Custom, Excise & Service Tax Tribunal
Hyderabad-Iii vs Singareni Collieries Company Ltd on 10 September, 2018
(1)
Appeal No: ST/286/2009
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench
Court - I
Appeal No. ST/286/2009
(Arising out of Order-in-Original No.11/2008-ST-HYD III-ADJN-COMMNR. Dt.22.10.2008,
passed by CCCE & ST, Hyderabad)
CCE, CC, Hyderabad-III ..... Appellant(s)
Vs.
Singareni Collieries Company Ltd ..... Respondent(s)
Appearance Shri V.R. Pavan Kumar, Superintendent/AR for the Appellant. Shri Harish Bindumadhavan, Advocate for the Respondent. Coram:
HON'BLE Mr. M.V.Ravindran, MEMBER (JUDICIAL) HON'BLE Mr. P. Venkata Subba Rao, MEMBER (TECHNICAL) Date of Hearing: 10.09.2018 Date of Decision: 10.09.2018 FINAL ORDER No. A/31199/2018 [Order per: P.V. Subba Rao.]
1. This appeal is filed by the department against the Order-in-Original No. 11/2008-ST-HYD III-ADJN-COMMNR., dated 22.10.2008.
2. The issue in brief is that the respondent herein is a Public Sector Undertaking involved in mining of coal they which provide to various organisations including the National Thermal Power Corporation Ltd (NTPC).
They have been collecting loading charges for the coal supplied to M/s NTPC and a show cause notice was issued demanding service tax under the head "cargo handling services" on these loading charges. For supply of coal to NTPC they have created a separate system while the coal gets transferred to power plant or to the vehicles of NTPC. It is the case of the department that the coal so loaded is cargo and loading of that cargo amounts to cargo handling for which NTPC is charging a separate loading charges in addition to the price of (2) Appeal No: ST/286/2009 the coal. Therefore, the loading charges are chargeable to service tax under cargo handling services. The case of the respondent is that the loading charges charged by them are a part of the coal price itself and since they have to do an extra work as far as the NTPC is concerned, they are charging an additional amount and this amount is not liable to be charged to service tax as this is not a cargo handling service rendered by them.
3. After following due process of law, the first appellate authority vide impugned order dropped the demand on the following grounds:
(a) The nature of the contract between respondent and NTPC is for delivery of coal through rapid loading system which the respondent has created. The contract is not for loading which is incidental to the sale of coal.
(b) When the coal is being loaded the ownership of the coal is still with the respondent herein and has not been transferred to the customer. In other words, by loading the coal they are doing the service to themselves and this cost has been recovered from the NTPC much later. Therefore, they are not rendering any service to NTPC and hence no service tax is chargeable.
(c) The respondent is not a cargo handling agency and hence is not liable to the service tax.
4. The appeal is on the following grounds:
(1) Handling and transportation of the coal are post-mining activities and are chargeable to service tax under cargo handling service even if the cargo handling is done using mechanical systems.
Therefore, the Commissioner erred in concluding that the cargo handling is incidental to the sale of coal.
(3)
Appeal No: ST/286/2009 (2) The concept of ownership does not arise in the instant case as the transfer of ownership has no bearing in deciding the leviability of the service tax.
(3) Since they are charging the loading charges from NTPC, they are rendering services to NTPC and not to themselves.
(4) The respondent herein has been billing NTPC separately for cargo handling services. Therefore, it is the case of the revenue that impugned order is incorrect and service tax is leviable on the loading charges collected by the respondent from NTPC.
5. Learned departmental representative reiterates the arguments made in the grounds of appeal and vehemently argued that the Order-in-Original in incorrect and since the respondent is collecting loading charges from M/s NTPC, they are liable to pay service tax on cargo handling services. The learned counsel for the respondent opposed it and argued that no service tax is payable on the loading charges collected by the respondent. He takes us through the clauses of the agreement to show that the sale is on FOB purchase transport basis and therefore, before the coal has been delivered to NTPC, it continues to be their property and they cannot render a service to themselves. In the case of SB Constructions Vs Union of India [2006 (4) STR (545)-Rajasthan] it was held by the Hon'ble High court that when the coal is handled or moved from railway wagons to the thermal power station with the aid of wagon tippling system to be fed in boiler bunkers through conveyor system no service tax is payable for cargo handling services. This judgment has been upheld by the Hon'ble Supreme Court [2017 (52) STR J19 (SC)]. Respondents are not separate coal handlers or packers but are producers of coal and they have put up this infrastructure within the mine as a part of their premises and the amount recovered by them as loading charges has also been included in the price of coal on which they have paid VAT. The learned counsel takes us (4) Appeal No: ST/286/2009 through some sample invoices to show that the loading charges have also been included for calculation of VAT payable on the coal. He, therefore, asserts that the so called loading charges are nothing but a component of coal paid by NTPC in addition to the basic price decided because of the additional effort taken in supplying the coal as per the convenience of the NTPC.
6. We have considered the arguments on both sides. We find force in the arguments of the learned counsel and in the Order-in-Original that the sale of coal has not taken place at the time the loading takes place. The sale takes place after loading is completed. In other words, the coal continues to be owned by the respondent herein at the time of handling of the coal. Therefore, there is no client to whom the service has been rendered by the respondent herein. We have also examined the argument of the department that since the coal handling charges are being collected from NTPC they should be considered as the recipient of the service. However, the invoices raised by the respondent on NTPC show very clearly that the coal handling charges which they charge from NTPC is only an additional element in the cost of coal for delivering the coal as per the convenience of NTPC. Therefore, they have also paid VAT on the full cost of coal including the loading charges. In this factual matrix, we find that there is no case to charge service tax on cargo handling services for loading charges collected by the respondent from NTPC. The Order-in-Original needs to be upheld and we do so.
7. The appeal is rejected.
(Operative Part of this Order was pronounced
on conclusion of hearing)
(P.VENKATA SUBBA RAO) (M.V. RAVINDRAN)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
Veda