2022 (5) TMI 1165 - AT - Service Tax

Levy of Service Tax - Cargo Handling Services - Storage and Warehousing services - benefit of cum Duty price - invocation of extended period of limitation - Circular No.18/2009-Customs dated 08 June, 2009 - HELD THAT - The facts of the case are that the appellant s are container freight station. The appellant s are providing services on the basis of a tariff card. There are standard packages which involved the complete service of container freight station (including storage for a specified limited time) at a particular rate. All the appellant s are paying service tax on such services in case of import of goods. All CFS are not paying service tax on such services in respect of export of goods being net covered in service tax net - All appellant s are charging a Storage and Warehousing fees only in case the cargo stays in CFS beyond the period included in such package rates given in tariff cards. In those circumstances for charges for storages beyond the Warehousing period included in package rate, all appellant s are paying Service Tax under category of Storage Warehousing Services . All CFS are paying Service Tax on reverse charge basis for transportation of cargo under taken by their contractors from CFS to port and vice verrce. For the period of Storage included within the consolidated package for handling import or export cargo no separate Service Tax need to be paid under the category of Storage and warehousing charges. However, for the period exceeding such period i.e. (the period included in the packages) if any storage and warehouse charges are collected the same are liable to service tax both in respect of import and export cargo - there are no merit in the argument of Revenue that the activity of Cargo Handling in the Container Freight Station is incidental to the Storage and Warehousing activity. From the discussion it is apparent that storage in the container freight station is only incidental to the cargo handling activity. The main purpose of the Container freight Stations is to handle cargo for the purpose of import or exports. The main purpose of the container Freight Stations is not Storage and Warehousing. In these circumstances, we do not find any merit in the order of Lower Authorities. In the impugned orders that only the Cargo Handling Services provided in respect of transportation of goods would be classifiable as Cargo Handling Services is misplaced and liable to be rejected - Appeal allowed.

Issues Involved:
1. Classification of services provided by Container Freight Stations (CFS) - whether they fall under "Storage and Warehousing Services" or "Cargo Handling Services."
2. Applicability of service tax on handling of export cargo.
3. Invocation of extended period of limitation.
4. Imposition of penalties under various sections of the Finance Act.

Detailed Analysis:

1. Classification of Services:
The primary issue revolves around whether the services provided by the appellants, who are Container Freight Stations (CFS), should be classified under "Storage and Warehousing Services" or "Cargo Handling Services." The appellants argued that their activities, such as carting, stuffing, and transporting cargo, fall under "Cargo Handling Services," which is exempt from service tax for export cargo. They emphasized that their tariff cards specified separate charges for "cargo handling" and "storage and warehousing services," and they were duly paying service tax on the latter.

The Revenue, however, contended that these activities were integral to "Storage and Warehousing Services" and should be taxed accordingly. The Revenue relied on Circular No. B11/1/2002-TRU dated 01.08.2002, which clarified that services provided by CFS, including handling and storage, should be classified under "Storage and Warehousing Services."

2. Applicability of Service Tax on Export Cargo:
The appellants argued that handling export cargo should be classified under "Cargo Handling Services," which is exempt from service tax. They cited various judicial precedents, including the case of Kerala State Industrial Enterprises Ltd. Vs. C.C.E, C. & S.T, which supported their stance. The Revenue, however, maintained that the handling of cargo within the CFS area was incidental to storage and warehousing and thus taxable.

3. Invocation of Extended Period of Limitation:
The appellants contended that the extended period of limitation could not be invoked as there was no suppression of facts or intent to evade tax. They were registered with the Service Tax Department and had been filing returns and paying service tax on applicable services. The Revenue, however, argued that the appellants acted in conscious disregard of their tax obligations.

4. Imposition of Penalties:
The appellants argued that penalties should not be imposed as they had acted in good faith and there was no willful misstatement or suppression of facts. They also sought waiver of penalties under Section 80 of the Finance Act, citing reasonable cause.

Judgment:
The Tribunal analyzed the issues in detail and concluded that the services provided by the appellants in relation to handling export cargo should be classified under "Cargo Handling Services" and not "Storage and Warehousing Services." The Tribunal noted that the primary purpose of CFS is to handle cargo for import and export, and storage is only incidental to this activity. The Tribunal also referred to various judicial precedents supporting this view.

Regarding the applicability of service tax on export cargo, the Tribunal held that handling export cargo is exempt from service tax under "Cargo Handling Services." The Tribunal rejected the Revenue's argument that such services should be classified under "Storage and Warehousing Services."

The Tribunal also found that the extended period of limitation was not applicable as there was no suppression of facts or intent to evade tax. The appellants had been transparent in their dealings with the Service Tax Department.

Lastly, the Tribunal set aside the penalties imposed on the appellants, noting that they had acted in good faith and there was no willful misstatement or suppression of facts.

Conclusion:
The appeals were allowed, and the impugned orders were set aside. The Tribunal held that the services provided by the appellants in relation to handling export cargo should be classified under "Cargo Handling Services" and are exempt from service tax. The extended period of limitation was not applicable, and the penalties were waived.

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