Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs M/S. Punjab State Container & ... on 29 June, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO.
Appeal No. ST/194/11
(Arising out of Order-in-Original No.14/CSP(14)/COMMR/RGD/10-11 dt. 31.12.2010 passed by the Commissioner of Central Excise, Raigad )
For approval and signature:
Honble Mr. Ramesh Nair, Member (Judicial)
Honble Mr. C.J. Mathew, Member (Technical)
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1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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Commissioner of Central Excise, Customs, & Service Tax, Raigad
:
Appellant
VS
M/s. Punjab State Container & Warehousing Corporation
:
Respondent
Appearance
Shri A.B. Kulgod, Assistant Commissioner (A.R.) for Appellant
Shri Arun H. Mehta, Advocate with
Shri Mayur Kadam, Advocate for respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Honble Mr. C.J. Mathew, Member (Technical)
Date of hearing : 29/06/2016
Date of decision : 29/06/2016
ORDER NO.
Per : Ramesh Nair
The fact of the case is that the appellant is engaged in the activity of Cargo Handling Storage and Warehousing falling under Section 65 of the Finance Act, 1994 and are registered with service tax authorities. Show cause notice was issued demanding service tax under the head of storage and warehousing service on the amount recovered from sale proceed of auction of unclaimed cargo. The contention of the department is that since the appellant is engaged in the service of storage and warehousing the amount recovered through auction of the unclaimed cargo is treated as storage and warehousing charges, therefore they are liable to pay service tax. The adjudicating authority giving detailed finding which is based on various judgments and Boards clarification on the specific issue involved in the present case, dropped the proceedings therefore the Revenue has filed this appeal.
2. Shri A.B. Kulgod, Ld. Assistant Commissioner (A.R.) appearing on behalf of the Revenue reiterates the grounds of appeal. He further submits that there is no dispute that the appellant has engaged in providing storage and warehousing service. Even though the proceed is towards auction of the unclaimed cargo but the purpose for auctioning the goods and recovery of the amount is to compensate the warehousing storage charges. Therefore the amount received by auction of unclaimed cargo is nothing but the service charges against providing of storage and warehousing service, therefore the same is legally taxable.
3. Shri Arun H. Mehta, Ld. Counsel for the respondent along with Shri Mayur Kadam, Advocate submits that the issue is of no more res-integara as the same is clearly clarified by the Board that the proceed of auction cannot be considered as service charges, therefore the same cannot be levied service tax. He submits that the issue is covered by the judgment of this Tribunal in the case of India Gateway Terminal (P) Ltd. Vs. Commissioner of C. Ex., Cochin 2010 (20) S.T.R. 338 (Tri.-Bang.). He further submits that the Ld. Commissioner has given very detailed finding which is based on various authorities. Therefore the order does not require any interference.
4. We have carefully considered the submissions made by both the sides, we find that the Revenue seek to charge service tax on the sale proceed from auction of abandoned goods though the person who stored the goods does not exist and there is no dealing with the said person. The appellant is selling the goods in open auction and receiving the sale proceed out of such auction, in this process no service recipient is existing. It is the foremost principle for levying service tax is that for provision of any service, provider and service recipient should exist then only the transaction of service can be completed by providing service of service provider and receiving the service by service recipient. In the present case, the service recipient does not exist. The activity is of sale of abandoned goods and the proceed of sale of goods does not attract any service tax. On perusal of the impugned order, we found that the Ld. Commissioner has by careful application of mind given a detailed finding for dropping the proceeding of the show cause notice. The relevant finding of the impugned order is reproduced below:
.8.1 I have gone through the charges framed in the show cause notice, the case records, the submissions made by the Noticee No.1 and Noticee No.2 (the Noticees for short) in their written replies and the record of personal hearings.
