Custom, Excise & Service Tax Tribunal
M/S. Thriveni Earthmovers Pvt. Ltd vs Commissioner Of Central Excise, Salem on 2 April, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal Nos. S/79/2008
(Arising out of Order-in-Original No.2/2008 (Commr.) dated 24.1.2008 passed by the Commissioner of Customs and Central Excise, Salem)
For approval and signature:
Honble Smt. Jyoti Balasundaram, Vice President
Honble Shri P. Karthikeyan, Member (T)
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 the Members wish to see the fair copy of the Order?
4. Whether Order is to be circulated to the Departmental authorities?
M/s. Thriveni Earthmovers Pvt. Ltd. Appellants
Vs.
Commissioner of Central Excise, Salem Respondent
Appearance Shri G. Natarajan, Advocate for the Appellants Shri R.P.Meena, SDR, for the Respondent CORAM Honble Smt. Jyoti Balasundaram, Vice-President Honble Shri P. Karthikeyan, Member (T) Date of Hearing: 02.04.2009 Date of Decision: 02.04.2009 Final Order No. ____________ Per P. Karthikeyan M/s. Thriveni Earthmovers (P) Ltd. Salem [TEPL] undertook the activity of loading and transportation of limestone and rejects to crusher and reject dump respectively in the Dholipatti limestone mines area during the period August 2002 to November 2006 for M/s. Chettinad Cements Corporation [CCC] under an agreement entered into with them. As per the agreement M/s. TEPL received Rs.9/- per tonne towards loading of limestone/rejects and Rs.27.50 per tonne towards transportation of the same. On 1.6.2007 mining of mineral, oil, gas was brought under the levy of service tax. The CBEC vide Circular F. No. 232/2/2006 CX-4 dated 12.11.2007 clarified the scope of the new category of service. It was clarified that service tax was chargeable under cargo handling service on post-mining activities such as loading, unloading and similar activities though done using mechanical systems. Though TEPL is registered as a provider of service under the category of mining of mineral, oil, gas effective from 1.6.2007, a notice was issued to them proposing to recover service tax on the activity of loading and transportation of limestone and rejects mentioned above. Adjudicating the Show Cause Notice the Commissioner demanded an amount of Rs.1,20,26,027/- towards service tax and education cess as well as applicable interest under the relevant provisions of the Finance Act, 1994 (the Act). He also imposed on TEPL penalty of Rs.200/- per day/2% of tax in arrears per month, whichever was higher, for the period 18.4.2006 till the service tax demanded was paid. A penalty equal to the total service tax demanded was imposed under Section 78 and an amount of Rs.1,000/- imposed under Section 77 of the Act.
2. In the appeal before us TEPL has challenged the impugned order on various grounds. Relying on the definition of cargo handling service under Section 65(23) of the Act and Letter F. No. B11/1/2002-TRU dated 1.8.2002 of the CBEC it is argued that the material moved by the appellants for CCC in the Dholipatti mines was not cargo envisaged in Section 65(23) of the Act. Limestone and rejects were not cargo and they were not transported. The activity involved moving of material in the mine area and constituted material handling. As per the clarification of the Board, cargo handling services involved transportation of goods. The material dealt with by the appellants did not come within the scope of the expression goods. The limestone transported contained impurities upto 20% and the same was not marketable. The appellants relied on the decisions of the Tribunal in Sainik Mining & Allied Services Limited Vs. CCE 2008 (9) STR 531 (Tri. Kolkata) and CCE Vs. B.K. Thakkar 2008 (9) STR 542 (Tri. Kolkata) both of which supported their claim that movement of limestone and rejects in the mining area did not involve cargo handling services. Citing the work order received from CCC the appellants claimed that the operations of TEPL in the Dholipatti mine area were governed by the Mines Act, Rules and Regulations and that the same were to be carried out under mining supervision as per the Mines Act and as per the directions of mining officials of CCC. Relying on the decisions of the Tribunal in Diebold Systems (P) Limited Vs. CCE 2008 (9) STR 546 and Gujarat Chem Vs. CCE & C, Vadodara 2009 (9) STR 386 it is argued that the activity made liable to service tax from a particular date was not taxable under a pre-existing service category when definition of earlier categories was not changed. As the appellants were registered with the Department as a provider of mining services with effect from 1.6.2007, the same activity could not be taxed under cargo handling service for the material period prior to 1.6.2007. It is also submitted that after issuing a Show Cause Notice on 24.7.2007 a corrigendum was issued on 22.10.2007 enhancing the amount of service tax proposed to be demanded from Rs.35,36,957/- to Rs.1,30,19,961/-. As both the notices were issued on the basis of same set of facts the second Show Cause Notice could not validly invoke extended period for demanding the differential amount of tax. As confusion existed as to the scope of the levy, CBEC had issued clarifications. Any failure to pay tax for bona fide belief of the appellants that tax was not payable could not be demanded invoking larger period.
3. We have heard both sides. We find that the impugned activity is loading and transport of limestone and rejects from the mine head to the premises were the mined limestone is crushed and that the entire activities take place in the mining area. In CCE Vs. Pyrites, Phosphates and Chemicals Limited 1983 (12) ELT 537 the Tribunal made the following observations:-
Further we agree with the contention of the respondents to the effect that the premises where the crushing of pyrites is being carried on will fall within the definition of Section 2(1)(j) of the Mines Act, 1952 since the premises are adjacent to the mine and on these premises crushing is carried on for getting low grade pyrites prepared for sale. Thus, this would squarely fall within the ambit of Item (X) of Section 2(1)(j) of the Mines Act, 1952. In Chowgule & Co. (P) Limited Vs. Union of India 1993 (67) ELT 34 (SC) the apex Court held that the process of mining comes to an end when ore is extracted from the mines, washed, screened and crushed in the crushing plant and stacked at the mining site. We find that the impugned activity undertaken by the appellants is covered by the Mines Act, 1952. From the above decisions we find that the activity undertaken by the appellants will be squarely covered by the head mining of mineral, oil, gas service for which they have been registered by the Department in the wake of introduction of service tax on mining services.
