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Khandelwal Transport, Khandelwal Earth Movers Versus Commissioner of Customs & Central Excise, Nagpur

2018 (2) TMI 939 - CESTAT MUMBAI

Classification of services - cargo handling services or transportation services? - appellants have argued that loading and unloading done is a kind of self-service necessary to undertake the service of transportation undertaken by them. - Held that: - Loading in the riverbed is not a simple activity of loading as the sand has to be mined using an excavator or other machine. The location of riverbed is not fixed. The loading in the stockyard is, however, simple activity of loading. - The .....

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to mining activity. However for the period in dispute mining was not a taxable service. In any case, the activity of movement of sand from warehouse to bunker cannot be considered as mining activity. From the terms of the contract it is apparent that the prime purpose of the contract is to bring the sand from the riverbed/ warehouse to the bunker. The loading or unloading are merely necessary requirements to complete activity of movement of the sand. - The contract is primarily intended fo .....

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No.2 for Appellants Shri M.K. Sarangi, Jt. Commr. (A.R) for respondent ORDER Per : Raju These appeals have been filed by M/s. Khandelwal Transport and M/s Khandelwal Earth Movers against orders confirming demand of service tax, interest and penalty. The matters are more or less identicle and therefore were listed together. 2. Ld. Counsel pointed out that the Appellants, M/s. Khandelwal Transport, is a transporter and has entered agreement with Western Coalfield Ltd. (WCL), mining owner for the .....

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re is no separate bifurcation between transportation and the loading and unloading activity.WCL has paid service tax on the transportation of the sand from riverbed to stockyard/bunker under Goods Transportation Agencyservice under reverse charge mechanism from 1.1.2005 on the entire consideration paid to the Appellants. WCL has, however, not paid service tax on within the mine movement. The Revenue has raised service tax demand against WCL for within the mine movement. The same was confirmed by .....

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able to pay service tax only on the loading and unloading activity, in absence of any data or bifurcation, the department has made the service tax demand on the entire consideration received by the Appellants from WCL under the head Cargo Handling Agency Services. 2.1 Ld. Counsel argued that the agreements between the parties are essentially in the nature of Transportation of the goods. Loading and unloading of the goods are services incidental to principal activity of transportation and the ent .....

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he category of GTA service. The relevant paragraphs are extracted below:- 3.....Clarification.........The composite service may include various intermediate and ancillary services provided in relation to the principal service of the road transport of goods. Such intermediate and ancillary services may include services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc., which are provided in the course of transportation by road. These services are not provided as .....

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portation cost is charged based on per metric ton and not per km basis will also not make any difference qua the aim of the customer to receive the transportation service. He relied on the case of Senairam Doongarmal v. CIT, Assam, AIR 1961 SC 1579, wherein it was held that the determination of measure of consideration is entirely a matter of commercial agreement between the parties. It is a settled principle of law that the measure of consideration is not determinative of the nature of the tran .....

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for both period holding it as transportation of goods by road, therefore not taxable. Revenue filed an appeal against the aforesaid order to the Hon ble Supreme Court. The Hon ble Supreme Court in 2017-TIOL-249-SC-ST, categorically held it to be transportation of goods services and therefore, not liable to be taxed under Mining Services. The relevant extract of the order is reproduced as under: 6. Be that as it may, even if the relied upon judgment in the case of Arjuna Carriers (supra) is of no .....

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unloading of the goods are services provided to self in order to accomplish the entire activity of transportation and amounts to self service. The appellants contracts are primarily undertaking the activity of transportation of coal. The activity of loading or unloading is undertaken by them to be able to provide the principal service of transportation. Thus, even if such activity is classifiable as Cargo Handling Service, the same is nature of self service for the benefit of appellants themselv .....

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y a container freight terminal or any other freight terminal, for all modes of transport and cargo handling services incidental to freight but does not include handling of export cargo or passenger baggage or mere transportation of goods. ...Emphasis Supplied He pointed out that the definition was later amended w.e.f. from 16.5.2008. The amended definition reads as under:- cargo handling service" means loading, unloading, packing or unpacking of cargo and includes," (a) cargo handling .....

