The Ahmedabad bench of Customs, Excise, and Service Tax Appellate Tribunal(CESTAT) has held that port service” also includes the service “cargo handling service” and held that service tax exemption is allowable under excise notification.
M/s Elegant Surveyors, the appellant challenged the impugned order wherein service tax demand of Rs. 77,22,854/- (including Education cess and Secondary and Higher Education Cess) has been confirmed against the appellant under proviso to Section 73(1) of the Finance Act, 1994 besides demanding interest under Section 75, imposing an equivalent penalty of Rs. 77,22,854/- under Section 78 and other penalties under Section 76 & 77 of the Act.
The appellant was engaged in providing the service under the category of “Port Service” classifiable under Section 65 (105) (zn) of the Act. The appellant had been providing port services since 2005. It has been held that the appellant had not discharged their tax liability amounting to Rs. 7,37,766/- during the period 2005-06 i.e. before obtaining service tax registration.
Further suppressed its taxable value and failed to pay another tax liability of Rs. 69,85,088/- for the period 2006-07 to 2009-10. An amount of Rs. 33,12,188/- already deposited by the appellant has been appropriated in the impugned order towards their total tax liability of Rs. 77,22,854/-.
The impugned order was challenged on the ground that the service under the category of “port service” also includes the service of “cargo handling service” and since the service provided by them was a cargo handling service, therefore they were eligible for benefit of service tax exemption under notification 10/2002-ST dated 01.08.2002 which exempted cargo handling service provided to any person by a cargo handling agency about agriculture produce.
It was stated that they were engaged in providing services in respect of services of supervision of cargo and survey of bulk cargo in the port area to M/s.Mundra Port and SEZ Ltd, Mundra.
They were providing these services of cargo supervision/survey work about cargo which comprise agricultural produce as well as non-agriculture produce. As per the contract, the scope of their work relates to the handling of cargo received by rail or road, supervision over internal shifting of cargo within the port, loading and unloading of cargo etc and reporting thereof. It is evident from the contract that the appellants are handling agriculture-based cargo as well as non-agriculture-based cargo.
The appellant argued that they were only liable for a tax liability of Rs. Rs.39,88,858/- from 2006-07 and they had already paid a service tax of Rs. 81,09,567/-. Since the appellants have paid an excessive amount than demanded in the impugned order, the demand confirmed in the impugned order has become infructuous.
It was viewed by the CESTAT that the notice has rendered services of supervision over the internal shifting of cargo within the port area, loading, unloading of cargo and reporting thereof, which would have been covered under the category of “cargo handling service” if provided outside the port area and therefore it can be construed that the appellant is a cargo handling agency which provides “port services” to M/S Mundra Port and Special Economic Zone Ltd, Mundra.
The two-member Coram comprising Mr Ramesh Nair, Member (Judicial) and Mr C L Mahar, Member (Technical) observed that the exemption is provided to the handling of agriculture produce by a cargo handling agency and it is not service specific whether for “cargo handling service” or for “port service”. Cargo handling agencies can undertake to handle agricultural produce within or outside the port.
The CESTAT held that the appellant was eligible for the benefit of notification no. 10/2002-ST dated 01.08.2002. While allowing the appeal, the Tribunal remanded back the case to the original adjudicating authority to re-determine the demand and decide the case afresh after allowing the benefit of notification no. 10/2002-ST dated 01.08.2002 to the appellant.
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