Coal Loading and Transport Classified as Goods Transportation, Not Cargo Handling: CESTAT Upholds Commissioner’s Order [Read Order]

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has dismissed the Department’s appeal and upheld the Commissioner (Appeals)’s order holding that coal loading and transport carried out by Bhaiya Lal Infrastructures Pvt. Ltd. for Northern Coalfield Ltd. (NCL) was classifiable as “transport of goods by road” and not “cargo handling services,” thereby affirming that service tax liability rested on the service recipient under reverse charge.

The assessee, a contractor engaged in providing services to NCL, had been issued a Show Cause Notice (SCN) alleging that its activities of deploying tipping trucks and pay loaders for loading coal amounted to cargo handling services under section 65(23) of the Finance Act, 1994.

The Department noted that during April 2008 – March 2013, the assessee had received ₹17,96,07,795, out of which ₹16,14,98,657 was treated as the taxable value, proposing a demand of ₹1,81,09,138 in service tax, along with interest and penalty.

The adjudicating authority confirmed the demand order.

On appeal, the Commissioner (Appeals) set aside the order, relying on the Supreme Court’s decision in Commissioner of Central Excise, Raipur v. Singh Transporters (2017), which held that coal transportation from pit-head to railway siding is classifiable as “transport of goods by road” and not as cargo handling. It was observed that the loading and unloading of coal was merely incidental to its transportation. The Commissioner also noted that under the reverse charge mechanism, the service recipient, NCL, had already discharged the tax liability.

The Tribunal, however, examined the definition of “cargo handling service” and dictionary meanings of “cargo” and “goods,” holding that coal at the mine site before being moved could not be treated as “cargo.”

The Tribunal reiterated that mere loading incidental to transport cannot be classified as cargo handling and that the principal service was transportation of goods. Since the assessee was not a goods transport agency and no consignment notes were issued, no tax liability arose.

The Bench observed that the demand was based on the assessee’s own documents, and the fact that NCL had discharged service tax under reverse charge was already in the Department’s knowledge. There was no suppression or intent to evade, making the invocation of the extended period under section 73 of the Act unsustainable.

The Bench comprising Dr. Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) upheld the Commissioner (Appeals)’s order and dismissed the Department’s appeal, concluding that the assessee’s activities constituted goods transportation and not cargo handling.

The assessee was represented by A.K. Batra, Chartered Accountant, while Jaya Kumari represented the Department.

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