whether the lifting, stacking and loading of sugar bags covered under cargo handling service?

Case:-PURSHOTTAM LAL VersusCOMMISSIONER OF C. EX., JALLANDHAR

Citation:- 2015 (38) S.T.R. 161 (Tri. - Del.)

Brief facts:-This order was being issued in respect of appeals No. ST/207/2009-Cus. and ST/208/2009-CU(DB) filed by Shri Purshottam Lal, Vill. Talarala, Distt., Nawanshahar (PB) (hereinafter referred to as the appellant) against Order-in-Appeal Nos. 866-867/CE/APPL/JAL/2008 passed by Commissioner (Appeals), Central Excise, Jalandhar. Waiver of pre-deposit had been granted in respect of both these appeals vide Stay Order No. ST/178-179/2009 by CESTAT, Delhi.
The facts, briefly stated, were as under:
The appellant was providing to the sugar factories at Shamli and Muzaffarnagar, the services by way of loading, unloading and shifting of sugar bags from the floor of mill house to godown, from one godown to another or as desired by their client, to move or handle the goods. The said Order-in-Appeal upheld the Orders-in-Original No. 11/ST/CE/JC/2008, dated 24-3-2008 and 12/ST/CE/GC/2008, dated 24-3-2008 in terms of which the appellant’s activity was held to be covered under the scope of cargo handling service. As a result, vide Order-in-Original under 11 ST/Jt. Commr./2008, dated 24-3-2008, issued in respect of show cause notice No. V(ST)/Adj/34/2007/3960, dated 10-8-2007 covering the period from 16-8-2002 to 15-11-2006 in respect of service rendered to sugar factory at Shamli the adjudicating authority held as under :-
“(1)      I confirm demand of Service Tax amounting to Rs. 13,67,536/- and order the same to be paid with interest under Sections 73 & 75 respectively of the Service Tax Act.
(2)        I impose penalty of Rs. 500/- on the party under Section 75A of the Service Tax Act.
(3)        I impose penalty of Rs. 200/- per day till the date of deposit of Service Tax under Section 76 of the Service Tax Act, subject to that the amount of the penalty payable shall not exceed the total amount of Service Tax due.
(4)        I impose penalty of Rs. 1,000/- under section 77 of the Service Tax Act.
(5)        I impose penalty of Rs. 13,67,536/- under Section 78 of the Service Tax Act.”
Similarly vide Order-in-Original No. 12/ST/Jt. Commr./2008, dated 24-3-2008 issued in respect of show cause notice No. V(ST) JC/Adjn/33/07, dated 10-8-2008 covering the period 16-8-2002 to 31-3-2006, in respect of services rendered to sugar factory at Muzaffarnagar, the adjudicating authority held as under :-
“(1)      I confirm demand of Service Tax amounting to Rs. 18,54,752/- and order the same to be paid with interest under Sections 73 & 75 respectively of the Service Tax Act.
(2)        I impose penalty of Rs. 500/- on the party under Section 75A of the Service Tax Act.
(3)        I impose penalty of Rs. 200/- per day till the date of deposit of Service Tax, under Section 76 of the Service Tax Act, subject to that the amount of the such penalty payable shall not exceed the total amount of Service Tax due.
(4)        I impose penalty of Rs. 1,000/- under Section 77 of the Service Tax Act.
(5)        I impose penalty of Rs. 18,54,752/- under Section 78 of the Service Tax Act.”
As the issue involved in both cases was identical, both were taken up simultaneously.

