Services separately provided and separately invoiced cannot be treated as composite service.

PJ/CASE LAW/2014-15/2420

Case:-GANGIREDDY SHIPPING Vs COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, VISAKHAPATNAM

Citation:-2014-TIOL-2128-CESTAT-BANG

Brief Facts:- M/s. Gangireddy Shipping, Visakhapatnam has been granted Stevedoring license under Form 13 by the Visakhapatnam Port Trust for undertaking stevedoring operations. The service of stevedore is port service as per decision in Western Agencies Pvt. Ltd. Vs. Commissioner of Central Excise, 2011 (22) S.T.R. 305 (Tri.- LB). The appellant has been discharging service tax on stevedoring operations, initially under Cargo Handling Services and subsequently under the Port Services. Separate invoices are raised for the stevedoring operations.

Indian Potash Ltd (IPL) is an agency designated by the Government of India for import and distribution of the fertilizers in India. The appellant as a licensed stevedore provides port services for unloading the bulk cargo. Service tax is paid on the same under port services.

The appellant has been entrusted with the task of transporting the bulk fertilizers from the wharf to the ware houses of IPL outside the port under a separate contract. The appellant issues Goods Consignment Notes and charges separate charges for transportation. Service tax as applicable to GTA services has accordingly been paid by IPL under reverse charge. IPL has paid service tax of Rs.46.55 lakhs during the relevant period.

The appellant has also been entrusted with the work of bagging the fertilizers, at the warehouses of IPL outside the port area. As per the contract and work order, the appellant raised invoices for the stevedoring operations and bagging operations.

The different services are provided by the applicant as per contracts and these services are charged separately. The services provided are:

i. Activity One: Stevedore operations and related operations inside the port including clearing and forwarding operations. This activity is classified under Port Services.

ii. Activity Two : Transportation of bulk cargo from the Port to the warehouses situated outside the port. Consignment notes are issued. This is a GTA service.

iii. Activity Three : Bagging of bulk fertilizers into 50 Kg. bags at the warehouses. The service is classifiable under cargo handling service.

iv. Activity Four : Loading of bagged fertilizers on to the Railway Wagons at the Railway siding for onward transportation to the dealers or loading of bagged fertilizers on trucks at the warehouse for transportation to the dealers. This activity is also classified under cargo handling services.

The services relating (i) and (ii) are in relation to bulk fertilizer and the services at in relation to (iii) and (iv) are in relation bagged fertilizer. Separate invoices are raised and service tax as applicable paid.

In the impugned order it has been held that different services provided by the appellants as discussed above are to be treated as if it is a single composite service and categorized as 'Cargo Handling Service' and tax should be discharged. On this basis, the differential service tax of Rs. 1,80,60,703/- has been demanded with interest and penalties have been imposed.

AppellantContentions:- The learned counsel on behalf of the appellants submitted that it is not correct to treat all the activities as a composite service. He submitted that separate heads have been fixed for different activities and separate orders have been issued and separate bills are raised. For the differential duty demanded, the service tax has been discharged by Indian Potash Ltd. treating the service as GTA service and rightly so. He relies upon the circular issued by the Board wherein a view was taken that where individual services are separately contracted, provided and charged by the service provider, then the same cannot be treated as a composite service. The CBEC Circular No. B/11/1/2002-TRU, dated 01.08.2002 has been referred. Further he also submitted that the appellant ispaying service tax under the category of Port Service in respect of handling of fertilizers withinthe port. He submits that according to the definition of 'Port Service' provisions of Section 65A ofFinance Act 1994 is not applicable and therefore on that basis also the principle of classificationnamely classification of a service on the basis of main activity cannot be applied in this case.

Respondent Contention:- Thelearned AR on the other hand submits that the impugned order has taken correct view and hedraws our attention to the observations of the Commissioner in Para 35 of the impugned orderwherein he has considered the circular issued by the Board and its applicability to the appellant. He pleads for upholding the order and rejecting the appeal.

Reasoning of Judgment:- For better appreciation the paragraph from order is reproduced as follows:-

"35. The assessees have cited the clarification provided by CBEC Circular No. F. No. B/11/1/2012-TRU dated 01.08.2002 and claimed that the amounts received towards transportation cannot be construed as having been received towards "Cargo Handling Service". The relevant portion of the CBEC Circular F. No. B/11/1/2002- TRU dated 01.08.2002 reads as follows:

"4. A point has been raised as to what would be the value of service tax in a case where transport and cargo handling service is provided in a composite manner. The measure of tax is the gross amount charged by the cargo handling agency from the customer. Therefore, if lump sum amount is charged for both transportation and cargo handling, the tax will be payable on the entire amount. On the other hand, if the bill indicates the amount charged for cargo handling and transportation separately on actual basis (verifiable by documentary evidence), then the tax would be leviable only on the cargo handling charges."

The learned Counsel find that the situation contemplated in the Circular is when the bill indicates the amount charged for cargo handling and transportation separately on actual basis But in the present case the transportation bill was raised as per a pre-determined rate chart and not on actual cost of transportation. Hence, I find that the circular is not relevant to the present case."

In this case the appellants are not charging the lump sum amount for both transportation and cargo handling. Separate purchase orders are filed, separate bills are raised and separate heads have been fixed. The view taken by the Commissioner that only when the appellant collected actual amount incurred they can be treated separately is not correct. It appears that Commissioner has not applied the meaning of "amount charged" correctly. Amount charged does not mean that actual amount payable.

On going through the records, we find that the claim of the learned counsel that the three activities undertaken by them namely handling of fertilizers and handling of the same within the port, transportation from port to outside the port and thereafter bagging activity are 3 independent separate activities, separately charged and separately billed for. That being the position, it cannot be treated as a composite activity at all. Moreover, service tax is payable on GTA service and there is no evidence that service tax has not been paid on GTA service by IPL.

In opinion of learned Counsel, transportation activity in this case is a distinct activity since it comes in the middle of handling of cargo within the port and bagging outside the port and unless the appellants charged a lump sum amount for all the three activities and there is no divisibility according to the understanding of both the parties, it cannot be treated as a composite contract.

Therefore in our opinion appellants have made out a case on merits and accordingly the requirement of pre-deposit is waived and stay against recovery is granted for a period of 180 days from the date of this order.

Decision:-Stay application allowed.

Comment:- The gist of this case is thatif invoices amount was charged separately for individual services contracted and provided by the service provider, then as per CBEC Circular No. B/11/1/2002-TRU, dated 01.08.2002, same cannot be treated as a composite service. In present case, appellant is paying service tax under the category of Port Service in respect of handling of fertilizers within the port and transportation being a distinct activity, the amount received towards transportation has been rightly discharged under GTA services. Thus said services cannot be treated as composite transactions/services and cannot be leviable under cargo handling services.

Prepared by: Meet Jain

Comments

PJ/CASE LAW/2014-15/2420

Post a Comment

Query