No Service Tax on Export Cargo Handling, Unaccompanied Baggage, and Abandoned Cargo: CESTAT [Read Order]

The Bangalore Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) recently allowed two appeals and held that no service tax can be levied on terminal charges for export cargo, unaccompanied baggage and abandoned cargo under the category of ‘Cargo Handling Service’, as per the definition under Section 65(23) of the Finance Act, 1994.

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The appellant Joint Working Group (HAL, CONCOR & MSIL) is a provider of various services under the categories of Airport Service, Cargo Handling Service, Storage and Warehousing Service.

The appellant functioned as a custodian of export cargo and unaccompanied baggage under Section 45 of the Customs Act, 1962, and collected charges including terminal charges, packing charges, demurrage, and overtime charges.

A show cause notice dated 14.09.2004 was issued for the period September 2002 to March 2004, alleging liability under ‘Storage and Warehousing Services’. Another show cause notice dated 23.10.2009 was issued for April 2004 to June 2008, alleging taxability under ‘Cargo Handling Services’.

The department contended that these charges were liable for service tax based on Board circulars, even in cases involving export cargo or unaccompanied baggage. The authorities confirmed demands along with interest under Section 75 and penalties under Sections 76 and 78 of the Finance Act, 1994.

However, the appellant contended that under Section 65(23) of the Act, Cargo Handling Services exclude handling of export cargo and passenger baggage, which also includes unaccompanied baggage. They also relied on Central Board of Excise& Customs (CBEC) Circulars to support their claim that statutory functions performed as a custodian cannot be taxed.

The Tribunal noted that the services provided related exclusively to export cargo, which is categorically excluded from the tax net under the Finance Act, and the unaccompanied baggage is considered part of passenger baggage and thus is exempt from service tax.

On abandoned cargo, it relied on CBEC’s clarification stating no service is rendered, hence no service tax is leviable.

The Bench comprising Dr. D.M. Misra (Judicial Member) and R. Bhagya Devi (Technical Member) held authorities in the impugned orders blindly confirmed the demands, ignoring the exclusions in law and circulars that clearly state that services related to export cargo and unaccompanied baggage are outside the purview of service tax.

Accordingly, the impugned orders were set aside, and both appeals were allowed.

The appellant was represented by Harish Bindu Madhavan, while M. A. Jithendra represented the Respondent.

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