ST - Appellants providing services to State Undertaking - since Cargo Handling does not give essential character of activities of appellants, prior to 10.09.2004 activities undertaken do not fall under Cargo Handling as loading & unloading are only incidental: CESTAT
By TIOL News Service
NEW DELHI, OCT 12, 2013: THE appellants were providing services to M/s Rajasthan State Mines and Minerals Ltd. (M/s RSMML). The appellants were having with RSMML agreement dated 27.11.2002 and 19.12.2002 and are registered with the Service Tax Department and paying the service tax under the category Business Auxiliary Service since June, 2005.
On scrutiny of the documents the Central Excise Officers observed that appellants have deployed machineries for excavation, crushing of lime stone and transportation (loading/unloading) of ROM & crushed lime stone.
It was the view of the Department that these activities were classifiable under the category of "Cargo Handling Services" with effect from 16.08.2002 and under "Business Auxiliary Services" with effect from 10.09.2004; that the appellants had received an amount of Rs.17,96,59,771/- as consideration during the period 01.02.2003 to 31.03.2007; and on the same a total service tax of Rs.1,89,44,579/- was due.
The adjudicating authority confirmed the demand with interest and penalties and so the appellant is before the CESTAT.
The appellant submitted that the activity undertaken is of mining of limestone and transportation; loading and un-loading of the same is just in incidental in the whole process; that the activity cannot be held to be classifiable under Cargo Handling Services prior to 10.09.2004 and even under BAS from 10.09.2004 as any services in relation to production of goods on behalf of the client; that the activity is correctly classifiable under BAS from 16.06.2005 when the amended clause “any services in relation to production or processing of the goods on the behalf of the client” was incorporated and when they have paid duty and this is not being disputed. Furthermore, SCN was issued on 17.03.2008 demanding duty from 01.02.2003 to 31.03.2007 and the same is hit by limitation since there was no malafide intention to evade service tax.
The Revenue representative submitted that the agreement between the RSSML and appellants clearly refers to the transportation/loading/un-loading of the goods and hence the demand raised and confirmed is legal and proper; that since the appellant never approached the department for any clarification, the demand is not time-barred.
The Bench perused the contracts/agreements and observed that the final objective of entering into agreement with the appellants is for production of limestone gitties and in the process of producing these gitties, appellants are performing some activities of loading/unloading of limestone/rejects/waste and transporting the same to various places within the mining area and that the appellants were paid consideration for final production of Gitties per MT basis.
Adverting to section 65A of the FA, 1994 regarding Classification of Taxable services, the Bench noted that the appellant was engaged in various activities and in terms of clause 2(b) of s. 65A of FA, 1994, the services are to be classified as service which gives them essential character; that since Cargo Handling Services does not give essential character of activities of the appellants, prior to 10.09.2004 the activities undertaken do not fall under Cargo Handling Service as loading/unloading are only incidental and not the main activity of the appellants.
For the period post 10.09.2004, the Bench extracted the definition of BAS as prevailing during the material period vis-à-vis the definition w.e.f 16.06.2005 and observed that the activities undertaken by the appellant are more in the nature of processing of raw and crude limestone to get Low silica limestone gitties of desired sizes and these are more appropriately termed as processing activities and not production of goods; that since processing has been added in the definition of Business Auxiliary Services with effect from 16.06.2005 these activities are taxable from that date only and from which date the appellant has been discharging service tax.
So, the Bench held that the appellant was not liable to ST prior to 10.09.2004 under Cargo Handling Service; not liable to ST from 10.09.2004 to 15.06.2005 under BAS as alleged in the SCN and confirmed by the adjudicating authority.
The appeals were allowed.
In passing : See Stay order 2009-TIOL-1397-CESTAT-DEL.
(See 2013-TIOL-1504-CESTAT-DEL)
