee executed Work Orders for “Transportation of coal (with incidental loading) within the Mines” upto lead of 7 km awarded by M/s Eastern Coal Fields Ltd., (ECL), Bharat Cooking Coal Ltd., (BCCL) and Northern Coalfields Ltd. (NCL). Further, a contract dated 01-02- 2011 was awarded by M/s Ambey Mining Pvt. Ltd. for “transportation of Over Burden within the mines”.

2.5 The Assessee executed Work Order dated 12-03-2007 awarded by M/s Eastern Coalfields Ltd. (ECL) for “Transportation of Clean & sized Coal from Chitra – A/B Depot to Jamtara Railway Siding between the lead of 26 – 27 K.M./28 – 29 K.M. and loading the same into Railway Wagons for transportation outside the mines” @ Rs.124.70 PMT. The contract is essentially for transportation upto lead of 26 km to 29 km. Under the contract the Assessee was also obliged for “picking of shale/stone and other extraneous material from the coal to be transported, breaking the clean coal, loading the broken clean coal into tippers by deploying pay loaders, transportation of the coal from Chitra dump to Railway siding and loading the clean broken coal in to Railway Wagon by pay loaders”. The said contract is executed by the Assessee during 2008-09 to 2010-11 i.e. prior to 01-07-2012.

2.6 The Assessee states that out of the aggregate rate Rs.124.70 PMT, Rs.96.10 PMT i.e. 77% relates to transportation of coal. Incidental “Picking”, “Breaking” etc. of coal is carried out inside Mine which constitute just 6% of the PMT rate of Rs.124.70 PMT. Loading & allied job constitutes 17%.

2.7 It is stated that the said contract is essentially for “transportation” of clean broken coal upto distance of 26 – 27 K.M./28 – 29 K.M. and not providing any Mining Service.

2.8 Under the said Work Order dated 12-03-2007, separate rates are provided for each of the five activities. The rate for transportation of coal from Chitra Dump to Jamtara Railway Siding is Rs.96.10/- PMT, for picking of shale/stone is Rs.3/- PMT, for breaking of clean Coal the rate is Rs.4.60/- PMT, for loading of broken coal into tipper by pay loaders the rate is Rs.6/- PMT and the rate for loading of coal into wagon by pay loaders and other allied jobs is Rs.15/- aggregating to Rs.124.70.

SEARCH & SEIZURE/INVESTIGATION

2.9 On dated 05-09-20 13 the Officers of the DGCEI conducted Search and Seizure operations and seized certain documents.

SHOW CAUSE NOTICE

2.10 Show Cause Notice dated 13-10-20 14 was issued by the Ld. Addl. Director, DGCEI, Kolkata classifying the said work orders under (i) Cargo Handling Services and (ii) Mining Services and alleging inter alia that the Assessee has not paid Service Tax of Rs.25,11,40,162/- during the period from 2008-09 to 2012-13 under the said two heads. Further, under Annexure – C2 of SCN Service Tax of Rs.3,58,15,811/- is demanded on the differential value of services as per Profit & Loss A/c vis-à-vis ST-3 returns (without specifying the category of services under which tax is demanded).

2.11 The Assessee in their exhaustive reply to SCN vide letter dated 18-11-2015 vehemently disputed and denied the allegations. The Assessee challenged the Show Cause Notice on grounds of merit, vagueness and also on limitation.

Service Tax Appeal No.75485/2016
(Assessee’s Appeal)

 3. The ld.Counsel for the assessee, submits that under the impugned Order, the Ld. Commissioner while confirming the demand under Mining Service and Cargo Handling Service has held in the following lines-

“11.13 Similarly exclusive coal transportation is also considered as part of mining service where the providers transports the coal within the mining area to the washery or the coal stock because these activities are certainly not post mining activity and loading the coal from there by pay loaders, carrying them to different locations, and unloading them in proper stacks certainly comes under the ambit of cargo handling service.

13.14 From the above……………………. of SCN.

From above, the demand against mining/cargo handling service comes to [Rs.28,69,55,973/-, Rs. 14,92,41,316/-] i.e. Rs.13,77,14,657/-.”

DEMAND UNDER “MINING SERVICE” IS ILLEGAL.

3.1 He further submits that the Work Order executed for ECL/BCCL/NCL for Transportation of Coal within mines upto distance of 7 km within mines with incidental loading is most appropriately taxable under the “Transport of Goods by Road Service”. The said contract is essentially for transportation with incidental loading.