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s; (Emphasis supplied) 2.5. He argued that the legislature in its wisdom has chosen to tax only those services which are in relation to handling of cargo and not goods. In clause (b) of the definition, the legislature uses both the words i.e. goods and cargo. The use of the word Cargo by the Legislature is a deliberate act with an intention to restrict the scope of the levy to Cargo only and not to extend it to goods/material/articles, handling activities. The word Cargo is not defined under the .....

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ship, shipload. In Chambers English Dictionary, it is defined as: The goods carried by a ship or aeroplane, any load to be carried In Cambridge English Dictionary Online Edition, it is defined as: The goods carried by a ship, aircraft, or other large vehicle. Collins Cobuild English Dictionary 3rd Edition, 2001 defines cargo as the cargo of a ship or plane is the goods that it is carrying; Macmillian Dictionary Online Edition has the following definition of cargo: Things that are being sent by s .....

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he transport comes to an end, these goods lose the character of cargo and revert to being goods simpliciter. It is important to note that while the transport is halted for a stopover or for a break in the journey, the goods still remain cargo. The key test is thus whether or not the goods are in transit. If yes, then they are cargo. He pointed out that the expression loading U/s 65(23) does not correspond to initial loading of goods but subsequent loading of Cargo by the Cargo Handling Agents wh .....

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t; and "goods" in the two different provisions of the Act becomes evident if cargo is understood to denote goods which are ready for transportation whereas packaging of goods is a stage prior i.e. before they became cargo and in fact on completion of such packaging the goods become cargo. The position becomes more clear if the dictionary meaning of the word "cargo" is taken into account, as set out below: As per Black' Law Dictionary, the word "cargo" means &quo .....

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gin and destination point and hence the same will be outside the scope of the levy under Cargo Handling Services. He argued that the term Cargo has a distinct meaning of goods being transported from an origin to destination and every movement of goods cannot be considered as movement of cargo. Ld counsel relied on the decision of the Tribunal in case of Sainik Mining & Allied Services Ltd. Vs CCE-2008 (9) STR 531 related to transportation of coal within a colliery area where a demand under C .....

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Tribunal held that such activity of transportation within a factory cannot be taxed under the category of Cargo Handling Service. This decision of Modi Construction (supra) was affirmed by the Jharkhand High Court at 2011 (23) STR 6. In this regard, in para 4 of the said decision of the Hon ble High Court, it was held that the activity of shifting the goods both finished and unfinished goods within the factory premises could not come within the definition of Cargo Handling Service. The said para .....

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necessarily be provided by a Cargo Handling Agency. He relied on the definition of the taxable service in the case of Cargo Handling Servicein Section 65(105)(zk) of the Finance Act, 1994 which reads as under :- Taxable service means any service provided to any person, by a Cargo Handling Agency in relation to cargo handling services. (Emphasis Supplied) He relied on the Board Circular No. B11/1/2002-TRU Dated 01-08-2002 which has cited illustration of Cargo Handling Agents i.e. Container Corpor .....

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vices provided in relation to cargo handling by the Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations. This is only an illustrative list. There are several other firms that are engaged in the business of cargo handling services. ....Emphasis Supplied He argued that from the language of Sec.65(23)/65(105)(zr) and understanding of the Government as per Circular it becomes very clear that the Legislature intended to cover only Cargo Handl .....

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ing up the excavated mine area with sand/debris to ensure safety of the rest of the mine. The excavation of coal from the coal mine create structural in places within the mine which have not corrected and provided for can have fatal consequences for the people working within the mine. Therefore, the sand is excavated from riverbed with the help of excavators and transferred and unloaded at such places where the coal mining is done.WCL has paid mining royalty to the government for mining of the s .....

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that any extraction/excavation of sand will also be covered by scope of mining service w.e.f. 1.6.2007. Hence, no demand can be raised on the entire consideration received from WCL on such mining activity. 2.10. Ld. Counsel also challenged the Quantification of demand as incorrect. He pointed out that show cause notice observed that in absence of bifurcation of transportation value or rate for loading and unloading, the gross payment of ₹ 11,49,38,025/- received by the Appellants from WCL .....

