Demand of service tax under the category of Business Support Service

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH
BANGALORE

Final Order No.  21023 / 2014  

Application(s) Involved:

ST/Stay/1475/2012    in    ST/2041/2012-DB

Appeal(s) Involved:

ST/2041/2012-DB

[Arising out of Order-in-Original No. VIZ-STX-001-COM-063-2012 dated 30/03/2012 passed by the Commissioner of Customs, Central Excise & Service Tax, Visakhapatnam]

Sri Krishna Engineering & Construction Co.
Kalyani, Plot No.9, Sector-2, MVP Colony Visakhapatnam - 530 017
Andhra Pradesh Appellant(s)

Versus
Commissioner of Central Excise, Customs and Service Tax Visakhapatnam-I
Central Excise Building
Port Area
Visakhapatnam - 530 035
Andhra Pradesh Respondent(s)

Appearance:
Mr. M.S. Nagaraja & Mr. V. Ravindranath, Advocates
T. Rajeswara Sastry & Associates
#48, 11th Main, Banashankari 2nd Stage, Bangalore - 560 070 For the Appellant

Mr. Ganesh Haavanur, AR
For the Respondent

CORAM:

HON'BLE SHRI B.S.V. MURTHY, TECHNICAL MEMBER
HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER


Date of Hearing: 24/06/2014 Date of Decision: 24/06/2014

Order Per: B.S.V. MURTHY

The demand for service tax, inadmissible CENVAT credit, amount payable under Rule 6(3) etc. have arisen as a result of the impugned order for the period from 01.10.2005 to 2009-10.

2. Heard both the sides.

3. Demand for Rs. 1,41,74,004/- being service tax on the ground that the appellants have rendered Cargo Handling Services has been made with interest. The learned counsel submitted that the appellants are rendering various services as per the work order issued by M/s. Rashtriya Ispat Nigam Ltd. (RINL). He submits that the work order issued by them is similar to the one which was received by M/s. Srinivasa Transports and the issue as to whether the services rendered by M/s. Srinivasa Transports can be classified as Cargo Handling Service or not, had come up before the Tribunal and this Tribunal in Final Order No. 20024/2014 dated 01.01.2014, had considered the issue and remanded the matter for fresh decision and submits that in this case also since the work order issued to the appellant is similar to the one which was considered in that case, on this issue the matter may be remanded at this stage itself in the case of the appellant also. We have considered the submissions and we find that in para 7 of the order cited by the learned counsel, the Tribunal had made the following observations:



7. As regards the demand of service tax under the category of Business Support Service, Section 65 (104c) of the Act defines the said service as follows:-
Support service of business or commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.
As per the explanation appended infrastructural support service includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security.

We find that the activity undertaken by the appellants is similar to the one as can be seen from the observations in paragraph 7 itself.

4.1. Learned AR would submit that there is a difference between the case of M/s. Srinivasa Transports and the appellant. He submits that in this case there is a break up of different activities undertaken by the appellant and he draws our attention to the impugned order wherein the issue was considered. He submits that in paragraph 21 the issue was discussed and it was found that the activities undertaken by the assessees under the following heads were considered as amounting to Cargo Handling Service.
a) Internal Handling
b) Material Handling Contract
c) Transportation and
d) Crane Supply and  wharfage charges

4.2. He also submits that the amounts under different categories also available and therefore the Tribunal can decide the issue regarding waiver of pre-deposit on the basis of material unlike the case of the Srinivasa Transports. He also submits that the decision relied upon by the learned counsel would not be applicable and he also draws our attention to the decision of the Tribunal relied upon by the learned counsel and submits that in the case of Coal Carriers, a similar issue had come up before the Hon ble High Court and he submits that the decision would be applicable to the present case. He draws our attention to paragraphs 21 and 22 of the decision in the case of Coal Carriers vs. Commr. of C.Ex., Cus. & S.T., Bhubaneswar [2011 (24) S.T.R 395 (Ori.)].