8.2. The main activity for the Noticees is receiving containers with imported cargo andstuffing export cargo which is sent to their CFS on the instructions of the shipping lines. After taking custody. non-duty paid imported cargo containers are brought into their Cl-S offloaded from the vehicles and stored in the yard. The CHA of the importers then completes the customs procedures such as appraisal or the goods. assessment and payment of import duty and clear their cargo from the CFS. During the course of providing these taxable services. there are situations when cargo remains uncleared by the importer over a long period of rime for various reasons. Such cargo being uncleared by the owner/ importer and also not having received the charges of the warehouse for the safe storage of the goods, the warehouse keeper (the Noticees) disposes of the uncleared cargounder Section 48 of the Customs Act. 1962 through the process of auction In accordance with the procedure specified in Section 150 of the Customs Act. 1962, to recover their dues in respect or storage and warehousing. The intention of this Notice is to demand the Service tax on the amount accrued to the Noticees on account of auction of the unclaimed cargo.
8.3 M/s GD were authorized by M/s PSCWC to take physical possession of the M/s PSCWC with effect from 1,1 February. 2007 to operate the Container Freight Station(CFS). Bill & Receive Payments in the name 01' Punjab Con ware in their capacity as O&M contractor. It was therefore alleged that. M/s PSCWC during the period April- 2004 to November-2006 and M/s un during the period from February-2007 till March-
2009 had contravened the provisions of Section 68 & 70 of Chapter V of the Finance Act. 1994 (32 of 1994) read with Rules 5.6 & 7 of Service Tax Rules.,1994.
9.1 The main allegation against the Noticees is that the excess amount recovered over & above the storage & warehousing charges was retained by them and that the same is liable to service tax. It is alleged that the Service tax for a particular period is payable on the gross value of taxable service received during the period and not the gross amount
billed to the client for the same period. It is alleged that since the said amount also forms part of the storage & warehousing charges & is secured towards storage & warehousing charges only. the same is includible in the taxable amount tor payment (If service tax. It is
therefore alleged that that no service tax has been paid by the Noticces on the said amount.
9.2 The Noticees are in the business or providing storage and warehousing services in respect of imported cargo through their Container Freight Station and the crux of the demand against the Noticees is on the ground that the sole association or the Noticees with the abandoned cargo auctioned by them is through the various such services provided by them and thus any income earned by the Noiicees from the auction or such abandoned cargo. after paying the customs duty and other expenses. is gross amount accruing to the Noticees in lieu or the storage & warehousing services provided by the Noticees in respect of such imported goods. It is the case of the department that the Service Tax is payable on the gross amount received by the Noticees, after deducting duties & taxes paid.
9.3. It is an admitted fact that auctioning of uncleared cargo is part of the business activity of running a CFS and selling of such uncleared goods is not their separate business activity. Therefore. there is no dispute that the sole association of the Noticees with such goods is through the services of Storage and Warehousing services provided by them to the importer I depositor of the goods. The process of recovery of storage & warehousing charges through auction of uncleared cargo takes place as a consequence to the non-payment of charges of the storage & warehousing service provided by CFS. Pertinently, in such a situation. there are two transactions taking place concurrently, i.e. (i) the warehousing of goods of the depositor (importer) in the CFS and (ii) sale of uncleared goods to the (New buyer by way of auction by the CFS (the Noticee). The question to be addressed in the instant case is whether such amount retained by the Noticees on sale of abandoned cargo is liable to service tax.
10.1 As per the guidelines. such retained amount on auction sale of abandoned cargo is to be retained as a liability for a period of 3 years pending appropriation against any future dues from Customs & claims from depositors and only thereafter it is to be treated as income under "miscellaneous receipts". There is strength in the contention of the Noticee that. the retained (surplus) amount does not carry the meaning of Taxable Warehousing Charges income on the ground that the retained amount is lying as liability and not taken as income into the books of account. Further. as per Government Circular F.No.B/11/1/ 12000/TRU dated 18.02.02 which while interpreting the storage & warehousing service, provides that the service provider normally make arrangement of space to keep the goods, loading, unloading and stacking of goods in storage area. keep inventory of goods, make security arrangement & provide insurance cover etc. but in the case of retained (surplus) amount no such arrangement is made. It is the contention of the Noticees that the surplus amount has simply resulted through efforts of auctioneer & competition in bid auction.