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the said activity should be adjusted against the tax liability of the appellants, if any, if the said activities held to be Cargo Handling Service.He further argued that the amount received must be treated as cum-duty. 2.12. Ld. Counsel further argued that Extended period of limitation should not be invoked in the present case and no penalties are imposable on the appellants. He argued that the issue involved in the present case is one of interpretation of the statutory provisions. The dispute i .....

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by the department are factually distinguishable from the factum of the present case. The decision relied upon by the department are factually distinguishable from the present case. The department has relied upon the decision of Hon ble Orrisa High Court in the case of Coal Carriers Versus Commr. Of C. Ex., Cus. & S.T., Bhubaneswar, 2011 (24) S.T.R. 395 (Ori.) to support their allegation that the activity in the present case is covered under the Cargo Handling Service. However, in the said d .....

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Therefore, the present matter is factually distinguishable from the Coal Carriers case.Further other cases also relied upon by the department such as Gangadhar Bulk Movers Pvt. Ltd. vs. CCE, 2012 (27) STR (258) (T)and Shreem Coal Carriers (P) Ltd. v. Commissioner, 2015 (37) S.T.R. 1067 (Tri.-Mumbai), are also not relevant to the factum of the present case as the demand in the said case laws was also only on the loading portion as separate heads were given for the loading and the transportation a .....

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. He argued that the contention that transportation is main activity has been considered by the authority in Para.17.16 of OIO. He argued that loading of sand is the main activity and transportation is incidental. They used to load sand with help of pay loaders into Truck/tippers from river to mines and from mines to another specified area , hence transportation is not main activity. 3.2. Ld. AR pointed out that the contention of the appellant that they have not recovered any amount from WCL tow .....

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which include the activity of loading and unloading, transportation and lumpsum charge of ₹ 135/MT was being paid. The contention of appellant that transportation of iron ore within mining area cannot fall within scope of CHS was rejected relying on earlier decision in case of Gayatri Carriers Pvt Ltd and Jai Jawan Coal Carrier Pvt Ltd. He also relied on the case of Nizamsingh Chauhan, 2016-41-STR-982-T-Del, handling and transport of manganese ore was held classified under CHS . He furthe .....

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Ltd , but the instant party was not there. Further in Deptt appeal against said Tribunal Order/20.8.14, has also been allowed by Hon ble Bombay HC vide order/7.4.16, and matter has been restored to CESTAT for decision as per direction of Hon ble SC. 3.4. Ld. AR further argued that the Hon ble SC in case of Signode India Ltd. 2017-TIOL-126-SC-ST/8.3.17, dealing with taxability of packaging activity, it held in Par.9, that cargo is understood to denote goods which are ready for transportation. Ld .....

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s earlier decision in case of South Eastern Coalfields , 2017-47-STR-93-T-Del/28.7.16. Hence as the said activity cannot be classified as GTA, it has to be classified as CHS. 3.5. Ld AR argued that the contention of the appellant that the major part of service activity pertains to transportation is not supported by evidence, as rate of loading , unloading and transportation of sand not shown separately. 3.6. Ld AR argued that the demand pertains to period 01.04.03 to 31.10.07, during which there .....

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sought to be levied is as follows i) taking the sand from the riverbed with the help of excavators, loading of the same on the tippers and then its transportation from riverbed and unloading at bunker/stockyard. ii) Transportation of the sand from stockyard to the bunker i.e. within the mine movement. From the above it is apparent that the activities involved are in the nature of i) loading the sand in the trucks from either riverbed or in stockyards, ii) movement of trucks from riverbed outsid .....

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the case of Coal carriers (supra) was concerned with the following activity It is also observed that supply of Pay Loaders by the appellant were merely an aid to perform the service of loading of Coal (Cargo) into the Railway Wagon and not a case of letting out of Pay Loaders on hire basis as obligation of the appellant did not end simply with the letting out of the Pay Loaders on hire but the appellant was required to carry out loading of required quantity within the given time frame and charge .....