21. This legal contention has been repudiated by the learned counsel appearing for the Central Excise Department placing strong reliance upon the finding of fact recorded by the Assessing Officer, which has been affirmed by the first appellate authority as well as the second appellate authority, that the same is proper appreciation of fact and material evidence on record.
22. The Assessing Officer has referred to Section 65(23) of the Finance Act and recorded his findings holding that three things are analyzed i.e. (1) What are the criteria of the services to be included in the "Cargo Handling Services".
(2) The nature of job entrusted to the noticee in the contract agreement/Work Order and (3) The submissions made by the noticee in reply to show cause notice and answered with reference to the meaning of "Cargo" viz. the term cargo means "the load" (i.e. freight) of a vessel, train, truck, aeroplane or other carrier (Black's Law Dictionary). Thus the goods, which are meant for transportation from one place to another by any mode of transport, are known as cargo. Therefore, the Assessing Officer has held the goods which were meant for transpiration from one place to another by any mode of transport is known as cargo. The meaning of "loading" - the term loading in the present context means the act of putting a load on or in as to load a car or a vessel. The act of loading invariably takes place at the starting place of the journey of the cargo. The meaning of "Unloading" - The term "unloading" means the act of discharging a cargo taking load from, disburdening or removing from. Thus while the act of loading refers to putting the cargo into the mode of transport at the starting point, the act of unloading refers to the removing of the cargo from the mode of transport at the destination point. It appears cargo handling is an adjunct service to the actual transportation of goods. The pre-transportation activities like packing/loading and post-transportation activities like unloading/unpacking have been brought under the service tax in the "Cargo Handling Service" category, which are provided by the Cargo Handling Agency. The clarification issued by the C.B.E.C. Circular F.No. B/1/2002-TRU. Dated  1-8-02.vide Sl.No.3 stipulates the services which are liable to tax under this category are the services provided by cargo handling of goods meant to be  transported by  any means of transportation namely truck, rail, ship or aircraft. Mere transportation of goods is not covered in the category of cargo handling service. The relevant portions of the terms and conditions of work order No. MCL/IBV/CGM/LOCP/03-04/91, dated 29.04.2003 are extracted hereunder:
"1. The notice has to be in readiness for starting loading work as specified in the tender as soon as the wagons are supplied. It will not be the management's responsibility to inform the contractor after wagons are placed. They will have to make their own arrangement for keeping in information etc.
2. The rate offered and as agreed by the noticee in writing and accepted is inclusive of all expenditure relating to labour wages, transferring machine, fuel charges, wears & tears, supervision, profit and all incidental thereon including taxes and other contingencies complete for which no additional payment shall be made. But the rate is subject to variation in accordance with the rise and fall of price of diesel oil as per escalation clauses keeping the base price of diesel as on the date of receipt of the tender i.e. Rs. 20.38/litre as per provision in the tender document. The amount of security deposit will also be increased in case the price of diesel oil is further escalated by the Union Government within the contract period.
3. The departmental official will make periodical surprise checking and verification of quality and quantity of coal being loaded by the noticee. The noticee should have to maintain complete record of coal loading made by the notice separately and such records should be produced whenever required by the authorized representative of the department.
4. While loading the noticee will ensure that the railway track in the siding is not blocked/no coal is spilled on the track/drain. It is the responsibility of the noticee to see that the railway track/drain in the siding is kept properly clean as per prevalent Railway Rules after loading of wagons are completed. If the management has to incur any demurrage due to above reasons the same shall be recovered from the bill. Expenditure, if any incurred for cleaning by the management shall be on noticee's account.
5. Loading of rake of 58-N Box to the specific height as required will have to be completed as stipulated in the tender document i.e. within 2.00 hrs. in the siding No. lll from the time of placement of the empty rake by railways including wagon cleaning, door closing, leaving of coal and lime washing. An additional time not exceeding 45 minutes for completing the rake will be allowed. In case of failure to load the 58-N Box in the above allotted time period, the notice shall be liable for penalty amounting to the demurrage charges by the railways, if any. In case of reasons of delay in loading are on account of the management's failure to provide sufficient coal etc. management may review the penalty.
6. (A) In case of weighment of coal is done on the spot by weigh bridge the responsibility for improper transfer will be of the contactor and penalty for under loading and over loading of wagons, if any, shall be recovered from the running bills of the contractors.
(B) In case weighment is calculated on volumetric basis, the contractor's responsibility shall be-
(i) To load the wagon to a predetermined height fixed by the management of MCL for each rake/wagon as the case may be and level the same to indicated height of loading.
(ii) To make necessary adjustments of the loaded wagons so as to bring it predetermined loading height correctly.
(iii) To make necessary adjustments of the loaded wagons if railways return the rake even after action taken as indicated in (i) and (ii) above.
(iv) lf the contractor fails to observe one or all clauses above and does any under loading/over loading will be fully on the account of the contractor."
On going through these paragraphs which are reproduced above, we find that the issue in the present case before us is not comparable with the issue before the Hon ble High Court. In the present case appellants are engaged in transferring equipments, machinery, raw materials etc. within the factory premises and there is no transportation outside the factory. Further decision in the case of CCE, Ranchi Vs. Modi Construction Company [2011 (23) S.T.R. 6 (Jhar.)] relied upon by the appellant appears to be more applicable to the facts of this case since in that case the Hon ble High Court was considering a similar situation as in the present case. Further we also find that the Commissioner has simply classified internal handling, material handling and handling contracts, transportation and Crane supply under one category namely Cargo Handling Services . We find that the exact nature of the work undertaken under each category and how it is covered by the definition and whether the amount quantified is correct are not at all forthcoming from the impugned order. Especially crane supply clearly does not appear to be covered under Cargo Handling Service . Similarly while classifying one of the categories under the heading transportation, the learned Commissioner has proceeded to classify it under Cargo Handling . We are very conscious of the fact that the Tribunal is the last fact finding body in the dispute resolution mechanism for indirect tax levy by Central Government and therefore we should be treading carefully when recording our findings of facts and this cannot be done in a hurry. When another Bench has already remanded the matter in similar circumstances and when all the activities of the appellant have been painted with single colour without seeing whether there is a difference or not, and without recording the fact and without indicating why all of them should be covered under one category of service, if we have to take a different view, it would require a very detailed appreciation of facts, documents and records, statutory provisions. Therefore in our opinion it would be prudent on our part and also the judicial discipline also requires that we should follow the decision of the coordinate Bench which has remanded the matter on this issue. Therefore we are unable to accept the submissions of the learned AR.

