TMI Blog2010 (12) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... s not constitute provision of taxable service to a person and, therefore, no service tax is leviable on such activities - Appeal is allowed by way of remand - ST/61 & 63 OF 2005 AND 523 OF 2008 - 1538 TO 1540 OF 2010 - Dated:- 21-12-2010 - M.V. RAVINDRAN, P.KARTHIKEYAN, JJ. ORDER P. Karthikeyan, Technical Member - These appeals deal with common questions of facts and law emanating from Order-in-Appeal No. 107/2005-ST, dated 29-4-2005 passed by the Commissioner of Central Excise (Appeals), Bangalore and Order-in-Original No. 57/Commr. LTU, dated 17-7-2008 passed by the Commissioner of Central Excise Service Tax, Large Tax Payers Unit, Bangalore. Both the orders impugned deal with liability to Service Tax of activities engaged in by M/s. Mysore Sales International Ltd. (MSIL for short), Bangalore, a State Government PSU, inter alia, operating as custodian at the Air Cargo Complex, Bangalore. MSIL has been appointed as custodian of goods in international trade, transiting through the Airport. Appeal No. ST/523/2008: Impugned Order: OIO No. 57/Commr./LTU, dated 30-6-2008 2. The impugned order confirmed differential Service Tax of Rs. 37,40,231 plus i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Abandoned cargo 1,15,979.00 d. Non-payment of Service Tax on Debit Notices 3,678.00 B. Cargo Handling Services : a. Import Cargo (i) Destination Charges 2,96,938.00 b. Export Cargo (i) O.T. Charges/Penalties 42,571.00 Total 26,01,981.00 3.1 Partly allowing the appeal filed by MSIL, the Commissioner (Appeals) vacated the demand of Service Tax on the following items : (i) Demurrage charges; (ii) Wharfage charges; (iii) Abandoned Cargo; (iv) Destination Charges; and (v) OT charges/penalties. Appeal No. ST/63/2005: Impugned Order : OIA No. 107/2005-ST, dated 29-4-2004. 4. This appeal is filed by Revenue against the impugned order, which held that MSIL is not liable to pay Service Tax on the following : (i) Demurrage charges; (ii) Wharfage charges; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice was issued proposing to demand Service Tax under various heads on account of certain other charges in addition to those mentioned above such as destination charges, wharfage charges, demurrage charges, abandoned cargo, OT charges and penalties. In adjudication, the Original authority held that by keeping in safe custody the goods involved in international trade transiting through the airport, the assessee rendered a taxable service classifiable under Storage and Warehousing services . The original authority relied on CBEC Circular No. B/11/1/2002-TRU, dated 1-8-2002. In para 3 of this Circular, CBEC had clarified the scope of the entry Storage and Warehousing Services and by way of illustration had indicated that such service was provided by public warehouses, private warehouses by agencies such as the Central Warehousing Corporation, Airport Authorities, Railways, Inland Container Depots, Container Freight Stations storage godown and tankers operated by private individuals. The storage and warehousing service provider normally made arrangement for space to keep the goods, loading, unloading and stacking of goods in the storage area, kept inventory of goods, made security ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mporter/passenger to clear the cargo safely. Repacking was a misnomer in his view. The charges were collected under the name Repacking charges . (C) Export Cargo - The export of the cargo is entrusted with the assessee after filing the shipping bill with the customs. The cargo remains with the assessee till the same is delivered on clearance by customs to the concerned airline. (i) Terminal charges and Cargo handling over charges - The assessee charges an amount for handing over of the cargo to the carrier from the exporter and for the facilities provided to the exporter by the assessee. This was the primary activity of the assessee as custodian of cargo. This activity clearly fell under the category Storage and Warehousing Service. The Assistant Commissioner relied on a Circular of the CBEC No. B11/1/2002-TRU, dated 1-8-2002 where it was stated that as per Notification No. Cargo/13519/Pt.I, dated 4-6-1993 of the International Airport Authority of India, terminal charges meant charges payable to, or collected by the Authority or Cargo Handling Agency for use of the facilities for processing of cargo. The Assistant Commissioner found that as per this Notification, stor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehousing . He agreed with the findings of the original authority except that the following charges viz. (i) Demurrage charges; (ii) Wharfage charges; (iii) Abandoned cargo; (iv) Destination charges; and (v) OT charges/penalties were exigible under Storage and Warehousing services . 6. The assessee has raised the same grounds as taken before the lower authorities that the activities in question were classifiable under the head Cargo Handling Services . Warehousing operation envisaged under the head Storage and Warehousing Services was an entirely different operation falling under Chapter IX of the Customs Act requiring licences for public and private warehouses. The appellant did not have a licence for any such warehouses. The definition of Cargo Handling Service excluded from its purview export cargo and passenger baggage. The legislative intention was thus clear. By classifying the impugned activities under Storage and Warehousing, the authorities defeated the object obvious from the statute. The services of the assessee were not available to all members of interested public. The assessee dealt with members of the trade and authorized airlines. The assessee collected a fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified that charges towards, inter alia, demurrage handling charges, storage and processing charges and terminal charges recovered were to be considered as cargo handling charges and accordingly, Service Tax would be leviable. This showed that the impugned amounts could not be taxed under storage and warehousing service. 