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ng of the coal into the wagons but the purpose was loading of wagons. In para 6 - 9 of the order the activities are described by the appellants in that case. 6. The case of the appellant pleaded before the First Appellate Authority, in brief, is that it is a partnership concern engaged in letting out Pay Loaders on hire basis for mechanical transfer of coal into Railway Wagons at different Railway sidings of MCL. Other contractors of MCL transport coal from different parts of the mines and dump .....

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the execution of the contract. 7. It is stated that the appellant was awarded contract vide Work Order No. MCL/CG/L/LKPA/SO(M)/Pay Loaders/2-3/17, dated 14/17-12-2002 by MCL for Hiring of Pay Loader for Mechanical transfer of Coal Wagon at MGR Siding No. 5 Lakhanpur Area for transfer of 56 lacs tonnes of coal over a period of two years for a contract value of ₹ 142.24 lacs payable @ ₹ 2.54 per tonne of coal transferred/loaded. Under the contract the appellant had to transfer/load 18 .....

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that like the aforesaid contract, another contract was awarded to the appellant vide Work Order No. MCL/CGM/LKPA/SO(M)/Pay Loader/03.04.0020, dated 6/11-2-2004 by MCL for Hiring of Pay Loader for Mechanical transfer of coal from Railway siding/platform into Rly. Wagons at Y Curve BOCM Siding at Chingriguda of Lakahnpur Area over a period of two years for a contract value of ₹ 92.99 lacs payable @ ₹ 2.79 per metric tonne of coal transferred/loaded. Under the contract the appellant had .....

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e purpose of the contract was loadingof the wagons and the transportation within the siding or nearby places was incidental to the activity of loading. Moreover, there was no mining involved in the activity undertaken by appellant in that case. Thus the facts of the case are significantly different. Coal mines use the sand to fill the voids created by the mining of the coal. From the article A review on utilisation of coal mine overburden dump waste as underground mine filling material: A sustai .....

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sed for Backfilling, which is commonly known as stowing, provides stability of ground by preventing land subsidence, reducing mine fire backfilling in underground mine voids such as river sand, fly ash, mine tailing and waste foundry sand (WFS). Thus the purpose of the entire activity is to fill the voids created by the coal mining activity by using sand mined from the riverbed. This activity is done by the appellants is to assist in movement of sand for this purpose from river bed to stockyard/ .....

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port of goods. Such intermediate and ancillary services may include services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc., which are provided in the course of transportation by road. These services are not provided as independent activities but are the means for successful provision of the principal service, namely, the transportation of goods by road. The appellants have argued that loading and unloading done is a kind of self-service necessary to underta .....

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rs for collection of sand from below water level and/or above water level, as the case may be, by mechanical means, loading of sand into tippers, transportation of sand, from Chorseonighat/Hadasthighat or any other ghat of Wardha River to Bunker/Stockyards of Nandgaon Incline of Chandrapur Area and unloading of sand. (a) From Hadasthighat/or any other ghat to Bunker No:10/Stockyard Lead : 6-7 Kms. Daily quantity of sand to be transported. 250 Cumt. 60,000 Cumt. Rs.66.00 per Cumt. Rs.39,60,000/- .....

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No:10 and Bunker No:12 to Bunker No:10 & Bunker No:12 respectively at Nandgaon Incline. (a) Stockyard of Bunker No:10 to Bunker No:10, Lead : 0-1 Km. 45,000 Cumt. Rs.20.50 per Cumt. Rs.9,22,500/- Daily quantity of sand to be transported : 375 Cumt. (b) Stockyard of Bunker No.12 to Bunker No.12 Lead : 0-1 Km. 45,000 Cumt. Rs.20.50 per Cumt. Rs.9,22,500/- Total: 90,000 For Job No.2 Rs.18,45,000/- It can be seen that the contract describes it to be a contract for excavation from riverbed, trans .....

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vice. In any case, the activity of movement of sand from warehouse to bunker cannot be considered as mining activity. From the terms of the contract it is apparent that the prime purpose of the contract is to bring the sand from the riverbed/ warehouse to the bunker. The loading or unloading are merely necessary requirements to complete activity of movement of the sand. In these circumstances we hold that the contract is primarily intended for the purpose of transportation of sand and the activi .....

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