3.2 He also submits that in the case of CCE Vs. Singh Transporters reported in 2017 (4) GSTL 3 (SC) the Hon’ble Supreme Court has held that transportation of Coal from pit head to railway siding inside the Mines is taxable as Goods Transport Agency Services.

3.3 It is submitted that services of transportation does not have any direct and proximate relation to the mining Service. The logistic services (like transportation service) having remote connections with mining activity cannot be held in relation to mining and cannot be included in entry (zzzy). The logistics services rendered in mines, like the one in hand, are either “pre-mining” or “post mining” activities and not in relation to mining. In the trade logistic service providers are never treated as “Mining Service” providers.

3.4 It is submitted that the Work Order dated 12-03-2007 awarded by M/s Eastern Coalfields Ltd. (ECL) for “Transportation of Clean & sized Coal from Chitra – A/B Depot to Jamtara Railway Siding between the lead of 26 – 27 K.M./28 – 29 K.M. and loading the same into Railway Wagons for transportation outside the mines” @ Rs.124.70 PMT. The contract is essentially for transportation upto lead of 26 km to 29 km.

3.5 He states that out of the aggregate rate Rs.124.70 PMT, Rs.96.10 PMT i.e. 77% relates to transportation of coal. Incidental “Picking”, “Breaking” etc. of coal is carried out inside Mine which constitute just 6% of the PMT rate of Rs.124.70 PMT. Loading & other allied job constitutes 17%.

3.6 It is stated that the said contract is essentially for “transportation” of clean broken coal upto distance of 26 – 27 K.M./28 – 29 K.M and not providing any Mining Service.

3.7 He submits that in Circular No.334/1/2008-TRU dated 29/2/2008, it is clarified that method of charging or invoicing does not in itself determine whether the service is a single service or multiple service, Single Price normally suggest single supply though not decisive. The real nature and substance of the transaction and not merely the form of the transaction should be the guiding factor for deciding the classification. Classification must be determined based on essential feature or dominant element of transaction.

3.8 The principle of classification set out under Section 65A/Section 66F of the Finance Act, 1994 in respect of composite services is classification of the entire contract under the service which is predominant or principal service. The principle of classification of goods on the basis predominance is accepted by the Hon’ble Supreme Court in the case of CCE Vs. Champdany Industries Ltd. reported in (2009) 241 ELT 481 (SC) (Para 24). The said principle would apply to service tax also in view of specific provision of Section 65A/Section 66F dealing with composite service.

3.9 He further relies on the following judgment in support of their contentions-

(i) M/s Ambey Mining Pvt. Ltd. Vs. CST reported in 2024 (3) TMI 1106-CESTAT KOLKATA (Para 6.3);

(ii) M/s BKB Transport Pvt. Ltd. Vs. CCE reported in (2023) 12 TMI 1068-CESTAT KOLKATA (Para 11, 12, 13)

DEMAND UNDER “CARGO HANDLING SERVICE” IS ILLEGAL.

3.10 He further submits that the activities of Transportation of Coal upto lead of 11 K.M. with incidental loading/unloading (Rungta Projects Ltd./Sainik Mining/A. K. Transport) is most appropriately taxable under “Transport of Goods by Road Service”. The said contract is essentially for Transportation of Coal.

3.11 It is submitted that the Board vide Circular No.104/7/2008-ST dated 06-08-2008 has clarified under Para 3 that incidental services provided along with Goods Transport Agency services shall stand classified under the category of Goods Transport Agency Services. Similar clarifications are issued under Circular No.186/5/2015-ST dated 05-10-2015.

3.12 He further submits that the aforesaid contracts are essentially for “Transportation of Goods by Road” with incidental loading/unloading hence, cannot classified under “Cargo Handling Service”.

3.13 It is further submitted that right from the show cause notice stage till the passing of the impugned order it is never the case of the department that the Assessee is a “Cargo Handling Agent” within the meaning of Section 65(23)/65(105)(zr). The levy under the Act is on “Cargo Handling Agent” providing “Cargo Handling Service”. In the show cause notice/impugned order, it is not department’s case that the Assessee is a Cargo Handling Agent. The Assessee is known as Transporter in the trade and not as Cargo Handling Agent.

