Classification of the service of loading and unloading of coal and their transportation.

PJ/Case Law/2013-14/1695

Case:- RUNGTA PROJECTS LTD. Versus COMMISSIONER OF C. EX., ALLAHABAD

Citation:-2013 (29) S.T.R. 254 (Tri. - Del.)

Brief facts:-- The appellants are engaged in providing various services to their various clients including M/s. Northern Coalfields Ltd., (NCL), Singrauli, M/s. National Thermal Power Corporation, (NTPC) Shaktinagar, M/s. Kanoria Chemicals Industries Ltd., (KCIL) Renukoot, M/s. India Glycols Ltd. (IGL) etc. The services included:-

(i)     Transportation of coal from different stock yards to crushing site, for NCL.
(ii)    Manual breaking of coal for NCL.
(iii)   Transportation of coal from stock yard of the factory to conveyer belt of the factory for KCIL.
(iv)   Transportation of fly ash from Ash dykes for NTPC.
(v)    Unloading of coal rakes and transportation of coal to factory yard for IGL.
(vi)   Preparation of site for mining by drilling, blasting, earth work, excavation, transportation of soil, handling at dump site etc. for NCL.

Appellant’s contention:-The main argument on behalf of the appellant is that they are doing these activities in mining area and these activities are appropriately covered by mining services which became taxable only from 1-6-2007. They submit they got registered for providing service under this category on 13-9-2007 and have been discharging tax liability under this head. They also admit that part of the service provided by them may be covered by the entry for goods transport agency for which the recipient of service is liable to pay service tax and the recipients are paying such service tax. The appellant submit that though there was direction from the Tribunal in the last round of proceedings to consider the submissions of the appellant and pass speaking order, the Commissioner has not considered the submissions of the appellant and passed orders on their submissions. It is also their submission that activity related to mining cannot be covered by the definition of site formation and also that transportation of goods within the mines or within a factory will not be covered by the entry for Cargo Handling Service because at that stage the goods are not “cargo”. They rely on the decision of the Hon’ble Jharkhand High Court in the case of Modi Construction Co. v. CCE, Ranchi - 2011 (23)S.T.R. 6. They also rely on the decision of the Hon’ble Rajasthan High Court in the case of S.B. Construction Company v. Union of India - 2006 (4)S.T.R. 545 (Raj.). It is also the contention that the handling of goods, which they do, is incidental to transportation for which they have entered into contract. The Counsel submits that Revenue is seeing transportation as incidental to handling of goods. They submit transportation of goods for 30-34 km cannot be considered as incidental to handling of goods. It is their contention that the demand is not maintainable in view of the above decisions and their appeal may be admitted for hearing without pre-deposit of dues arising from the impugned order.

Respondent’s Contention:-Revenue was of the view that the above services provided by them was classifiable under the entry for ‘cargo handling service’ and “Site Formation and Clearance Excavation and Earth Moving Services” and service tax was payable which was not paid. So they initiated proceedings for recovery of service tax short paid by issue of two Show Cause Notices one for the period 1-10-2002 to 28-2-2008 and another for the period 1-3-2008 to 31-3-2010. The Show Cause Notice dated 18-3-2008 for the first period was initially adjudicated by Order-in-Original No. 33/2009, dated 20-3-2009. The appellant came in appeal to the Tribunal and the Tribunal vide Final Order No. ST/79/2011, dated 18-2-2011 [2012 (24)S.T.R. 495 (Tri. - Del.)] remanded the matter to the adjudicating authority to pass a fresh speaking order after considering the submissions made by the appellants. While doing such de novo adjudication the adjudicating authority has passed order in respect of Show Cause Notice issued for the subsequent period also, i.e. Show Cause Notice dated 1-11-2010. The amount confirmed is Rs. 15.86 crore (approx.) under Cargo Handling Service and Rs. 0.29 crores and Site Formation Service for both the Show Cause Notices taken together. AR for Revenue submits that preparing the ground for mining activity has been executed by the appellants in a few contracts and such work is appropriately covered by the entry for site formation and clearance, excavation and earthmoving and demolition services. It is also his argument that they are basically handling coal within the coal mines and also at the railway station for loading the goods to railway wagons and unloading goods from railway wagon and therefore service tax is demanded correctly. Revenue relies on the decision of Gajanand Agarwal v. CCE - 2009 (13)S.T.R. 138 (Tri.). Therefore, he prays that the appellant should be put to some terms of pre-deposit for admission of appeal.

Reasoning of Judgement: The contract is mostly in relation to mining activities and transportation of goods within the mines or within a factory though it appears that there is some activity relating to loading of coal in railway wagons and unloading of coal from railway wagons at which stage the goods may be considered as “cargo”. But we have not been able to find any separate amounts charged for such loading of cargo in railway wagons unlike the facts in the case of Gajanand Agarwal (supra). Prima facie it appears to us that the activities were related to mining and transportation of goods within a mine or a factory. Further it appears that for transportation activities service tax is also being discharged by the recipient of the service as per legal provisions in this regard. We are not inclined to prima facie approve the point of view of Revenue that whenever there has been transportation and loading into railway wagon or unloading from railway wagon and then transportation the activity involved is primarily in the nature of cargo handling and transportation is incidental. Prima facie it appears the contract is for transportation and cargo handling is incidental. So classifying the service as cargo handling service is not warranted at this stage.

In the case of activities sought to be classified under site formation service our prima facie view is that this activity is classifiable as mining activity and liable to service tax only from 1-6-2007 and such tax is being paid. Demand of service tax under site formation service does not appear to be prima facie maintainable in this case where during the relevant period the definition did not cover the activity specifically and later a specific entry is introduced to cover the activity. So at this prima facie stage, we find that the appellants have made out a strong case for waiver of pre-deposit of dues arising from the impugned order for admission of appeal. We order so and there shall be waiver on collection of such dues during the pendency of the appeal.

Decision:-Stay application was allowed.

Comment:-The essence of this case is that every activity of loading and unloading and its transportation cannot be classified under the cargo handling service and leviable to service tax and the same depends on the facts and circumstances of each case.

Comments

PJ/Case Law/2013-14/1695

Post a Comment

Query