Appellant’s contention:-In his appeals the appellant had contended that :-
(i)         They were only supplying labour and not providing cargo handling services.
(ii)        The process of packing, loading were mechanised and the appellant did not own the equipment and merely supplemented the process by supplying labour.
(iii)       They were under the genuine belief that their activity was not taxable and there was no wilful misstatement or suppression of facts and therefore demand was time-barred.
(iv)       Their labour were only doing the loading, unloading and shifting of bags within the factory.
(v)        CESTAT in their own case for same activity had decided the issues in their favour vide Order No. 51834/2014, dated 17-4-2013. Similarly the CESTAT judgment in the case of CCE, Meerut-I v. Surinder Kumar - 2010 (20)S.T.R.678 (Tri.-Del.) was also in their favour.
(vi)       In case of CCE, Ranchi v. Modi Construction Company - 2011 (23)S.T.R.6 (Jhar.), the Hon’ble Jharkhand High Court had held that the definition of cargo handling cannot in any way be considered to cover handling of goods within factory premises.
(vii)      The appellant also referred in the case of Gaytri Construction Co. v. CCE, Jaipur - 2012 (25)S.T.R.259 (Tri.-Del.).
The ld. AR fairly conceded that the activities of the appellants within the factory would not amount to cargo handling as had been held in several judicial pronouncements referred to earlier. He added that on careful scrutiny of the contract, a small part of their activity mentioned at Sr. No. 4 of the “rates for sugar handling and allied jobs of sugar godown” namely “loading of sugar in trucks for despatch by rail” could be covered under cargo handling but he conceded that they did not have separate figures for various activities (19 in total listed in the said rate list).