3.13 In support of his contention, he relies on the following judgments-

(i) Maa Kalika Transport Pvt. Ltd. Vs. CCGST reported in 2023 (79) GSTL 263 (Tri.-Kolkata (Para 13,14,15,16,17,18);

(ii) Deputy Commissioner of Central Excise Vs. Sushil and Company reported in (2016) 13 SC 223 (Para 6)

Service Tax Demand of Rs.3,58,15,811/- on difference of value
as per Profit & Loss A/c and ST-3 returns.

 3.14 It is submitted that Service Tax of Rs.3,58,15,811/- is demanded on “adhoc basis” on the differential value as per Profit & Loss A/c vis a vis ST-3 returns without specifying the category under which the said service tax is demanded @ 10.30 %/12.36%.

3.15 It is submitted that the differential relates to work contract service on which tax is paid @ 4.12% on which now tax is demanded @ 10.30%/12.3 6%.

3.16 Further, he submits that the tax @ 10.30%/12.36% is also demanded on the value of free supply of HSD (Diesel).

3.17 In the case of Maa Kalika Transport Pvt. Ltd. Vs. CCGST reported in 2023 (79) GSTL 263 (Tri.-Kolkata) [Para 19], it is held that demand cannot be raised on the basis of data from Income Tax Department without any corroborative evidence that the value is received in connection with provision of taxable service. Similar views have been expressed in the case of Go Bindas Entertainment Pvt. Vs. CST reported in 2019 (27) GSTL 397 (Tri.-All.).

Service Tax Appeal No.75775/20 16
(Revenue’s Appeal)

4. In respect of the Revenue’s Appeal, he submits that the demand of Service Tax of Rs.14,92,11,316/- on activities of “Transportation of Ash” under the categories of “Cargo Handling Service” is rightly dropped by Ld. Commissioner.

4.1 It is submitted that the contracts in hand are essentially for transportation of Ash upto a distance of 25 K.M./31 K.M. with incidental loading (evacuation of ash from ash pond). It is submitted that the aim of the client is “Transportation of Ash” and not “Loading of Ash” and therefore the activity of “Transportation” provides the essential character to the contract in hand.

4.2 He submits that the case of the Assessee is directly covered by decision of this Hon’ble Tribunal in the case of M/s BKB Transport Pvt. Ltd. Vs. CCE reported in (2023) 12 TMI 1068-CESTAT-Kolkata. 4.3 In the instant case, it is no body’s case that the Assessee is a “Cargo Handling Agent”. In the instant case, in the show cause notice no case is made out that the Assessee is a Cargo Handling Agent. Under the circumstances, the services provided by the Assessee cannot be taxed under the category of “Cargo Handling Services” defined U/s 65(23) read with Sec.65(105)(zr). In support of his contention, he relies on the following decisions :

(i) Maa Kalika Transport Pvt. Ltd. Vs. CCGST reported in 2023 (79) GSTL 263 (Tri. -Kolkata

(ii) Deputy Commissioner of Central Excise Vs. Sushil and Company reported in (2016) 13 SC 223.

COMMON SUBMISSSIONS TO ASSESSEE’S APPEAL AND DEPARTMENT APPEAL

4.4 He submits that the demand in the instance case is barred by normal period of limitation.

4.5 In the instant case, he submits that show cause notice is issued on the basis of figures appearing in the Profit & Loss A/c.

4.6 He submits that the major part of the demand in the instant case is barred by normal period of limitation.

4.7 Under the SCN, it is accepted that the transaction in question is already disclosed in the ST-3 returns under the GTA Service, hence, undisputedly there is no suppression of facts.

4.8 Further, the dispute relates to classification of service/pure interpretation of law hence, extended period of limitation cannot be invoked as held by the Hon’ble Supreme Court in the case of International Merchandising Company, LLC, Vs. CST reported in 2022 (12) TMI 556 – SC].

4.9 He further submits that the dispute in the instant case relates to the period from 2008-09 to 2012-13 whereas the Show Cause Notice is issued on 17-07-2014 i.e. beyond the normal period of limitation under Section 73 of the Act.

4.10 It is submitted that the normal period of limitation from 2008-09 to 27-05-2012 was “one year”. The normal period of limitation from 28- 05-20 12 to 13-05-20 16 was “eighteen months”.

