CESTAT clarifies Service Tax Demand on Transportation Income, classifies Tirupur Container Terminals’ Services under Cargo Handling [Read Order]
The adjudicating authority confirmed the demand, which was subsequently upheld by the Commissioner (Appeals), prompting the appellant to move the CESTAT.
Service - tax - demand - Taxscan
Service - tax - demand - Taxscan
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, has held that the differential amount between transport income and expenses cannot be subjected to service tax under “Business Support Service” (BSS). The Tribunal thus clarified that the appellant’s activities were squarely covered under “Cargo Handling Services” (CHS) and hence, the demand raised by the Customs Department was not sustainable.
The appellant, an Inland Container Depot (ICD), was engaged in providing cargo handling services for import and export consignments. The Revenue alleged that apart from CHS, the assessee also arranged logistics for transportation of cargo and collected charges higher than actual costs from Customs House Agents (CHAs).
The differential amount reflected as “transportation income” in the books was sought to be taxed under the category of Business Support Service, invoking Section 65(104c) of the Finance Act, 1994, along with interest and penalties.
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Shri Joseph Prabakar, appearing for the appellant, contended that the services rendered were integral to cargo handling and could not be split into a separate taxable category. He argued that as per Section 65A of the Finance Act, 1994, a specific service classification (CHS) prevails over a general one (BSS). Further, the liability to pay service tax on goods transport services lay with the recipient under Rule 2(1)(d)(v) of the Service Tax Rules, 1994, and not on the service provider.
The appellant further submitted that the difference between transport income and expenses merely represented the business margin and could not be treated as consideration for an independent support service.
The Bench comprising Mr. P.Dinesha (Judicial Member) and Mr. Vasa Seshagiri Rao (Technical Member) noted that the appellant was providing composite cargo handling services, wherein transportation was only an ancillary activity. The Tribunal held that Revenue had not provided sufficient justification for classifying the service as “Business Support Service.”
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It further observed that under Section 65A, specific descriptions take precedence over general ones. Therefore, services rendered by an ICD involving transportation of containers as part of cargo handling cannot be taxed under another head. The Bench emphasized that the demand based on mere differences in transport income and expenses lacked legal basis.
Additionally, the Tribunal found that the invocation of the extended period of limitation was unwarranted since there was no suppression or misstatement of facts by the assessee.
Allowing the appeal, the CESTAT set aside the impugned order, holding that the services were rightly classified under Cargo Handling Service, and no separate service tax liability could be fastened under Business Support Service. The appeal was allowed with consequential relief.
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