10.2 As per Section 150 of the Customs Act. 1962. proceeds from the auction sales should first go towards (I) expenses for sale, (2) payment of freight and other charges to the carrier. (3) payment of duty. (4) payment of the charges in respect of the goods sold,to the person having custody of the goods and (5) payment of any amount due to the Govt. I Customs and balance. if any. shall be paid to the owner of the goods. This is a statutory and mandatory requirement. The retention of such amount by the custodian is expressly with the obligation to refund to the owner or such goods. The obligation of the Custodian is similar to that of a Bailee who has to pass on the proceeds to owner of such goods and that as per the law in force, this obligation is not extinguished at any point of time and that there is no defined period of limitation under the Act, where after the Custodian is specifically authorized to appropriate or deal with such amount.
10.3 In order to decide the ambit of service tax in relation to any activity, there needs to be a service provider and a service receiver. It also requires the realization of the amount for such services rendered by the service provider. In the instant case, pursuant to completion of auction and consequent to sale of such goods. the title of the goods passes to a successful bidder who eventually has not received any service on account of storage and warehousing of such goods. The auction of the said goods is carried out purely on a commercial basis and consideration so received obviously is without the element of cost
of Storage and Warehousing charges. The successful bidder is in no way concerned with the Storage and Warehousing charges. It would be a fallacy to presume that the proceeds received in relation to auction sale of abandoned cargo also fetches charges on account of services provided for Storage and Warehousing. It is stated that in case or an auction of the abandoned goods the payment is not received from the owner of the goods, who is the actual- service receiver. Upon sale of the unclaimed/abandoned goods. the title on such goods as are sold passes to the successful bidder. It is a new entity, the bidder who has bid for the particular goods and being the highest quote entitled to the purchase of the abandoned cargo. A sale invoice is generated on the successful bidder and the goods delivered after he has paid the full value of the bid amount. together with the Sales Tax due thereon. I agree with the contention of the Noticees that there is no privity of service contract between Noticees and the bidder. except that of purchase and sale of goods. It is contended by the Noticees that at no stage during the bidding process. does the bidder specify the bid value as comprising of any components, such as auction expenses, freight. Customs Duty, Custodian charges etc. It has also been submitted that such appropriation out of such sale proceeds. is made by the Noticees as per the provision of the Customs Act.
10.4 The process of such appropriation to the various components. as stipulated under the Act, priority thereof is also laid down therein. Thereby, the amount realized during process of sale of particular item of abandoned goods may not be sufficient to meet all the components as listed in the Act. The custodian has the last priority and very often the value realized on sale of unclaimed/abandoned goods is insufficient even to meet the prior charges. The custodian (the Noticees) has to consequently treat the unrealized amount of its dues, at irrecoverable loss. It thus becomes a matter of chance that the sale proceeds after meeting all prior charges. are sufficient enough to realize the full amount due to the Custodian.
10.5 Further. the money realized from the bidder loses the character of a "Storage & Warehousing Service", and acquires the status of sale proceeds. and becomes subject to Sales Tax/VAT. The Noticees therefore has to apportion the sale proceeds to the respective components as per order of priority stipulated under Customs Act. It is therefore evident that the character of the balance amount lying with the Noticee for statutory disbursement to owners is not in the nature of Storage & Warehousing Service.
10.6 Notification No. 12/2003 (ST) dated 2006.2003 exempts so much of the value of the taxable service as is equal to the value of the goods sold by the service provider to the recipient of service, from the service tax leviable thereon under Section (66) of the said Act subject that there is documentary proof specifically indicating the value of the said
goods and material. In the instant case. the auctioned goods have been sold to the highest bidder and the amounts collected by the Noticees are on account of the sale of abandoned goods, and therefore the sales proceeds are clearly exempted from the levy of Service
Tax.
11.1 The provisions of Section 65( I 05). Section 66. Section 64(3) and Section 67. if read conjointly. make it clear that in order to attract service tax there must be a taxable service provided, a service provider. a service receiver and a consideration received for the provision of the taxable service. In their case, they are forced to sell cargo as it is not
claimed by the importer and no charge is levied for storage and warehousing service to anyone as no service emanates from them to anyone. As such. when there is no service. there is no chargeable event to attract service tax. Also, there is no provision in Section
67 to treat the surplus amount retained by the noticee (after deduction of auction related expenses and customs duty) as value of storage and warehousing services.