4.3. The second demand is for Rs. 1,69,160/- under Business Auxiliary Service. The learned counsel submitted that the appellants have deposited an amount of Rs. 1,28,426/- with interest which has been appropriated and this has been paid on receipt basis. Even though appellants are disputing this, in view of the decision already taken to remand the matter and in view of the fact that amount has been deposited, at this juncture we do not consider that it is necessary for us to discuss this issue in detail.

4.4. An amount of Rs. 9,64,674/- has been demanded on the ground that appellant had availed CENVAT credit on capital goods as well as claimed depreciation under Section 32 of the IT Act 1961. The learned counsel submitted that the appellants have filed revised return and therefore the credit availed is in order. Learned AR submits that the credit was taken in October 2007 and even at the time of adjudication, the appellants could not give the details and could not specifically confirm that they have filed a revised return. The learned counsel also could not clearly show whether the time limit for filing return was over and the return was filed or not. In the absence of any clarity in this regard, we consider that appellant should deposit this amount even if the matter is going to be remanded for de novo adjudication. Learned counsel fairly agrees to do so.

4.5. An amount of Rs. 60,840/- being the credit taken on wire ropes, gears and tools  as inputs have been held to be capital goods and demand has been raised on the ground that 50% of the credit was taken prematurely. Learned counsel fairly agrees but submits that only interest is required to be paid which would be a small amount. We find ourselves in agreement.

4.6. Service tax credit of Rs. 20,685/- has been denied on the ground that credit of service tax paid towards bank charges and telephone service is not admissible. Since the entire amount with interest has been paid, we do not consider it necessary to go into this issue.

