Custom, Excise & Service Tax Tribunal
M/S. Orissa Stevedors Ltd vs Commr. Of Central Excise, Customs & on 15 July, 2014
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EAST REGIONAL BENCH : KOLKATA
Service Tax Appeal No. 172/2008 & 157/08
(Arising out of the Order-in-Original No. Commr./BBSR-I/ST-12/2008 dated 30/06/2008 passed by the Commissioner, Central Excise, Customs & Service Tax, BBSR-I)
For approval and signature of:
DR.D.M. MISRA, HONBLE JUDICIAL MEMBER
DR. I.P. LAL, HONBLE TECHNICAL MEMBER
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1. Whether Press Reporters may be allowed to see :
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 :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not ?
3. Whether Their Lordships wish to see the fair copy :
of the Order?
4. Whether Order is to be circulated to the Departmental :
Authorities ?
M/s. Orissa Stevedors Ltd.
APPELLANT(S)
VERSUS
Commr. of Central Excise, Customs &
Service Tax-BBSR-I
RESPONDENT(S)
AND
Vice Versa
APPEARANCE
Sri Jagabandhu Sahoo, Advocate
FOR APPELLANT(S)
Sri S. Misra, Addl. Commr. (A.R.)
FOR THE RESPONDENT(S)
CORAM:
DR.D.M. MISRA, HONBLE JUDICIAL MEMBER
DR. I.P. LAL, HONBLE TECHNICAL MEMBER
DATE OF HEARING & DECISION : 15/07/2014
ORDER NO. FO/A/75658-59/14
Per DR.D.M. MISRA
The Assessee as well as the Revenue are in appeal against the Order-in-Original No. Commr./BBSR-I/ST-12/2008 dated 30/06/2008 passed by the Commissioner of Customs, Central Excise & Service Tax, BBSR-I.
2. Briefly stated the facts of the case are that the Appellant M/s. Orissa Stevedors Ltd. had rendered services to M/s. Orissa Mining Development Corporation (OMDC) against six Agreements/Work Orders between the period October 2004 to October, 2006. A show cause-cum-demand notice was issued to them on 24th May, 2007, invoking extended period of limitation, alleging non-payment of service tax under the category of Cargo Handling service and Business Auxiliary service involving Service Tax of Rs.87,37,279/-. The Ld. Commissioner has confirmed the demand against four Work Orders involving total Service Tax of Rs.16,85,176/- and imposed equivalent penalty under Section 78, penalty @200/- per day under Sec.76 and Rs.1,000/- under Section 77 of the Finance Act, 1994. Hence, the appeal No. ST/172/08 is filed by the assesse/appellant.
3. The Revenue has come in appeal bearing No. ST/157/08 against the same order-in-original on the ground that the Ld. Commissioner has erroneously dropped the demand against two work Orders/agreements viz. OMD/T-5/152 dated-20.01.2003.
4. Assailing the impugned order, the Ld. Advocate for the Appellant-assessee has submitted that the Ld. Commissioner has wrongly observed that in executing the Work Order No. OMD/T-5/917 dated-18/03/2005, the services rendered by them was held to be in the nature of Business Auxiliary Service. He has submitted that the Appellant/assessee had not undertaken any work on the raw material or semi finished goods and hence their activity cannot be construed as production or processing of goods on behalf of the clients. Hence, its classification under the category of Business Auxiliary Service is erroneous. He submits that their activity under the said work Order squarely falls under the category of Mining Services, hence not chargeable to service tax.
4.1 In relation to the work order Nos. OMD/T-5/1782 dt.26.05.2005, OMD/T-5/749 dt.25.02.2006 and OMD/T-5/1813 dt.13.05.2006, the Ld. Advocate has submitted that the activities carried out therein relate to transportation of iron ore within Mining area and hence the activity is not that of Cargo Handling Services in view of the decision of this Tribunal in the case of Singh Transporters Vs. CCE, Raipur (2007) 8 STR-594 (Tri-Del), Sainik Mining & Allied Services Ltd. & Others Vs. CCE, Bhubaneswar (2008) 9 STR 531 (Tri-Kol), S.B. Construction Company-V/s. UOI (2006) 4 STR 545(Raj.), CCE, Jaipur-I-V/s.- Giriraj Brothers (2008) 10 STR 549 (Tri-Del.).