7. In the appeal filed by the Revenue, the impugned order (OIA No.107/05-ST, dated 29-4-2005) is challenged for holding that the following charges collected by MSIL are not liable to Service Tax without justifying the same. (i) Demurrage charges - It is submitted that the demurrage charges are nothing but rental charges for services provided by the assessee to customers in relation to storage of goods and were, therefore, liable to Service Tax. Value of taxable services was the gross amount charged. The gross amount included demurrage charges. (ii) Abandoned Cargo - As per the instructions contained in para 12 of CBEC Circular B.11/1/2002-TRU, dated 1-8-2002, proceeds of auction on abandoned cargo are to be shared towards cost of auction, customs duties and then to the custodian of the goods. It is submitted that MSIL receives a portion of the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngineering v. Mysore Sales International Ltd. 2006 (205) ELT 114 (Kar.) In this judgment, the Hon ble High Court of Karnataka had expressed the view that MSIL was acting as statutory functionary under the provisions of the Customs Act. (ii) Amarchand Fulchand v. Union of India 1995 (77) ELT 539 (Bom.) In this case, the Hon ble High Court had decided that the custodian appointed under section 45 for the areas notified as Customs Area was not competent to levy higher fees for services provided by it under the Customs Act as deligatee of Collector. The custodian was required to collect fees as per regulations. (iii) Mysore Sales International Ltd. v. United India Insurance Co. Ltd. 2009 (243) ELT 161 (Kar.) In this judgment, the Hon ble High Court had held that the custodian was a statutory creation under section 45(1) of the Customs Act and was answerable to the Customs department, for any loss or destruction of such goods. 8.1 It was argued that in the second notice issued to the same assessee relating to the same dispute, larger period of limitation could not have been validly invoked. The relevant facts were within the knowledge of the department when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eping the cargo in transit safely pending export or customs clearance for home consumption. In holding that keeping safe custody of cargo in transit pending clearance by the customs constitute an activity exigible under the above entry, the lower authorities relied on circulars of the CBEC which clarified that storage and warehousing service provided by, inter alia, Airport authority is covered by the entry. The entry Cargo Handling Service was clarified by CBEC as not covering export cargo and passenger baggage. We find that the clarification is not to the effect that all activities relating to export cargo and passenger baggage are also excluded from levy under other entries. We agree with the finding of the Commissioner that the exceptions provided under cargo handling services with regard to passenger baggage and export cargo cannot be claimed under storage and warehousing services. 9.3 Demurrage or wharfage charges are collected respectively in relation to clearance of import/export cargo beyond five days and 24 hours. As found by the original authority, these are higher charges for continued storage of cargo collected by the assessee from members of the trade. We find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have validly invoked extended period and imposed penalties. The penal liability of the appellant requires reconsideration in the light of section 80 of the Act. 10. In the assessee s appeal, it is submitted that the Commissioner (Appeals) ought to have held that levy of interest and penalty by the Assistant Commissioner was not justifiable for the reason that there was no wilful intent on the part of the assessee in non-payment of tax legitimately payable by them. As regards the demand of interest, we find that the relevant section 75 of the Act reads as under :- Every person, liable to pay the tax in accordance with the provisions of section 68 or rules made thereunder, who fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed, shall pay simple interest at such rate not below ten per cent and not exceeding thirty-six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette for the period by which such crediting of the tax or any part thereof is delayed. 10.1 In view of the above provision, the assessee is liable to pay interest for delay in paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority under the provisions of law does not constitute provision of taxable service to a person and, therefore, no service tax is leviable on such activities. 3. However, if such authority performs a service, which is not in the nature of statutory activity and same is undertaken for a consideration not in the nature of statutory fee/levy, then in such cases, service tax would be leviable, if the activity undertaken falls within the ambit of a taxable service. 4. Trade and field formations may be advised accordingly. 5. Hindi version will follow. 12. We find that the lower authorities had no occasion to examine this plea and to determine the liability of the assessee in the light of the same. We are not in a position to decide the issue as it is not clear whether the Circular applies to MSIL and if MSIL would come under the description public authority as envisaged in the above Circular. In any case, records do not indicate that the charges collected by MSIL are deposited with the Government. The Circular defines statutory authorities discharging sovereign functions etc. to be those that deposit the fees collected with the Government. 13. In the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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