Whether exclusion of transportation cost from cargo handling services for the contract of unloading coal from field and transferring to other place proper?

PJ-Case law-2012/13-1557

Case:- BALAJI HEAVY LIFTERS PVT. LTD. Versus COMMISSIONER OF C. EX., RAJKOT

Citation:- 2013 (30) S.T.R. 255 (Tri. - Ahmd.)

Issue:- Whether exclusion of transportation cost from cargo handling services for the contract of unloading coal from field and transferring to other place proper?

Brief facts:-The issue involved in this case is regarding discharge of Service Tax liability by the appellant under the head Cargo Handling Services, with interest. Ld. Advocate would take us through the Show Cause Notice, Order-in-Original and submit that the appellant herein was discharging the Service Tax liability under Cargo Handling service. It is his submission that the lower authorities are of the view that the amount which has been charged by the appellant to M/s. Gujarat Adani Port Ltd. (now M/s. Mundra Port Ltd.), for the transportation, for execution of oral contract of unloading of coal from the field and transferring the same within the port area and loading in rail wagon, is to be included in the gross value for discharge of Service Tax liability under Cargo Handling Service.

Appellant’s Contention:The Appellant submit that the Board's Circular dated, 1-8-2002 in respect of clarification given for Service Tax liability on Cargo Handling service would come to his aid. He would submit that detailed circular envisages for deduction of cost of transportation for discharge of Service Tax liability under the cargo handling service. He would also submit that the entire case made out by the Department is that the amount charged by them under the head Transportation would fall under the category Cargo Handling service as it would amount to bifurcation of the contract given by the service recipient to them in order to evade Service Tax liability. He would rely upon the decision of the co-ordinate Bench of Tribunal at Chennai in the case of South India Corporation v. CCE, Trichy - 2011 (22) S.T.R. 70 (Tri-Chennai) and submit that the case of the Department is not accepted by the Tribunal in that case. It is also his submission that the question of limitation will arise as the period for which differential Service Tax has been demanded is from 1-10- 2004 to 31-3-2006, while the Show Cause Notice was issued on 24-4-2010. It is his submission that the appellant has followed the Board's circular and had issued two separate bills one for transportation charges and other for cargo handling services.

Respondent’s Contention:Ld. DR. would submit that the bifurcation of the amount received by the appellant seems to be illusionary and was done in order not to discharge the Service Tax liability on the entire contractual amount. He would take us through the statement recorded of the appellant as well as the representative of the service recipient. It is his submission that the entire activity of unloading of coal and loading in to the railway Wagon was a single contract and the appellant had artificially bifurcated the amount in the form of transportation charges and cargo handling service, while the essence of the entire contract was cargo handling service. He would submit that the appellant cannot take the advantage of limitation as both the appellant as well as the service recipient were aware that the Service Tax liability has to be discharged on the entire contracted value.

Reasoning of Judgment:- Tribunal has considered the submissions made at length by both sides and perused the records. We find that it is undisputed that the appellant herein had separately prepared two bills - one for transportation and other for cargo handling service. It is also undisputed that the appellant has discharged the Service Tax liability under the cargo handling service category on the bills which have been raised by him for cargo handling service, while for transportation, he has not discharged Service Tax liability under the category of cargo handling service. We find that Board's Circular No. B11/1/2002-TRU, dated 1-8-2002 on the point of value of the services rendered. It can be seen from the above reproduced clarification given by the Board that in 2002 itself, the Board has clarified that if the bill amount indicates cargo handling service separately and transportation separately on actual basis, then the Service Tax liability can be levied on cargo handling service only. We find that the arguments raised by both sides on the merit can be considered at the final disposal of appeal. At the same time, the Board's circular which has issued in 2002 was correctly followed by the appellant herein, raising separate bills for cargo handling service and transportation. In Tribunal’s view, the appellant has made out a prima casefor waiver of pre-deposit of the amounts on limitation at this juncture. Accordingly, the application for waiverof pre-deposit of amounts involved is allowed and recovery thereof stayed till the disposal of appeal.

Decision:- Stay Application allowed

Comment:-The essence of this case is that when the act of the assessee is based on the clarification given by the Board, prima facie, assessee cannot be found at fault. Accordingly, bifurcation of transportation charges and excluding the same from the cargo handling services cannot be held as improper and so complete waiver from the condition of complying with the amount of pre-deposit was granted.

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PJ-Case law-2012/13-1557

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