Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Missing seized records must be considered while testing ITC claim; duplicate GST demands ordered corrected: Delhi High Court. *  GST appeal can’t be rejected without addressing taxpayer’s grounds: Allahabad High Court. *  Surplus IGST credit can offset CGST, SGST shortfall: GSTAT. *  GST refund can’t be denied when cancelled airfares are returned with tax: GSTAT. *  3 Hearing notices issued within 2 minutes: Gujarat High Court flags portal flaw, seeks report. *  GSTR-9, GSTR-9C filing for FY 2025-26 enabled; pending GSTR-1 and GSTR-3B must be filed first. *  Dupattas are exempt fabrics, can’t be taxed as fibres at 4%: Madras High Court. *  Full transitional credit allowed on capital goods received after GST rollout: GSTAT denies Rs. 6.99 lakh export duty credit. *  GST return mismatch alone can’t justify fraud proceedings: GSTAT orders fresh adjudication under section 73. *  Supplier found non-existent later can’t alone justify input tax credit denial: GSTAT. *  GST interest stops once tax reaches government account, can’t run until return filing: GSTAT. *  Cancelled flat booking- GST refund can’t be denied without excluding COVID period from limitation: GSTAT. *  India notifies rules of origin for India–New Zealand FTA. *  Incomplete E-bike kits classifiable as complete vehicles, but not eligible for CKD duty concession: CESTAT. *  Same GST rate on main input and output can’t by itself bar inverted duty refund: GSTAT. *  Unjust enrichment doesn’t apply to customs refunds from assessments finalised before July 13, 2006: Gujarat High Court. *  CENVAT credit can’t be denied solely because plant And machinery are embedded in earth: Karnataka High Court. *  DFIA exports ineligible for RoDTEP benefits; customs directs repayment with applicable interest. *  Second E-Way bill alone doesn’t prove another supply: GSTAT. *  Bail denied in Rs. 1.19 crore fake GST refund case over risk of accused absconding again: Punjab and Haryana High Court. *  GST registration can be restored after revocation deadline if outstanding dues are paid: Gauhati High Court. *  Multiple GST proceedings over same suppliers: Calcutta High Court directs dept. to share findings for adjudication. *  E-Governance portal services not OIDAR, fixed deposit interest not taxable: CESTAT. *  Rs. 500 Stamp duty required on authority letters for CAs, CMA and GST practitioners in Pune GST division.  *  Rs. 1.10 crore GST refund must be paid in cash after business closure: Allahabad High Court. *  Godown rent attracts 18% GST even when used exclusively for exempt agricultural warehousing: AAR. *  GST portal launches "Multi-State Registration" facility: one master TRN for registration applications across multiple States/UTs. *  RoDTEP scheme extended till 31st December, 2026.  *  Mere disagreement with order can’t override Rs. 20 lakh appeal limit: GSTAT. *  Customs interest can’t be backdated before confiscation liability is determined; nearly 8 year period excluded: Delhi High Court.
Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

Comments

Print   |    |  Comment

PJ/Case Laws/2012-13/1215

Whether loading of coal done on tippers by hiring pay-loaders and by using manual labour and the tippers transport coal from one place within the mining area to another place and unload it there fall under the category of ‘Cargo Handling Service’ which i
 
 
Case:- GANGADHAR BULK MOVERS PVT. LTD. v. COMMISSIONER OF C. EX., NAGPUR
Citation: - 2012(27) S.T.R 258 (TRI-Mumbai)
Issue: - Whether loading of coal  done on tippers by hiring pay-loaders and by using manual labour and the tippers transport coal from one place within the mining area to another place and unload it there fall under the category of ‘Cargo Handling Service’ which is chargeable to Service Tax with effect from 16-8-2002?
Whether penalty imposable against the Appellants under Sections 76, 77 and 78 of the Finance Act, 1994 is justified?
Brief fact: - The Appellants are engaged in loading/unloading of coal on a contract with M/s. Western Coalfields (here-in-after referred as WCL). The loading of coal is done on tippers by hiring pay-loaders and by using manual labour and the tippers transport coal from one place within the mining area to another place and unload it there. The officers of DGCEI working on intelligence found that the appellants were providing service under the category of 'Cargo Handling Service’, however, they did not obtain the Service Tax Registration and did not discharge the Service Tax liability on the amounts received from their clients. Proceedings were initiated against the Appellants and accordingly, show cause notices were issued demanding Service Tax by invoking the extended period of time under the provisions of Section 73(1) of the Finance Act, 1994 on the ground that the Appellants had willfully suppressed the fact of loading of coal undertaken by it at the coal-mines of WCL with intent to evade payment of Service Tax. The penalty under Sections 76, 77 and 78 of the Finance Act, 1994 were also proposed in the show cause notice.
Learned Commissioner held that service rendered by the Appellant falls under the category of 'Cargo Handling Service' which is chargeable to Service Tax with effect from 16-8-2002. He accordingly confirmed the demand along with the interest and also imposed penalty under Sections 76, 77 and 78. Aggrieved by the same, the Appellants filed these Appeals.
Appellant Contention: - The Contention of the Appellants is that they are ex-servicemen companies incorporated under the Companies Act, 1956 & own equipments such as tractor mounted excavator (Back Hoe), Pay Loaders and Tippers. They have entered into a contract with WCL, the agreements are in the nature of work orders. The work orders, inter alia, provide for hiring of Pay Loaders for loading of coal into tippers from various quarries, phases, surfaces and stocks of WCL and transportation of the same in the tippers and unloading of the same within the mining area of WCL from phase of the mines up to the surface such as stockyard, bunkers etc. and also from one surface area to another surface area. The contention is that no manual operation is being carried out and no labour workmen are involved in this operation.
The Appellants placed reliance on the definition of 'Cargo' in Collins Internet-linked Dictionary of Business and Webster's Dictionary. The contention is that cargo is the same as freight and that the term, 'cargo' in commercial usage has a peculiar usage to the extent that only the goods in transit on a vehicle, ship or aircraft be 'cargo' and coal mined from earth is not 'cargo'. To qualify as cargo handling, the handling must be of cargo. While all cargo may be goods, all goods need not necessarily be cargo. In this regard, they have placed reliance on para 14 of the Budget Circular No. B11/1/02-TRU, dated 1-8-2002, wherein it was clarified that empty containers cannot be treated as cargo. In support of their contention, they also placed reliance on the amendment to definition of 'Cargo Handling Service'; vide Finance Act, 2008 with effect from 16-5-2008.
 