4.11 He further submits that prior to the instant SCN, they were issued with another SCN dated 13-02-2008 by the Ld. Addl. Director DGCEI, Kolkata for the immediately preceding period i.e. 16-08-2002 to 31-03- 2007, invoking extended period of limitation classifying similar “Transportation contract (with incidental loading) within the Mines” as taxable under the category of “Cargo Handling Service” whereas in the instant case the similar contracts are sought to be taxed under the category of “Mining Service”.

4.12 It is submitted that while dealing similar situations were in the case of Nizam Sugar Factory Vs. CCE reported in 2006(197) E.L.T 465(S.C) it is held by the Hon’ble Apex Court that department cannot invoke extended period claiming suppression of facts etc. while issuing second/third show cause notices on same/similar grounds as department acquires full knowledge while issuing first show cause notice.

4.13 Further, in the instant case, it is submitted that demand is revised on the basis of books of accounts, records, returns maintained by the Assessee. No material is brought on record by the department hence, extended period of limitation cannot be invoked as held by the Hon’ble Calcutta High Court in the case of Larsen & Toubro Ltd. Vs. Asst. CST reported in 2023 (72) GSTL 361 (Cal.).

4.14 On the above facts and in the circumstance of the case, it is submitted that the levy of interest under Section 75 and imposition of penalty under Section 77 and 78 of the Finance Act, 1994, are not warranted.

4.15 He further submits that in the facts and circumstances of the case, there is no warrant in levying interest and imposition of any penalty upon the Assessee under any of the provisions of the Act/Rules.

4.16 He, therefore, prayed that the impugned Order passed by Ld. Commissioner be quashed and set aside with consequential relief to the Assessee.

5. Heard both sides and considered the submissions.

6. We find that the assessee is contested that they are not liable to pay service tax under the category of “Cargo Handling Service” and “Mining Service” on the ground that they have got the works order for transportation of coal up to the distance of 11 km to a place outside the mines with incidental loading. Further, in respect of the transportation of ash, the assessee was a specific location up to the distance of 25 km/31 km, which was automatically uploaded. The said activity of transportation of ash, sought to be classified by the adjudicating authority under “Cargo Handling Service”. We find that this issue has been examined by this Tribunal in the case of Maa Kalika Transport Private Limited Vs. Commissioner of CGST & C.Ex., Rourkela reported in 2023 (79) GSTL 263 (Tri.-Kolkata), wherein this Tribunal has observed as under :

“11. The issues to be decided in this appeal are :

(i) Whether the Appellant has rendered „Transportation Service‟ as claimed by them or „Cargo Handling Service‟ as claimed by the department?

(ii) Whether the service rendered are essentially „Transportation Service‟ naturally bundled or the individual services in the contract can be vivisected to demand service tax?

(iii) Whether the demand of service tax under „Cargo Handling Service‟ has gone beyond the scope of the Notice?

(iv) Whether the demand can be made only based on the data received from Income-tax department, without any corroborating evidence?

(v) Whether suppression of fact involved in this case or not, to demand service tax by invoking extended period? Consequently, whether penalties imposed in the impugned order are sustainable or not?

12. From the terms and conditions of the contracts mentioned in para 2 above, we observe that the contracts are basically meant for transportation of coal. However, the adjudicating authority has observed that the services would fall under the category of „Cargo Handling Service‟ on the basis of his findings in paras 13.2 and 13.3 of the impugned order, which are reproduced below :

“13.2 On scrutiny of the scope of work specified under W/O­SRPL/Trans/03 dated 17-6-2015, issued by M/s. Saffron Resources Pvt. Ltd. (mentioned at Sr. No. 1 of the table -1 above), I find that the scope of work includes various activities under running contract on tonnage basis, like provision of trucks along with helpers, supervisors, HSD for loading and transportation of Coal from Kula and Basundhara mine to respective plan site of M/s. Hindalco Industries Ltd, and M/s. OCL India Ltd. The said work order further specifies that the contractor has to follow safety norms of Hindalco and OCL in respect of Operators and equipment deployed for the work. Thus, the Noticee is not doing merely a transportation job. Rather they are providing multiple activities of providing loading, unloading, handling and transportation of coal from mines to plant site of their service recipients using required specific equipment, supervisors, helpers and operators.