5. Per contra, the Ld. A.R. for the Revenue has submitted that in relation to work order No. OMD/T-5/917 dt.18.3.05, the Ld. Commissioner has rightly observed that the assesse had undertaken the activity of production or processing of goods for and on behalf of the client and accordingly, correctly classified their services under the category of Business Auxiliary Service. Regarding the activities/services against work order Nos. OMD/T-5/1782 dt.26.05.2005, OMD/T-5/749 dt.25.02.2006 and OMD/T-5/1813 dt.13.05.2006, the Ld. A.R. for the Revenue has placed reliance on the judgment of this Tribunal in the case of Commissioner of Central Excise Vs. Gayatri Carriers (Pvt.) Ltd. 2013 (32)STR3678(Tri.-Del.) Jai Jawan Coal Carriers Pvt. Ltd. Vs. Commr. of S. Tax, New Delhi-2014-TIOL-727-CESTAT-DEL. It is his submission that the Tribunal after discussing the case laws on the subject had observed that the activity of loading of coal into the tippers and subsequent unloading in the Railway wagons for its transportation is clearly identifiable as separate rates are prescribed for the same, hence these services are chargeable to Service Tax under Section 65 (105) (zr) read with Section 65 (23) of The Finance Act,1994 i.e. Cargo Handling Services. It is his contention that the facts of the present case are almost similar to the facts afore stated cases, hence the services rendered by the Appellant against the aforesaid work orders, is in the nature of cargo handling service and leviable to service tax..
5.1 The Ld. A.R has further submitted that Department has also filed Appeal challenging the finding of the Adjudicating Authority in relation to the work orders No.OMD/T-5/152 Dt. 20.01.2003 & OMD/T-5/256 dt.27.1.2006, that raising, transporting and calibration of iron ore from R Block Area of Bhadrasai Mines, Roida would not attract service tax under the taxable category of site formation and clearance, excavation and earth moving and demolition service, and do not fall under the category of Mining Services as observed by the Ld. Commissioner which become taxable w.e.f. 01/06/2007. Hence, the Order is bad in law to this extent.
6. Heard both sides and perused the records. We have carefully considered the observation and arguments advanced by both sides. Undisputedly, in both these appeals, the services/activities in dispute relate to six work orders, executed by the Appellant-assesse. The said work orders are listed at para No. 5.6 of the impugned order. The Ld. Commissioner while recording reasons in relation to work order No. OMD/T-5/152 dt. 20.1.2003 and OMD/T-5/256 dated 27.01.06 observed that the activities relate to the Mining activity which became taxable only w.e.f. 01/06/2007, accordingly, no service tax were leviable for the period prior to 01/06/2007. The observation and reasoning of the Ld. Commissioner is reproduced as below:
5.10 In this case, the very nature of the job indicate that the noticee had to raise the iron ore from the earths bed and transport it to the crusher & finally calibrate it as per requirement. Though the services provided by the notice are multifarious & composite, the essential character of the composite service is derived from the activity of raising of iron ore from the earth bed. Other services of transportation and calibration are incidental to the raising of the ore. Hence, in view of Section 65A (2)(b) the said service has to be classified considering the same to be raising or excavation of iron ore. In the show cause notice the services of raising and excavation of iron ore has been alleged to be production or processing of goods for or on behalf of the client and classified under the category of business auxiliary service. It is a common fact that excavation of iron ore is nothing but digging out of the ore from the earths bed and by any yardstick this cannot be construed as any production or processing as no raw material go into the process. In this context, I would like to place reliance on the Honble Supreme Courts decision in the case of Commissioner of Central Excise, Customs, Bhubaneswar-I Vs. Tata Iron & Steel Co. Ltd. 2003 (154) ELT-343 (SC) wherein the Honble Court had held that raising of coal from the ground in the collieries would not amount to manufacture or production of coal. On the other hand the activity of raising or excavation has to be held as pure mining activity which has become taxable w.e.f. 01.6.2007 under the category mining service. 5.11 I am fortified in my view by the clarification issued by CBEC vide letter F. No. 232/2/2006-CX-4 dated 12.11.07 wherein it has been clarified that coal cutting or mineral extraction and lifting them upto pithed are essential integral processes and are part of mining operation. Mining activity has been made taxable by legislation under the Finance Act, 2007 (w.e.f. 01.06.07), prior to this date, such activities, being part of mining operation itself are not subjected to Service Tax. Therefore, no Service Tax is leviable on such activities prior to the said date. 5.12 In view of the foregoing discussion, I conclude that the activities of raising of iron ore at the mines owned by OMDC, by the notice are restricted to raising/mining of iron ore without involving any production or processing services as envisaged under Section 65 (19) of the Finance Act, 1994 and also within the scope of definition of taxable service under Section 65 (105) (zzb) of the Act ibid and hence are not liable to Service Tax. In the result I hold that the notice is not liable to pay any Service Tax on their activity of raising of iron ore during the period from 10.09.2004 to 03.10.2006.
6.1 The said observation is challenged by the Revenue on the ground that the services rendered by the assesse/appellant would fall under the scope of site formation service. We do not find merit in the contention of the Revenue as not supported by any evidence and acceptable sound basis. On the other hand, the aforesaid observation of the Ld. Commissioner arrived at on the factual analysis of the individual work orders, seems to be well reasoned and accordingly, we uphold the same.