Further Contention of Appellants is that they are ex-servicemen companies. They are incorporated pursuant to a Memorandum of Understanding (MoU) entered into between the Ministry of Energy and Ministry of Defence in 1979. The shares of the Appellants are held by War Widows and Disabled Soldiers. The aim of the MoU was to provide union free captive transport organizations to various coal companies under the Department of Energy and at the same time, provide a source of income for ex-servicemen who are registered with the Director General of Rehabilitation, Ministry of Defence, New Delhi. Thus, it is clear that the Appellants, by no stretch of imagination, are understood as 'cargo handling agency' in ordinary or commercial parlance. The Appellants do not undertake any of the regular functions of a cargo handling agency.
 
The contention is that it is well-settled that a commercial contract has to be understood in business parlance only. It is the substance and not the form of the contract that should be regarded. The contract cannot be construed in a manner so as to negate the intention of the parties to the contract. Though for administrative convenience, separate consideration has been agreed, loading is not an independent activity. Therefore they are not covered under Cargo Handling Service.
The Appellants are merely acting as an agency on behalf of Director General of Rehabilitation (DGR) in case of Service Tax liability, if any, the same is recoverable only from DGR, the main contractor and not the Appellants and the cum-tax benefit must be extended to the appellant
The Appellant further contended that the issue involves is of interpretation and there is no suppression of fact, extended period is not invocable in this case on the part of the Appellants, therefore penalty is not imposable against the Appellants.
Respondent Contention:-   The Id. Jt. CDR submitted that the contention is not factually correct. In this regard, he has drawn our attention to page 13 of the Appeal of M/s. Gangadharan Bulk Movers Pvt. Ltd., from which it is revealed that the work order dated 24-2-2007 consists of two jobs. The first job is for loading and unloading of coal for which they are paid @ 7.65 PMT, and the second part of the contract is that of transportation of the coal from one place to another for which they are paid Rs. 64.69 PMT and had it been a composite order for mere transportation of goods, there would be no need for showing the two jobs separately with separate rates. In the present case, the demand is confined to the first part of the work order viz. loading & unloading of coal. There is no demand in respect of transportation charges as ST on the same is paid by WCL, as the recipient of this service of GTA.
 
They further contended that decision of the Tribunal in the case of Sainik Mining and Allied Services (supra) was duly considered by the Tribunal of Kolkata Bench in the case of Gajanan Agarwal v. CCE, Bhubaneswar reported in 2009 (13) S.T.R. 138 (Tri.-Kol.). Further the Department also placed reliance on the following decisions :-
(i) Singh Brothers v. CCE - 2009 (14) S.T.R. 552 (Tri.-Del.);
(ii) Vishal Traders v. CCE, Jaipur-I - 2010 (19) S.T.R. 509 (Tri.-Del.).
 
Learned Jt. C.D.R. has also drawn our attention to para 5 of the Board's Circular No. 232/2/2006-CX. 4, dated 12-11-2007 and also placed reliance on the Board's Circular F. No. B-11/1/2002-TRU, dated 1-8-2002. He con-tends that the said Circular does not help the case, as the instances of cargo handling service providers comprise only an illustrative list. And the decision in the case of S.B. Construction Co. reported in 2006 (4) S.T.R. 545 (Raj.) (supra), is clearly distinguishable, since the coal was transported from a railway wagon to the site of the thermal power station through a conveyor system and not by any means of transportation viz. truck, rail, ship or aircraft and the same could not be considered as cargo and the service would not be considered as Cargo Handling Service.
 
