Mere handling of coal and movement of said goods from railway wagon to the site of Thermal Power Station will not constitute cargo handling service.

PJ/Case law/2013-14/1630

Case:- M/s NARAYAN BUILDERS Vs COMMISSIONER OF CENTRAL EXCISE, JAIPUR

Citation:- 2013-TIOL-816-CESTAT-DEL

Brief Facts:-The appellant/assessee entered into an agreement with Kota Thermal Power Station, Kota Rajasthan, inter alia for execution of works for smooth operation of coal handling system including clearing under coal handling operation circle for meeting coal consumption requirements of KTPS units stage (I) to (IV) by unloading of coal wagons at WT No. 1 to 5 and others specified operations in relation thereto. Revenue issued a Show Cause Notice dated 10.11.2005 alleging, on the basis of information gathered from KTPS/Kota that the assessee had provided coal handling service to KTPS involving service tax liability of Rs.7,55,357/- in respect of receipts from KTPS, during 22.10.2003 to 14.9.2004. The SCN further asserted that a clarification was issued in the Regional Advisory Committee meeting held on 6.9.2004, that the assessee and others similarly situated who were providing loading, unloading, packing, unpacking services are liable to service tax with effect from 16.8.2002, if such services are provided by cargo handling agency; an assessee failed to remit service tax in the specified amount in respect of the period 8.8.2003 to 7.8.2004 had failed to declare the facts to the department; and had wilfully suppressed the value of the taxable service with intent to evade service tax and thereby contravened specified provisions of the Finance Act, 1994. The assessee responded to the Show Cause Notice denying its liability and predicated its immunity to service tax on Board's Circular No. B/1/2002-TRU dated 1.8.2002 wherein para 3 purported to clarify that the services which are liable to tax under Section 65(23) of the Act are those 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 viz. truck/rail/ship or aircraft. The adjudication order was passed after a due process of consideration of the assessee's response and the liability to tax as per the Show Cause Notice was confirmed. The assessee unsuccessfully preferred an appeal which was dismissed by Commissioner (Appeals) on 30.3.2007. The assessee is thus before this Tribunal seeking invalidation of the appellate determination which confirmed the primary determination by the adjudicating authority.

Appellant Contentions:-The appellant contends that there are several decisions by this Tribunal as well as by the High Court of Rajasthan and Jharkhand which have taken the view that mere handling of coal and movement of the said goods from railway wagon to the site of Thermal Power Station with the aid of the wagon tipping system to be fed in the boiler bunkers through motor vehicles or any other means of transportation involved in such handling, would not constitute cargo handling service within the meaning of Section 65(23) of the Act. Ld. Counsel has referred the decisions of this Tribunal in J & J Enterprises Vs. CCE - 2006 (3) STR 655 (Tri.-Del.) = (2005-TIOL-520-CESTAT-DEL) , Southern Electronics (Bang.) P. Ltd. Vs. CCE - 2007 (212) ELT 276 (Tri.-Bang.) = (2007-TIOL-868-CESTAT-BANG) , Singh Brothers Vs. CCE - 2009 (14) STR 552 (Tri.-Del) = (2009-TIOL-189-CESTAT-DEL) , CCE Vs. Modi Construction Company - 2011 (23) STR 6 (Jhar.), Gaytri Construction Co. Vs. CCE - 2012 (25) STR 259 (Tri.-Del.) and the judgement of High Court of Rajasthan in S.B. Construction Company Vs. Union of India - 2006 (4) STR 545 (Raj.) = (2006- TIOL-390-HC-RAJ-ST) . Appellant also contend that initiation of proceedings leading to the order of adjudication followed by the appellate order is unsustainable for unjustified invocation of the extended period of limitation under the Proviso to Section 73(1) of the Act. Ld. Counsel would contend that (a) the assessee had bonafide believed that it was immunized to the charge of service tax and had based that this assumption on the Board's circular dated 1.8.2002 which interpretation has found resonance in the judgement of Rajasthan High Court in SB Construction. Reliance is placed for the contention regarding unauthorized invocation of the extended period of limitation on the judgement of Supreme Court in Uniworth Textiles Ltd. Vs. CCE - 2013 (288) ELT 161 (SC) = (2013-TIOL-13-SC-CUS). The Supreme Court analysed the scope of Section 28 of the Customs Act, 1962 and having considered several earlier judgements on the appropriateness of invoking the extended period of limitation in the said provision of Customs Act, concluded that the expression "willful" which precedes the phrase "mis-statement or suppression of facts" clearly indicates that there must be an intention on the part of the assessee to evade duty; that mere failure to declare does not amount to wilful suppression of fact nor mere contravention of any provision would be sufficient to legitimize invocation of the extended period of limitation.

Respondent Contentions:- Respondentrelies on the recent judgement of the Orissa High Court in Coal Carriers Vs. CCE - 2011 (24) STR 395 (Ori.). The respondent also contends that apart from unloading the coal through wagon tippers, the residual coal in the wagons is required to be cleared by the assessee and this activity at any rate involves unloading the coal from wagons, bringing it within cargo handling service, a service liable to tax under Section 65(23). Respondent to the contrary contends that the relevant provision of the contract clearly indicate contract between unloading of wagons is part of the contractual obligation.