6.2 Also, we find that while analyzing the work order (OMD/T-5/917 dt. 18.3.05), the Ld. Commr. has observed that the appellant was required to produce desired size and quantity of iron ore as required to be rendered against the said work order. The said services i.e. production of 10-30 mm size iron ore by means of Mechanical screening at Belkudi-Baglbaru iron ore Mines were not considered by him as resulting into manufacture within the definition of Section 2(f) of Central Excise Act, 1944 and accordingly, it was held to come under the scope of Business Auxiliary Services, being the services of production or processing of the goods for and on behalf of the clients. We do not see any infirmity in the said observation and accordingly the same is also upheld.
6.3 Regarding the three other Work Orders OMD/T-5/1782 dt.26.05.2005, OMD/T-5/749 dt.25.02.2006 and OMD/T-5/1813 dt.13.05.2006, it is noticed that the activities relate to shifting/transportation of 10-30 mm of iron ore from the quarry to railway siding at Barbil which include the activity of loading & unloading, transportation and the lump sum charge was @ Rs.135/- per MT. The contention of the appellant is that the services rendered by the Appellant are only relate to transportation of iron ore within the Mining area and hence cannot fall within the scope of Cargo Handling services. On the other hand the Ld. Adjudicating authority relying on the decision of Gajanand Agarwal Vs. CCE,Kolkata 2009 (13)STR 138(Tri-Kolkata) has held that the activities are not mere transportation but in essence handing of the cargo, hence fall under the category of cargo handling service. We find that this Tribunal in Gayatri Carriers Pvt. Ltd. which was later followed in Jai Jawan Coal Carriers Pvt. Ltd. case (supra) after analyzing the case laws on the subject more or less under similar circumstances has observed that the activities of shifting, loading, unloading of Ores with the help of tippers, Trucks etc. into railway wagons are cargo handling service. Therefore, in view of these decisions of this Tribunal which are squarely applicable to the facts of the present case, we agree with the finding recorded by the Ld. Commissioner that the activities/services rendered by the appellant in relation to Work Order Nos. OMD/T-5/1782 dt. 26.5.05, OMD/T-5/749 dt. 25.2.06 and OMD/T-5/1813 dt. 13/5/2006 are in the nature of Cargo Handling Services.
6.4 The Ld. Advocate for the appellant has submitted that present demand pertains to the period October, 2004 to October, 2006 and the show cause notice was issued to them on 24/5/2007. Therefore, a portion of the demand is barred by limitation. Also, he has submitted that since the issue is that of interpretation of law and conflicting views are expressed by different judicial fora, therefore, penal provisions are not warranted in the present case and it is a fit case for invoking Section 80 of the Finance Act,1994. We find force in the said argument of the Ld. Advocate, in view of the observation of the Tribunal in the case of Jai Jawan Coal Carriers Pvt. Ltd. (supra), This Tribunal has observed as:
7.Next comes, the question of limitation. The show cause notice dated 23/4/09 is for the period from October 2003 to March 2008 and this demand has been confirmed by invoking extended period while the second show cause notice dated 15/10/09 being for 2008-2009 period is within time. During the period of dispute, there were conflicting decisions on the issue involved in as much as in the case of Sainik Mining and Allied Services Ltd. and G.G. Coal Transport Ltd. vs. CCE, Customs and Service Tax, Bhubneshwar (supra), in respect of similar activity, the Tribunal had taken the view that the same is not taxable as cargo handling service while in the case of CCE, Raipur vs. Gayatri Carriers Pvt. Ltd. (supra) and Gajanand Agarwal vs. CCE, BBSR (supra), the Tribunal in respect of similar activity had taken a contrary view. In view of this, keeping in view the Apex courts judgment in the case of Continental Foundation Jt. Venture vs. CCE, Chandigarh I (supra), the non-payment of service tax has to be treated on account of bonafide belief of the appellant that their activity was not taxable and accordingly the longer limitation period under proviso to Section 73 (1) of the Finance Act, 1994 would not be available to the Department. In view of this, the duty demand in respect of the value of service for loading of coal/mineral ore into the tipper trucks and thereafter loading of the coal/ore into the railway wagons would survive only for the normal limitation period which has to be quantified by the original Adjudicating Authority. As regards, the penalty on the appellant under Section 77 and 78, since as discussed above, during the period of dispute there were conflicting decisions by the Tribunal with regards to taxability of the appellants activity, it has to be held as the non-payment of service tax by the appellant was due to bonafide belief on the part of the appellant that their activity is not taxable. Therefore in view the provisions of Section 80 of the Finance Act, 1994, the penalty under Section 77 and 78 would have to be waived. Ordered accordingly. 6.5 Following the same, we are also of the view that extended period of limitation is neither invokable, nor penalty is imposable on the assesse/Appellant. For the limited purpose of ascertaining the liability of assesse/appellant with respect to the demand for the normal period, we remand the matter to the adjudicating authority. The assesse/appellants appeal is partly allowed to the extent above and the Revenues appeal is rejected.
(Operative part of the order already pronounced in the court) Sd/- 01/12/2014 Sd/- 01/12/2014 (I.P.LAL) (D.M.MISRA) MEMBER (TECHNICAL) MEMBER (JUDICIAL) k.b/-
Service Tax Appeal No. 172 & 157/2008 9