 The contention is that the decision of Hon'ble High Court of Jharkhand in the case of Modi, Construction Co. reported in 2011 (23) S.T.R. 6 (Jharkhand) is also distinguishable. The contract in the said case was for transportation only and loading and unloading were incidental to it unlike the present case where the work order is in two parts - one for loading and unloading and the other for transportation and having separate rates for each. In the case of Jharkhand High Court, the issue was shifting of goods within a factory premises. Therefore, the decision is distinguishable.
 
 
Reasoning of Judgment: Section 65(105)(zr) of the Act declared cargo handling service to be "taxable service" w.e.f. 16-8-2002. For better appreciation the relevant provisions are extracted hereunder : (a) "65(105) "taxable service" means any service provided or to be provided, -
(b) (zr) to any person, by a cargo handling agency in relation to cargo handling services;" (c) In view of declaration of law as above, meaning of the term "cargo handling service" was provided by Legislature in Section 65(23) of the Act, which reads as under : 65(23)"cargo handling service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-containerized freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport and cargo handling service incidental to freight, but does not include handling of export cargo or passenger baggage or mere transportation of goods.
 
The necessity of law for taxation under the class cargo handling service is that the service provided should be relating to or in relation to cargo handling by a cargo handling agency. The service provided should be integrally or inseparably connected with handling of cargo or attributable thereto without being a mere activity of transportation of such cargo since transport service independent of cargo handling is an exception under the scheme of levy by Section 65(23) of the Act. Thus it can be said that loading, unloading, packing or unpacking of cargo and handling of cargo for freight in special containers or non-containerized freight and service provided by container freight terminal or other freight terminal for all modes of transport are subject matter of taxation under the class "cargo handling service". That apart, any activity incidental to freight of cargo is also liable to be taxed under such class. Mode of transport is irrelevant for incidence of levy once the service provided meets the test of handling of cargo in the manner envisaged by law. It is also not necessary that the cargo should only be meant for transport either by vessel in ships or aircrafts.
 
As regards the decision of the Tribunal cited by the Appellants in the case of Sainik Mining & Allied Services (supra), the same has been considered by the Kolkata Bench of CESTAT in the case of Gajanand Agarwal (supra) and distinguished, since the contract in the case of Sainik Mining (supra) was for mere transportation and loading and unloading were incidental to it.
Similarly, the decision in the case of S.B. Construction (supra) cited by the Appellant is clearly distinguishable as contended by the respondents and the Hon’ble High Court decision in the case of Modi Construction (Supra) is also distinguishable from the present case.  Board vide para 5 of Circular 232/2/2006-CX. 4, dated 12-11-2007 has also clarified that handling and transportation of coal/mineral from pithead to a specified location within the mine/factory or for transportation outside the mine are post-mining activities and are chargeable to service tax under the relevant taxable services, i.e., "Cargo Handling Service" and "Goods Transport by Road". However, in case, such transportation is undertaken by mechanical systems, such as conveyor belt system, ropeway system, merry-go-round systems etc., and the same is not transported by road, no service tax would be chargeable, service tax is, however, chargeable under cargo handling service, even if the loading, unloading and similar activities are done using mechanical systems.  In view of the above discussion Tribunal find no reason to interfere with ld. Commissioner's orders, holding the service rendered by the Appellants as ‘Cargo Handling Service’
 
Tribunal find that the issue raised in this appeal is one of interpretation of law. This view is strengthened by the circulars issued by C.B.E. & C., from time to time, in this regard. At the infancy stage of implementation of law there appears to have been confusion as to taxability. In these circumstances, the invocation of larger period of limitation is not sustainable. Further, in view of, no positive act, on the part of the appellant, penalties are not imposable upon them. Therefore, Tribunal set aside the demand for the larger period and the penalties imposed. Accordingly, the orders-in-original are set aside and appeals are allowed to this extent. Only the demand for normal period survives. But we make it clear that when tax is leviable and realizable, the appellants shall be required to make payment of interest on the tax.
 
As regards what should be the value for charging service tax, the Id. Commissioner (Appeals) in Para 18.7 (at pages 19/20) of both the Orders-in-Original, has found that the appellants have failed to produce any documentary evidence in support of their contention that for transportation, the service tax has already been paid, therefore, the service tax is to be payable on the entire amount.
 
In these circumstances, the case is remanded to the ld. Commissioner, for limited purpose of determination of value and quantification of demand for the normal period and interest thereon. Both sides are at liberty to produce the documents in their support. Needless to say, a reasonable opportunity of hearing may be granted to the appellants.
 
Decision:- Appeal disposed off
 
 
 
 
Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com