4.7. An amount of Rs. 46,34,224/- equal to 8% for the year 2008-09 and 6% for the year 2009-10 that the value of the traded goods has been demanded on the ground that the appellant did not maintain separate account for taking credit on bank charges and telephone bills. Learned counsel draws our attention to the paragraph 23(viii) on page 28 of the order-in-original. In this paragraph we find that the Commissioner has observed that CENVAT credit on input services attributable to trading activity is not allowed. He observed that assessee did not maintain separate accounts for taxable output service and for trading activity also did not exercise any of the options provided in CENVAT Credit Rules, therefore the assessee is liable to pay 8% and 6% as proposed. While coming to this conclusion he has relied upon the decision in the case of M/s. Orion Appliances Ltd. Vs. CST, Ahmedabad [2010-TIOL-752-CESTAT-AHM.]. We find that the conclusion reached by the learned Commissioner is not supported by the decision or the ratio of the decision in the case of M/s. Orion Appliances Ltd. In that decision the Tribunal had taken the view that prior to amendment of definition of trading and treating it as an exempted service, trading cannot be considered as a service at all. When trading is not a service, it cannot be treated as an exempted service. Therefore it was held that if the assessee reversed proportionate credit attributable to the trading activity according to standard accounting principles that would be sufficient and there would be nothing to deposit 8%/6% (as in the present case) of the value of the traded goods.

4.8. Learned AR vehemently argued that the decision taken by the Commissioner is correct. He relies on the decision in the case of ING Vysya Life Insurance Company Ltd. in Miscellaneous Order Nos. 20880-20882/2014 dated 01.04.2014. In the case of ING Vysya Life Insurance Company, in paragraph 4 this Tribunal had made the following observations:

4. The learned AR on the other hand submits that Rule 2(e) of the CCR defines exempted service as taxable service exempted from the whole of the service tax payable thereon and includes services in which no service tax is leviable under Section 66 of the Act. Non-taxable service has been interpreted to mean and include those services not specified under Section 65(105) of the Act also. He relied upon the decisions in the case of Idea Cellular Ltd. [2009 (16) STR 712 (Tri. Del.)], mPortal India Wireless Solutions Ltd. [2012 (27) STR 134 (Kar.)] and Loreal India Pvt. Ltd. [2012 (28) STR 443 (Tri. Mumbai)]. He also submits that if the services or activity relation to this amount is held as banking service, the same is fully exempt from tax in respect of account operation service and similar services. He submits that therefore the premium amount collected towards savings management can be considered as exempted by notification issued under Section 93.

4.9. He relies on the observations in this paragraph to submit that trading is a non-taxable service. Nowhere in the order we have observed that trading is a non-taxable service in paragraph 4 relied upon by the learned AR. It is his submission that prior to 2008, Information Technology Service was also considered as exempted service and it has been excluded from the definition of Business Auxiliary Service and even then it was held that Information Technology Service is an exempted service and therefore if separate accounts are not maintained, the amount as specified in Rule 6 of CENVAT Credit Rules is required to be paid. It was pointed out by the counsel that Information Technology Software Service by the very name itself is considered as a service and it was specifically mentioned and excluded from the definition of service and when any activity is a service, then only, even if it is non-taxable, it would be an exempted service in accordance with Finance Act 1994. In the case of trading, the very fact that subsequently it was specified as a service in the statute as a service and was exempted separately, the trading came to be treated as a service after the amendment. Therefore we do not find any merit in the submissions made by the learned AR. He also relied upon the decision cited by the Bench in paragraph 4 but in the absence of specific submissions with reference to specific paragraphs in that case, we do not consider it necessary that the same should be discussed. In view of the above observations, we consider that this demand cannot be sustained.

5. In view of the above discussion, the appellant is directed to deposit an amount of Rs. 10,00,000/- (Rupees Ten lakhs only) and report compliance to the Commissioner within 8 weeks and report compliance to the Commissioner on or before 03.09.2014 and learned Commissioner is directed to adjudicate the matter after noting compliance with the pre-deposit as directed above. Needless to say if the appellants failed to make the deposit, the impugned order would come into force and appeal filed by them has to be considered as rejected. If the appellants make the deposit within the time specified hereinabove, the Commissioner shall proceed to adjudicate the matter after observing principles of natural justice in accordance with law and keeping our observations in mind.

(Operative portion of the order has been pronounced
 in open court on 24.06.2014)


(S.K. MOHANTY)
JUDICIAL MEMBER (B.S.V. MURTHY)
TECHNICAL MEMBER


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