13.3 On scrutiny of the scope of work specified under Agreement dated 30-5-2015, issued by M/s. Vedanta Limited -Aluminuim & Power (formerly Sesa Sterlite Ltd.) (mentioned at Sr. No. 2 of the table -I above,), I find that the scope of work includes multitude of activities like lifting and transportation of coal from mines of M/s. MCL to CCP/IPP of M/s. Vedanta Ltd., under running contract on tonnage basis together with other service activities like arranging Road Delivery Order (RDO) from Mine owner M/s. MCL, Obtaining mining permission from respective mining circles, feeding of the RDO at Kulda and Basundhara Mines area with all documents like mining permit, authorization copy, sale intimation letter immediately after issuance of mining permit issued by Deputy Director of Mines, Co-ordination with M/s. MCL, providing trucks, ensuring proper quality and quantity loading, ensuring proper quality of coal to be lifted and transported in respect of Gross Calorific Value (GCV), Volatile matter (VM) and Moisture Content (with applicable penalty clause on Noticee for failing to ensure guaranteed quality of Coal). In view of all these contractual specifications, the agreement dated 30-5-2015 is not a plain transportation work. It involves series of item of works right from arranging necessary statutory/transaction documents to safe and quality lifting, handling and ultimate delivery of coal from mines to the plants of service recipient M/s. Vedanta Ltd. Thus such multitude of activities cannot be termed as transportation job/GTA.”

13. We observe that the Ld. Commissioner has arrived at the conclusion that the Appellant has provided multiple services in the form of loading, unloading, handling, providing trucks, obtaining delivery orders obtaining mining permission etc. and hence the services provided are not mere transportation. We observe that the contract is a composite contract primarily for the purpose of transportation of coal beyond 180 to 200 KM. The activities like loading, unloading, obtaining delivery orders etc. are incidental or ancillary to the transportation service. The contract has not provided any separate charges for these activities. The composite contract cannot be vivisected to arrive at the value of service for each activity artificially.

14. We observe that the Board has issued Circular No. 104/07/2008-S.T., dated 6-8-2008, wherein it has been clarified as under :

“3. Issue : GTA provides service to a person in relation to transportation of goods by road in a goods carriage. The service provided is a single composite service which may include various intermediary and ancillary services such as loading/unloading, packing/unpacking, transshipment, temporary warehousing. For the service provided, GTA issues a consignment note and the invoice issued by the GTA for providing the said service includes the value of intermediary and ancillary services. In such a case, whether the intermediary or ancillary activities is to be treated as part of GTA service and the abatement should be extended to the charges for such intermediary or ancillary service?

Clarification : GTA provides a service in relation to transportation of goods by road which is a single composite service. GTA also issues consignment note. The composite service may include various intermediate and ancillary services provided in relation to the principal service of the road transport of goods. Such intermediate and ancillary services may include services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc., which are provided in the course of transportation by road. These services are not provided as independent activities but are the means for successful provision of the principal service, namely, the transportation of goods by road. The contention that a single composite service should not be broken into its components and classified as separate services is a well-accepted principle of classification. As clarified earlier vide F.No. 334/4/2006-TRU, dated 28-2-2006 (paras 3.2 and 3.3) and F. No. 334.1/2008-TRU, dated 29-2-2008 (paras 3.2 and 3.3), a composite service, even if it consists of more than one service, should be treated as a single service based on the main or principal service and accordingly classified. While taking a view, both the form and substance of the transaction are to be taken into account. The guiding principle is to identify the essential features of the transaction. The method of invoicing does not alter the single composite nature of the service and classification in such cases are based on essential character by applying the principle of classification enumerated in Section 65A. Thus, if any ancillary/intermediate service is provided in relation to transportation of goods, and the charges, if any, for such services are included in the invoice issued by the GTA, and not by any other person, such service would form part of GTA service and, therefore, the abatement of 75% would be available on it.”

15. The Board has issued another Circular No. 186/5/2015-ST, dated 5-10-2015 on similar lines. The said clarifications issued by Board are reproduced below :

“3. Goods Transport Agency (GTA) has been defined to mean any person who provides service to a person in relation to transport of goods by road and issues consignment note, by whatever name called. The service provided is a composite service which may include various ancillary services such as loading/unloading, packing/unpacking, transshipment, temporary storage etc., which are provided in the course of transportation of goods by road. These ancillary services may be provided by GTA himself or may be sub-contracted by the GTA. In either case, for the service provided, GTA issues a consignment note and the invoice issued by the GTA for providing the said service includes the value of ancillary services provided in the course of transportation of goods by road. These services are not provided as independent activities but are the means for successful provision of the principal service, namely, the transportation of goods by road.