11.2 The Honble Supreme Court in the case of M/s Acer India Ltd.-2004( 172)ELT- 289 & Mathuram Agrawal v. State of Madhya Pradesh (1999) 8 SCC 667} have discussed at length on the issue of the interpretation of the provisions of fiscal/taxation laws and have laid down the framework of interpretation as under:
The intention ofrhe legislature in a taxation statute is 10 he
gathered from the language ofthe provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to he obtained by making the provision which is relevant ill interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from (he plain unambiguous language of' the statute. Word; cannot he added to or substituted so as 10 give a meaning /0 the statute which will serve the spirit and intention of [he legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tux and the rate at which the tax is to be paid. If there is any ambiguity F regarding any of these ingredients in a taxation statute then there is no tax in law'. Then it is [or the legislature to do the needful in [he matter. "
11.3 Thus it can be seen that the Honble Apex Court has laid down framework of interpretation of the 'statute' in an unambiguous manner. The Honble apex Court has further enlisted the existence of three necessary ingredients viz. the subject of the tax, the person who is liable to pay the tax and the rate at winch the tax is to be paid and went to clarify further that if there is any ambiguity regarding any of these ingredients in a taxation statute. then there is no tax in law. In the instant case. tax is sought to be levied on the auction of abandoned cargo. on the assumption that the sales proceeds have
accrued on account of the "Storage and Warehousing" services provided by the Noticee. This contention cannot hold grounds following the above ratio of the apex court that no tax can be levied on assumption. The apex court has also held that it is also well settled
rule of construction of a charging section that before taxing a person it must be shown that he falls within the ambit thereof by clear words used as no one can be taxed by implication.
11.4 In CBEC's Master Circular No.96/7/2007-ST dated 2:)-08-2007. in Para 036.03. it has been clarified that "Service fox is not leviable ON a transaction treated as sale of goods and subjected to levy).' of Sales tax/VAT Whether a given transaction between the service station and the customer is a sale or not, is to he determined taking into account the real nature and material facts of the transaction. Payment of VAT/sales tax on transaction indicates that the said transaction is treated as sale of goods." Thus in an unequivocal terms it is made clear in the instant Circular that value of goods on which VAT is paid is not chargeable to Service Tax and therefore for this reason. I hold that the
amount collected by the Noticee towards sales/auction proceeds does not fall under the purview of Service tax.
11.5. The clarifications issued by the Board vide F. No BIIII12002 dated 01.08.2002 clinches the issue in favour of the assessee. In paragraph 12 of the said clarifications it has been specifically provided as under:
"'A clarification has been sought as to whether service tux is payable on abandoned cargo which ore auctioned by the CFS as no service is rendered to any person. In the case of auctioned goods. the proceeds of the auction goes first to the cost of auction, then towards customs duties and then La the custodian of the goods. It is clarified that no cargo handling service can he said 10 have been rendered in such cases. therefore service tux is not leviable."
The ratio of the above clarification is directly applicable to the instant case since no warehousing service can be said to have been rendered.
11.6. Further, the Tribunal in the case of M/s. India Gatway Terminal (P) Ltd. Vs.CCE Cochin 2010 (20) STR 338 (Tri-Bang.) while discussing the coverage of auction of good under the head Port Service, categorically held that auction of goods not cleared by importers is not covered under Port Service. It was held that the auction charges adjusted by port authorities towards port charges cannot be considered as receipt towards any service. Thereby maintaining judicial discipline. I follow the ratio of the findings of the Honble tribunal and hold that the auction charges adjusted towards warehousing charges cannot be considered as receipt towards any service and hence not liable to demand of service tax.
12. Since, I am inclined to drop the proceedings on merit alone, I do not find it necessary to discuss other submissions of the Noticees including those regarding limitation and penalty. In view of the above, I pass the following order.
ORDER
I drop the proceedings initiated vide the Show Cause Notice No. F. No. V/PI/ST/Gr.II/RGD/PUNJAB/75/08-09/136312 dated 21/10.2009.
It can be seen from the above finding that the Ld. Commissioner has considered various judgments and Boards clarification and came to conclusion that there is any activity of service which is liable to service tax. We completely agree with the findings of the impugned order and do not feel to interfere in the same, we therefore uphold the impugned order and dismiss the Revenues appeal.
(Pronounced in court ) (C.J.Mathew) Member (Technical) (Ramesh Nair) Member (Judicial) SM.
12Appeal No. ST/194/11