Reasoning of judgment:-they considered the submissions of both sides.
The main, rather, the only issue involved in the case was whether the service rendered by the appellant fell under the cargo handling service which was defined as per Section 65(23) of Finance Act, 1994 as under :-
“loading, unloading, packing or unpacking of cargo and includes cargo handling 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 appellants’ argument that they were only providing manpower was not sustainable because the activities/services of, to quote from the show cause notices, “lifting, stacking and loading of sugar bags” were done by the persons who were on the pay roll of the appellant and the service receivers made the payment to the appellant. Therefore, it was evident that the said services of “lifting, stacking and loading of sugar bags” were provided by the appellant.
In the case of CCE, Meerut-I v. M/s. Surender Kumar - Final Order No. 56355/2013, CESTAT, Delhi [2014 (36)S.T.R.327 (Tri.-Del.)] has held as under :-
“On going through show cause notice as well as order-in-original it is the case of Revenue that respondent is engaged in loading, unloading and shifting of sugar bags from floor of mill house to godown, from one godown to another. This activity does not fit in the definition of cargo handling service. Revenue’s contention that respondent is engaged in loading of bags in truck is without any basis. Accordingly we do not find any merit in appeal and reject the appeal.”
In the case of CCE, Ranchi v. Modi Construction Co. the Hon’ble Jharkhand High Court has held as under :
“We have given our considered opinion to the submission of the learned counsel. As per sub-section (23) of Section 65 of the Act, cargo handling service means loading, unloading, packing or unpacking of cargo. This definition does not in any way can be considered to cover handling of goods within the factory premises because cargo, according to the dictionary meaning of the expression, means ‘loaded or unloaded on truck, aircraft and ship’.”
Indeed, in the case of appellant himself, CESTAT vide Order No. A/65/2012, dated 12-1-2012 had held as under :-
“Page 4 of the Appellate order indicated that the consideration received by the respondent was in respect of loading and unloading of sugar from one place to another within the factory and allied activities relating to the said principal activity. Once such a facts comes out from the Appellate order, the respondent is covered by the decision of CCE, Ranchi v.Modi Construction Company reported in 2011 (23)S.T.R.6 (Jhar.). In the result, Revenue appeal is dismissed.”
Also is yet another Order No. 51834/2014, dated 17-4-2013 CESTAT in the Appellant’s own case stated as under :
“Being aggrieved with the order passed by the Commissioner (Appeals) Revenue has filed the present appeal. The short issue required to decide as to whether the respondent who was engaged in shifting of sugar bags from one place to another within the factory premises of sugar mill is required to be considered as cargo handling service provider or not.
They found that the earlier appeal of the Revenue against same assessee for a different period stood rejected by the Tribunal vide its Final Order No. ST/A/65/2012-CU-DB, dated 18-1-2012. They also took note of the latest order of the Division Bench in the case of CC & C.Ex., Meerut-I v. Omprakash in Appeal No. ST/276/2009 wherein identical issue was considered and vide its Final Order No. 51285/2014, dated 28-3-2014, Revenue’s appeal rejected. By following the above decision we find no merit in the present appeal and the same was accordingly, rejected.”
In the case of M/s. Coal Carriers v. Commissioner of Central Excise, Customs & S.T., Bhubaneswar - 2011 (24)S.T.R.395 (Ori.) the Hon’ble Orissa High Court had also approvingly referred to cargo being the goods which were meant for transportation from one place to another by any mode of transport, adding that pre-transportation activities like packing/loading were covered under cargo handing service.
The learned AR had not contended that any of these orders have been set aside.
The appellant had all along claimed that their activities were confined to the factory premises. The Revenue had not given any evidence that the tasks of, to quote from the show cause notice, “lifting, stacking and loading of sugar bags” were not within the confines of the factory premises. The rate list referred to by the learned AR contains 19 items of work, all of which, with the possible exception of Sr. No. 4 (loading of sugar in trucks for despatch by rail for rake loading only), fall outside the scope of cargo handling as had been fairly conceded by the ld. AR. Even with regard to item No. 4 there is no evidence produced as to whether this item of work was actually performed and therefore threadbare discussion on the point whether this item of work can get stretched into the scope of cargo handling service was pointless. It was also because in the show cause notice, the bouquet of services (lifting, stacking and loading of sugar bags) had been sought to be classified as cargo handling service and therefore such activity-wise vivisection was not a point at issue in this case; more so in the absence of any evidence of all such activities having been performed and the individual quantification thereof. In this context, it is pertinent to refer to the case of CCE v. Gaytri Construction Co. - 2012 (25)S.T.R.259 (Tri.-Del.) where there was a possibility of a small part of service involving manual loading of cargo into railway wagon being covered under the cargo handling service and the CESTAT, Delhi made the following observations :
“Therefore, essentially the present demand is for services use for transporting goods within the factory and also for manpower supplied for manual assistance at various points of loading system using conveyer system though there may be a small part of the service which may be in the nature of manual loading of cargo into railway wagons or trucks which may come within the meaning of “Cargo Handling Service.” In the facts of the case the service, rendered by Appellants cannot be considered as Cargo Handling service in view of the decisions in the case of S.B. Construction Co. - 2006 (4)S.T.R.545 (Raj.) and Modi Construction Company - 2008 (12)S.T.R.34.”
Thus, in view of the foregoing discussion, the appellant’s appeals were sustainable on merit. In addition, the appellant had contended that they were under the genuine belief that their activity was not taxable and they had not suppressed or wilfully misstated anything to evade Service Tax. There was nothing in the show cause notice to even suggest that there was a positive act on their part to suppress or wilfully misstate any facts to evade Service Tax. Indeed, as was evident from the various judicial pronouncements, there had been confusion regarding what is cargo handling or even as to what is cargo. In the wake of the appellant’s belief that their activity was not cargo handling, their not taking Service Tax registration or not filing return was understandable. In these circumstances, it was difficult to sustain the allegation of suppression or wilful misstatement of facts with intent to evade Service Tax.
In the light of the foregoing, the appellant’s appeals were allowed and the impugned Orders-in-Appeal set aside.

Decision:-appeal allowed

Comment:- The gist of this case was that merelylifting, stacking and loading of sugar bags within the factory cannot be covered under the category of cargo handling service. The service to be cargo handling must be related to loading unloading in truck, ship or aircraft. Here as the appellant was just shifting the sugar bags from one place to another it was more likely a service of manpower supply than of cargo handling.

{Prepared by:- Prayushi Jain}

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