4. A single composite service need not be broken into its components and considered as constituting separate services, if it is provided as such in the ordinary course of business. Thus, a composite service, even if it consists of more than one service, should be treated as a single service based on the main or principal service. While taking a view, both the form and substance of the transaction are to be taken into account. The guiding principle is to identify the essential features of the transaction. The interpretation of specified descriptions of services in such cases shall be based on the principle of interpretation enumerated in Section 66F of the Finance Act, 1994. Thus, if ancillary services are provided in the course of transportation of goods by road and the charges for such services are included in the invoice issued by the GTA, and not by any other person, such services would form part of GTA service and, therefore, the abatement of 70%, presently applicable to GTA service, would be available on it.”

16. The clarifications cited above clearly establishes that when a contract is entered for a composite contract for transportation service including various intermediate or ancillary services provided in relation to the principal service of road transport of goods like loading/unloading, packing/unpacking, transshipment, warehousing etc., which are provided in the course of transportation, such contract cannot be vivisected. It will be treated as a contract for transportation only as the other services are naturally bundled together with the principal service. Accordingly, be relying on the Board Circulars and the decisions cited above, we hold that the contracts are essentially meant for transportation of goods and other activities are naturally bundled along with this principal service. Once the services rendered are classified as Transportation Service, the liability of payment of service tax on these services was not on the Appellant, as the service recipients in all these cases are Companies registered under Companies Act, 1956/2013, and the liability to pay service tax is on the recipients of service as provided under Rule 2(1)(d)(i)(B) of the Service Tax Rules, 1994.

17. Regarding classification of the service rendered by the Appellant under the category of „Cargo Handling Service‟ we observe that Board has issued a clarification as to what type of services will fall under the category of „Cargo Handling service‟ and cited certain illustrations of “Cargo Handling Agents” i.e. Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations etc. The relevant portion of the said circular is reproduced below :-

“3. The services which are liable to tax under this category are the services provided by cargo handling agencies who undertake the activity of packing, unpacking, loading and unloading of goods meant to be transported by any means of transportation namely truck, rail, ship or aircraft. Well known examples of cargo handling service are services provided in relation to cargo handling by the Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations. This is only an illustrative list. There are several other firms that are engaged in the business of cargo handling services.”

18. In the instant case, we observe that the Appellant was not providing any of the services mentioned above which fall under the category of „Cargo Handling Agent Service‟. Further, we observe that there was no proposal in the Notice to categorize the service rendered by the Appellant as „Cargo Handling Agent service‟. In the impugned order, the adjudicating authority classified the services under the category of „Cargo Handling Agent Service‟ on his own. Thus, we observe that the adjudicating authority has travelled beyond the scope of the Notice, which is legally not sustainable.”

7. As the issue has already been settled that the transportation of goods outside the mines, do not qualify under “Cargo Handling Service”. Therefore, we hold that the demand of Rs.14,92,41,316/- has been rightly dropped by the adjudicating authority and the demand of Rs.13,77,14,657/- is also not sustainable under the “Cargo Handling Service”, which is only transportation of goods agency service.

8. We further find that the assessee’s case has also supported from the Circular No.104/7/2008-ST dated 06.08.2008, which is extracted below :

“Goods Transport Agency service ² Clarifications on ancillary services and classification

Circular No. 104/7/2008-S.T., dated 6-8-2008

F.No. 137/175/2007-CX.4

Government of India

Ministry of Finance (Department of Revenue)

Central Board of Excise & Customs, New Delhi

Subject : Service tax levy on goods transport by road services – Reg.

The All India Motor Transport Congress (AIMTC) has represented to government regarding the difficulties being faced by the goods transport agency in respect of service tax levy on goods transport

by road service. In this regard, a number of meetings were held between the representatives of AIMTC with the government and a joint statement by the government and AIMTC, dated 4-7-2008, was issued laying down the principles to be followed in respect of the issues raised by AIMTC.

2. The issues raised by AIMTC and the clarifications with respect to those issues are given below :

3. Issue : GTA provides service to a person in relation to transportation of goods by road in a goods carriage. The service provided is a single composite service which may include various intermediary and ancillary services such as loading/unloading, packing/unpacking, transshipment, temporary warehousing. For the service provided, GTA issues a consignment note and the invoice issued by the GTA for providing the said service includes the value of intermediary and ancillary services. In such a case, whether the intermediary or ancillary activities is to be treated as part of GTA service and the abatement should be extended to the charges for such intermediary or ancillary service?