Reasoning of Judgment:-While the decisions cited by the ld. Counsel for the assessee including the decision of the High Court of Rajasthan within whose territorial jurisdiction the appellant/assessee falls are in favour of the assessee and clearly interprets the relevant provision [i.e Section 65(23) which defines cargo handling service], to mean handling of Cargo (coal) including unloading from wagons and loading through the mechanical process of wagon tipplers for loading on a conveyor belt of a Thermal Power plant for feeding such coal into its boiler unit does not constitute cargo handling service, the decision of the Orissa High Court in Coal Carriers is clearly to the contrary. In Coal Carriers, the Orissa High Court clearly ruled that cargo means "the load" or "freight" of a vessel, train, truck, aeroplane or other carrier (according to Black's Law Dictionary); that goods which are meant for transportation from one place to another by any mode of transport is known as cargo; that meaning of expression "loading" means the act of putting a load on a car, vessel etc; that 'unloading' means disburdening or removing from; that cargo handling service is an adjunct service to the actual transportation of goods; and consequently pre-transportation activities like packing/loading and post-transportation activities like unloading/unpacking have been brought within the service tax net, a "cargo handling service". Relying on the judgement of Orissa High Court in Coal Carriers, Revenue contends that assessee's activities clearly fall within cargo handling service and thus exigible to service tax; that neither the adjudication order nor the appellate order confirming the same suffer from any illegality warranting appellate intervention. In SB Construction Company, the facts (before the Rajasthan High Court) were that the appellant therein was awarded a contract of unloading of coal through WT system, stacking/reclaiming of coal to S/R system and feeding of coal to boiler bunkers through the conveyor system. This contract with Rajasthan Rajya Vidyut Utpadan Nigam was from 29.3.2004 to 25.7.2006. There were identical contracts for subsequent periods as well. In this factual context, the High Court ruled that since coal is handled/moved from railway wagons to the site of Thermal Power Station with the aid of the wagon tipping system, to be fed in boiler bunkers through a conveyor system; handling of the coal was through mechanical devices and no motor vehicle was involved in the said handling, it was not a case of Cargo Handling Service. The Court further held that the Circular dated 1.8.2002 (earlier referred to in this judgement) also supports the assessee's claim to immunity to service tax under the category of cargo handling agency service. The Rajasthan High Court proceeded to hold that in the case before it the service provided by the appellant under the contract is a distinct activity of transporting coal from wagons to the site of Thermal Power Station by conveyor belt and not by means of any transportation and the service rendered is not cargo handling service, liable to service tax. The cause of action of the assessee has arisen within the jurisdiction of Rajasthan High Court and the assessee was assessed to service tax by the jurisdictional Commissioners and the appellate Commissioner within the territorial jurisdiction of the Rajasthan High Court. A full Bench of this Tribunal in Madura Coats Vs. CCE - 1996 (82) ELT 512 clarified that where a conflict of decisions among High Courts does not relate to interpretation of statutory provisions or a notification (and not vires thereof) the decision of the jurisdictional High Court which has jurisdiction in respect of the authority which adjudicated the matter initially and of the assessee and has taken a particular view of interpretation or proposition of law, must be followed in cases falling within that jurisdiction. Madura Coats was reiterated by a Larger Bench of this Tribunal (5 Hon'ble Members) in Collector of Central Excise Vs. Kashmir Conductors - 1997 (96) ELT 257 = (2002-TIOL-353-CESTAT-DEL-LB). The larger bench referred to the Madura Coats decision and reiterated the principle that pronouncements as to the interpretation of a statutory provision or notification, by the High Court having jurisdiction inter alia over the assessee would be binding. The facts and circumstances of this case that the assessee was persuaded by the ambiguity of Board's circular dated 1.8.2002 to assume that it was immune to the liability to service tax, since its contractual activity did not involve onward transportation of the coal unloaded from wagons within the premises of the Kota Thermal Power Plant. In the facts and circumstances of the case, we do not consider it appropriate or necessary to pursue an analysis of whether the petitioner was at all involved in the activity of unloading coal from the rail/wagons as part its is contractual obligation. Ld. Counsel for the assessee on this aspect, contends that coal was unloaded from wagon by tippers provided and manned by KTPS personnel and that the assessee had no participation in such unloading nor was associated with operating the wagon tipper.

On the analysis above the appeal must succeed and is accordingly allowed. The adjudication order dated 1.6.2006, confirmed by the appellate order dated 30.3.2007 is quashed however, without costs.

Decision:-Appeal allowed.

Comment:-The analogy drawn from this case is that as the facts and circumstances of the present case were similar to the decision of the Jurisdictional high court of Rajasthan in assessee’s favour, its ratio was applied and the appeal was allowed stating that the appellant was not liable to service tax under the category of cargo handling service.

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