1. These three Appeals filed by the Appellants and one Cross Objection filed by the Department are taken together for hearing and disposal as the issue involved is the same. Appeal No. EDM-806/04 & CO-31/05 are against the Order-in-Appeal 30.9.2004 arising out of Order-in-Original dated. 25.6.2007. Appeal No. EDM-22/06 is against the Review Order dated 20.6.2006 enhancing the penalty, arising out of the same Order-in-Original dated 25.6.2004. Appeal No. EDM-06/06 is against Order-in-Appeal dated 25.1.2006 arising out of Order-in-Original dated 28.3.2005.
2. The Learned Advocate appearing for the Appellants states that the Appellants are engaged in the business of material handling equipment and parts thereof and they also carry out activities like unitisation, straping, packeting or packing, the customers' goods at their premises or sites. For the activities carried on by the Appellants in the premises of M/s. Tata Refractories Ltd., Belpahar they have been asked to take Service Tax Registration and under the impugned orders demand of Service Tax has been confirmed against them and penalty has been imposed holding that the Appellants have provided "Cargo Handling Service".
3. The Learned Advocate states that the services being rendered by the Appellants are now covered under the new service relating to packaging service w.e.f. 16.6.2005 only. It is his contention that the service is not covered under the definition of 'Cargo Handling Service' which is defined under the Finance Act, 1994 as under : "Cargo handling service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport and cargo handling service incidental to freight, but does not include handling of export cargo or passenger baggage or mere transportation of goods;J and J Enterprises v. CCE, Raipur Cargo: Freight or loading of a ship, shipload - The Shorter Oxford English Dictionary.
Cargo: The load or freight of a ship, airplane or vehicle; load - New Webstar's Dictionary.
Cargo: Cargo of a ship or plane, the goods that it is carrying - Collins English Dictionary.
Cargo: The goods carried by a ship or aeroplane, any load to be carried - Chambers English Dictionary.
Cargo: The goods transported by a vessel, air-plane or vehicle; freight - Black's Law Dictionary.
3.3 It is the contention of the Learned Advocate that the Appellants that they do not handle any cargo and they do not come in the category of 'Cargo Handling Agency' and hence they are not liable to pay the service tax demanded from them.
4. Heard the Learned SDR, who supports the impugned order and states that the law as it existed at the material time has to be interpreted without taking into account the scope and coverage of the new service included in the Finance Act w.e.f. 16.6.2005. He draws our attention to the provision in the Finance Act which provides for determining the rate of tax in case any particular service falls under two different categories. According to the Learned SDR, the Appellants were engaged in 'cargo handling service' and hence they are required to pay the demanded amount.
5. After considering the submissions made from both the sides we find that according to the definition in Section 65(21) of the Finance Act, 1994 the 'cargo handling service' means - ii) Cargo handling services provided for freight in special containers or for non-containerised freight, iii) Services provided by a container freight terminal or any other freight terminal and 5.1 The definition applies to all modes of transport. The only exception provided in the definition is handling of export cargo, passenger baggage and mere transportation of goods.
5.2 In the cited decision in M/s. S.B. Construction Co. (cited supra), the Hon'ble High Court of Rajasthan has held as follows: 10. In the instant case, the coal is handled/moved from railway wagons to the site of Thermal Power Station with the aid of wagon tippling system to be fed in the boiler bunkers through conveyor system. It is evident that handling of the coal is done through wagon tippling system or conveyor system, they are mechanical devices and no motor vehicle is involved in the said handling. The clarification made by the CBEC also supports the petitioner's contention. It clearly appears that the Service Tax has been levied under the 'Cargo Handling', on such services which undertakes the activities of packing, unpacking, loading, unloading of goods to be transported by any means of transportation namely truck, rail, ship or aircraft. In the instant case, the service provided by the petitioner Firm under the contract is distinct i.e. transporting coal from wagons to Thermal Power Station by conveyor belt and not by any means of transportation. Thus, we are of the view that the service rendered by the petitioner under the subject contract does not fall under the ambit of Cargo Handling Services and as such it is not liable to pay the service tax.
5.3 The Learned Advocate states that in the case decided by the Hon'ble Rajasthan High Court, the coal was initially carried by railway wagon to the rail head and then to the site of Thermal Power Station with the help of wagon tippling system to be fed in the boiler bunkers through conveyor system. He states that since in that case, the Hon'ble High Court has held that the activity was not coming under the scope of cargo handling service, in the present case though the goods packed by the Appellants are to be moved by transport subsequently, the same should not be covered under the cargo handling service. With great respect, we note that the Hon'ble Rajasthan High Court has considered un-loading of the coal by the wagon tippling system and thereafter the coal was transported by conveyor belt and not by any other means of transportation. Hence, the ratio of the decision based on such consideration (Sic) will apply to a similar case where the goods are transported by conveyor belt etc. and not by employing any other means of transportation such as truck, rail etc. There is no finding by the Hon'ble High Court on the fact that coal was initially moved by rail.
The cited decision is entirely based on a consideration of the question that subsequent movement of the coal from the wagons to the Thermal Power Stations was by means other than employing one of the usual means of transportation such as ship, rail, aircraft or truck. Hence, we are unable to accept the prayer by the Learned Advocate that the ratio of the cited decision should be applied to the case of the Appellants where the goods have been packed for subsequent transportation by truck/rail. The Learned Advocate fairly admits that the decision of the Hon'ble High Court of Rajasthan is silent in regard to the initial movement of the coal by rail.
5.4 We find that the expression 'cargo handling service' covers packing of cargo for all modes of transport and since the Appellants have undertaken the activity of packing etc. to facilitate subsequent transport of the cargo, we are unable to accept their plea that they are not covered under the scope of 'cargo handling service'. The Learned Advocate also made an attempt to argue that what was packed by the Appellant was not cargo, but it became cargo as a result of packing. We are of the view that the expression 'packing of cargo' is wide enough to cover the activities undertaken by the Appellants such as unitising, straping, packeting or packing the impugned goods into cargo for subsequent movement by trucks and/or rail. We also take note of the Learned Advocate's fair submission that nothing more is required to be done to the cargo before the same is transported and hence we have no hesitation in holding that the Appellants are engaged in packing of cargo for transport and hence they are squarely covered under the definition 'cargo handling service' for the impugned period and hence they are liable to pay the service tax as held by the authorities below.
5.5 Learned Advocate states that part of the cargo was meant for export and hence by definition the same is required to be excluded from the ambit of levy of service tax. We find merit in this submission of the Learned Advocate.
5.6 The Learned Advocate also states that since the issue involved relates to classification of the impugned service, imposition of penalty on the Appellants is not justified. Considering the fact that the levy on cargo handling service was a new tax, we are of the view that a lenient consideration in regard to imposition of penalty is called for.
5.7 In view of our findings as above, we hold that the activities of the Appellants is taxable as cargo handling service. However, we set aside the impugned orders and remand the matter to the original authority for the limited purpose of excluding the cargo handling service provided by the Appellant in respect of export cargo and for re-determing the tax payable thereafter. As regards the penalties imposed, we take a lenient view and set aside the same. All the three Appeals are disposed off in the above terms. The Cross Objection also stands disposed of.