The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that activity of unloading milk cans & bottle crates to pre-pack machine services does not falls under ‘Cargo Handling Service’ and set aside the service tax demand.
Quality Services, the assessee challenged the confirmation of demand of service tax and imposition of penalty under Sections 77 and 78 of the Finance Act, 1994. However, the penalty under Section 77 was set aside by the impugned order on the ground that the issue is of pure interpretation.
It was contended that they are in appeal against the demand of service tax and interest on services provided by them to M/s Rajkot Dist. Co. Op. Milk Prod. Union Ltd. (Rajkot Dairy) and imposition of penalty under Section 78 of the Finance Act 1994.
It was stated that the appellant had entered a contract with Rajkot Dairy for the work of dispatch of their products namely, Gopal Milk, Gopal Ghee, Amul Milk, Amul Ghee, Amul Flavoured Milk etc. The activity of dispatch comprises various items like unloading milk cans and bottles crates from various incoming vehicles, dumping milk in weighing vessels, cleaning cans, plastic crates, and bottles, putting milk pouches in creates, putting bottles/ pouch in crates, cleaning the pre-pack machine, loading the crates in the vehicle for dispatch, etc.
The revenue had sought to classify the service provided by them under the category of ‘Cargo Handling Service’ during the period 2004-2005 to 15.06.2005 and under the category of BAS during the period 2005-2006 (w.e.f. 16.06.2005) and 2006-2007.
The appellant was registered under the category of Manpower Recruitment and Supply Agency Service and Business Auxiliary Service and was discharging service tax liability under the said heading and was also filing returns accordingly.
The appellant is engaged in services which involve unloading milk cans and bottle crates from various incoming vehicles, dumping milk in weighing vessels, cleaning cans, plastic crates, and bottles, putting milk pouches in crates, putting bottles/pouch in crates, cleaning or pre-pack machine and department, loading the creates in the vehicle for dispatch.
It was observed that the contracts are not like ‘Cargo Handling’ but are like labour contracts on a piece rate basis. Thus, the classification of these services under ‘Cargo Handling Service’ cannot be sustained.
The distinction between the two expressions, namely, “cargo” and “goods” in the two different provisions of the Act becomes evident if cargo is understood to denote goods which are ready for transportation whereas packaging of goods is a stage prior i.e. before they became cargo and in fact on completion of such packaging the goods become cargo.
The CESTAT observed that the appellant has nothing to do with the transportation of goods which it packs within the factory unit of the principal manufacturer before the goods leave the factory.
The two-member bench comprising Mr Ramesh Nair, (Judicial)and Mr C L Mahar, (Technical) observed that the entire activity undertaken by the appellant is a stage before the goods become cargo. While allowing the appeal, the CESTAT set aside the impugned order.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