Clarification : GTA provides a service in relation to transportation of goods by road which is a single composite service. GTA also issues consignment note. The composite service may include various intermediate and ancillary services provided in relation to the principal service of the road transport of goods. Such intermediate and ancillary services may include services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc., which are provided in the course of transportation by road. These services are not provided as independent activities but are the means for successful provision of the principal service, namely, the transportation of goods by road. The contention that a single composite service should not be broken into its components and classified as separate services is a well-accepted principle of classification. As clarified earlier vide F.No. 334/4/2006-TRU, dated 28-2 -2006 (para 3.2 and 3.3)[2006 (4) S.T.R. C30] and F. No. 334/1/2008-TRU, dated 29-2- 2008 (para 3.2 and 3.3) [2008 (9) S.T.R. C61], a composite service, even if it consists of more than one service, should be treated as a single service based on the main or principal service and accordingly classified. While taking a view, both the form and substance of the transaction are to be taken into account. The guiding principle is to identify the essential features of the transaction. The method of invoicing does not alter the single composite nature of the service and classification in such cases are based on essential character by applying the principle of classification enumerated in section 65A. Thus, if any ancillary/ intermediate service is provided in relation to transportation of goods, and the charges, if any, for such services are included in the invoice issued by the GTA, and not by any other person, such service would form part of GTA service and, therefore, the abatement of 75% would be available on it.

4. Issue 2 : GTA providing service in relation to transportation of goods by road in a goods carriage also undertakes packing as an integral part of the service provided. It may be clarified whether in such cases service provided is to be classified under GTA service.

Clarification : Cargo handling service [Section 65(1 05)(zr)] means loading, unloading, packing or unpacking of cargo and includes the service of packing together with transportation of cargo with or without loading, unloading and unpacking. Transportation is not the essential character of cargo handling service but only incidental to the cargo handling service. Where service is provided by a person who is registered as GTA service provider and issues consignment note for transportation of goods by road in a goods carriage and the amount charged for the service provided is inclusive of packing, then the service shall be treated as GTA service and not cargo handling service.

5. Issue 3 : Whether time sensitive transportation of goods by road in a goods carriage by a GTA shall be classified under courier service and not GTA service?

Clarification : On this issue, it is clarified that so long as, (a) the entire transportation of goods is by road; and (b) the person transporting the goods issues a consignment note, it would be classified as „GTA Service‟.

6. Pending disputes on the above issues may accordingly be decided expeditiously.

7. Trade & field formations may be informed suitably.

8. Hindi version will follow.”

9. Admittedly in this case, the assessee is providing transportation service, accordingly, the loading and unloading is incidental thereto. Therefore, the activity undertaken by the assessee falls under the category of “Transport of Goods by Road” , not under the category of “Cargo Handling Service”. Therefore, we hold that the adjudicating authority has rightly dropped the demand of Rs.14,92,41,316/- and the demand of Rs.13,77,14,657/- are not sustainable against the assessee.

10. The assessee further submits that the demand has been raised under the category of “Mining Service”. The activity undertaken by the assessee, is the transportation of coal up to the distance of 7 km, which is incidental loading and the same is taxable under “Transport of Goods by Road Service” as held by the Hon’ble Supreme Court in the case of Commissioner of Central Excise and Service Tax, Raipur Vs. Singh Transporters reported in 2017 (4) GSTL 3 (SC), wherein it has been held that the transportation of coal from pit head to railway siding inside the mines is taxable as “Goods Transport Agency Services”. In this case, the Hon’ble Supreme Court has held as under :

“5. Though the learned Customs, Excise & Service Tax Appellate Tribunal, New Delhi (“Tribunal” for short) in answering the issue in favour of the respondent leading to the present proceedings has relied upon its earlier judgment in the case of M/s. V.N. Transport v. CCE, Raipur [2016-TIOL-1510-CESTAT-DEL], Arjuna Carriers Pvt. Ltd. v. Commissioner of Service Tax [2016 (41) S.T.R. 632 (Tri.-Del.)] it is argued that the said decisions may not be relevant to the present case inasmuch as the same pertains to a period prior to 1st June, 2007 and the present case pertains to the post 1st June, 2007 period. The difference in time is relevant in view of the insertion of Section 65(1 05)(zzzy), extracted above, effective from 1st June, 2007.

6. Be that as it may, even if the relied upon judgment in the case of Arjuna Carriers (supra) is of no consequence to the present case, we are of the view that the activity undertaken by the respondent i.e. transportation of coal from the pit-heads to the railway sidings within the mining areas is more appropriately classifiable under Section 65(1 05)(zzp) of the Act, namely, under the head “transport of goods by road service” and does not involve any service in relation to “mining of mineral, oil or gas” as provided by Section 65(1 05)(zzzy) of the Act.

7. The reliance placed on the definition of the term “mines” under Section 2(j) of the Mines Act, 1952 does not assist the Revenue inasmuch as what would be indicated by the said definition is that a mine is not to be understood necessarily in respect of pit-heads of the mining area or the excavation or drilling underground, as may be, but also to the peripheral area on the surface. The said definition has no apparent nexus with the activity undertaken and the service rendered.”

11. Further, we find that the Circular No.334/1/2008-TRU dated 29.02.2008, has clarified that the method of charging or invoicing does not in itself determine whether the service is a single service or multiple service. Single price normally suggest single supply though not decisive. The real nature and substance of the transaction and not merely the form of the transaction should be the guiding factor to decide the classification. The classification is to be determined based on essential feature or dominant activities.

12. We further find that this issue has also been examined by this Tribunal in the case of M/s Abey Mining Private Limited Vs. Commissioner of Service Tax II, Kolkata in Service Tax Appeal No.75839 of 2015 vide Final Order No.75611/2024 dated 22.03.2024, wherein this Tribunal has held as under :

“6.3. Regarding the demand of service tax under ‘Mining Services’, the Appellant submits that the Service Tax demand has been raised by merely comparing ST-3 returns with Balance Sheet/Profit & Loss A/c without any investigation. They further submit that the activity of transportation of Coal outside the mines and also within the mines cannot be classified under the categories of Mining Services, as defined under Section 65(1 05) (zzzy) of the Finance Act, 1994. We also observe that he activities of the Appellant “Shifting and Feeding of Coal into the Hoppers” round the clock inside the Power Plants, were also categorized under ‘Mining Service”. We have perused the scope of works under all these contracts. We observe that the activity undertaken by the Appellant is mainly transportation of Coal, within the mining area and out side the mining area. The activity of transportation is most appropriately classifiable under “Goods Transport Agency Services” and the liability to pay Service Tax on the transportation service lies on the service receiver under the reverse charge mechanism. Accordingly, we hold that the transport services provided by the Appellant cannot be classified under the category of “Mining Services”. We observe that this view has been taken by the Hon ‘ble Supreme Court in the case of CCE Vs. Singh Transporters reported in 2017 (4) G.S.T.L. 3 (S.C.). Relying on the said decision, this tribunal has taken the same view in the case of Maa Kalika Transport Pvt. Ltd. Vs. Commissioner of CGST & CE reported in (2023) 8 Centax 273 (Tri. -Cal) wherein it has been held that transportation of coal within the mines is liable for service tax under the category of “Goods Transport Agency Services” and therefore the liability to pay service tax under the reverse charge mechanism lies on the service receivers.. Accordingly, we hold that the transportation service rendered by the Appellant within the mines and outside the mines are not chargeable to service tax under the category of ‘Mining Services’. Similarly, the activities of Shifting and Feeding of Coal into the Hoppers” has been carried out in the Power Plants and hence the same cannot be categorized as ‘Mining Service’. Accordingly, we set aside the demand of service tax confirmed in the impugned order on this count.”

13. Therefore, we hold that the transportation of coal within mines up to the distance of 7 km, falls under the category of “Transport of Goods Agency Services” and not under the “Mining Services”.

14. In view of this, we hold that the demand under “Mining Service” of Rs.10,18,98,846/- is not sustainable against the assessee. 15. Further, we find that the demand of service tax of Rs.3,58,15,811/- is demanded on the differential value of services as provided and the service tax has been confirmed against the assessee. The contention of the assessee that the said demand is relating to “works contract service”, on which the assessee has paid the tax at the rate of 4.12% under composite scheme. Therefore, we hold that that the said demand is not sustainable against the assessee.

16. In view of the above, the appeal filed by the assessee is allowed and the appeal filed by the Revenue is dismissed.

17. Cross objection also gets disposed off in the above terms. (Operative part of the order was pronounced in the open court)