4. In several decisions, this Tribunal has held that when an activity comes under the service tax net with effect from a certain date the same activity could not be subjected to tax under a pre-existing category unless the scope of the pre-existing categories of service is simultaneously modified. In this connection we find that the appellants have rightly relied on the decisions of the Tribunal in Diebold Systems (P) Limited (supra) and Gujarat Chem (supra).
5. The impugned activity was undertaken under a contract with CCC. TEPL were to operate under the supervision of mining officials of CCC. They were subject to the provisions of Mines Act and mining regulations when they moved limestone and rejects within the mining area. We find that the loading and unloading of limestone and rejects in mining area under contract with CCC were mining services .Section 65(23) of the Finance Act, 1994 defines Cargo handling service as under:-
Cargo handling service means, loading, unloading, packing or unpacking of cargo and includes cargo handling services provided by a container freight terminal or any other freight terminal, for all modes of transport and cargo handling services incidental to 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.
Transport of limestone and rejects within the mining area cannot be treated as transport of cargo. The Tribunal examined the scope of cargo handling service in relation to loading and transport of coal and iron ore in the mining area respectively in Sainik Mining & Allied Services Limited (supra) and CCE Vs. B.K. Thakkar (supra). In the Sainik Mining & Allied Services case the Tribunals has observed as follows:-
We find that the activity undertaken by both the appellants for mechanical transfer of coal from the coal face to tippers and subsequent transportation of the coal within the mining area, does not come under the purview of cargo handing service. The dominant activities undertaken by the appellants under the contract in question are primarily the movement of coal within mining area and transfer of coal from the coal face to the tippers, if at all, includes loading and unloading which are merely incidental. Cargo in commercial parlance has a definite connotation which is carried as freight in a ship, plane, rail or truck and the activities undertaken by the appellants in terms of the contracts on behalf of M/s. MCL to move coal within mining area do not fall in the category of cargo handling service. Moreover, the activities undertaken are principally the transportation of coal within mining area and hence, the gross amounts received for the same cannot be taxed under the category of cargo handling service. We have, therefore, no hesitation in our mind to hold that the definition of cargo handling service under the Finance Act, 1994, does not include the kind of activities undertaken by the appellants and hence the same are not chargeable to service tax. We also find that there was no suppression or mis-statement by the appellants regarding the nature of activities undertaken by the appellants and hence the imposition of penalty on them is not at all justified. Accordingly, we set aside the impugned order and allow both the appeals with consequential benefit to the appellants.
The finding is to the effect that movement of coal within the mining area does not fall in the category of cargo handling service. The dominant activity undertaken by the appellants under the contract in that case was found to be primarily movement of coal within the mining area which included incidental loading and unloading. In CCE Vs. B.K. Thakkar case the Tribunal has found as follows:
4.?After hearing both sides and perusal of case records, we are of the view that the activities undertaken by the respondents under the impugned contracts primarily involves excavation and transportation of iron ore subsequent to blasting in the iron ore mines and feeding of iron ores to the hill top crusher plant. The activities incidentally may involve some loading and unloading of iron ore while carrying out the principal activities under the contracts. Such incidental activities of loading and unloading undertaken by the respondents cannot give the entire contracted activities the character of cargo handling services. Further, as noted by us in our earlier Order in the case of M/s. ITW India Ltd. v. C.C.Ex. & Cus., Bhubaneswar - 2007 (8) S.T.R. 490, cargo handling service means -
(i) Loading, unloading, packing or unpacking of cargo, and includes -
(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
(iv) Cargo handling service incidental to freight.
5.?The coverage under cargo handling service would extend ordinarily to what is commercially known as cargo carried as freight in a ship, airplane, rail or truck. As such, in our view, the activities undertaken by the respondents are primarily in the nature of mining activities comprising of excavation, transportation and feeding of iron ores to the crusher plant and even though these activities may incidentally involve some loading and unloading, the same cannot be covered under the category of cargo handling service as what is carried cannot be commercially called cargo in this case. Consequently, we are of the view that the gross amount received by the respondents from M/s. SAIL cannot be charged to Service Tax under the said heading of cargo handling services. Hence, we uphold the impugned Order-in-Appeal, but for the different reasons recorded by us above, and we dismiss the Departmental Appeal. The Cross Objection filed by the respondents also stands disposed off.
The Tribunal found that the impugned activity in that case comprised excavation, transportation and feeding of iron ores to the crusher plant even though those activities incidentally involved some loading and unloading the same could not be covered under the category of cargo handling service. The above authorities also held that cargo, in commercial parlance had a definite connotation; cargo was carried as freight in a ship, plane, train or truck. The material moved by the appellants was not cargo as commercially understood.
6. CBEC clarified cargo handling service vide letter F. No.B11/1/2002-TRU dated 1.8.2002 which is reproduced below. This clarification suggests that agencies such as Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations alone carry out cargo handling service and activity of a person like the appellants is not cargo handling service. The letter points to the existence of circumstances that called for clarification. The appellants claim that they entertained a bonafide belief that their activity did not attract tax under cargo handling service carries considerable force.
The services which are liable to tax under this category are the services provided by cargo handling agencies who undertake the activity of packing, unpacking, loading and unloading of goods meant to be transported by any means of transportation namely truck, rail, ship or aircraft. Well known examples of cargo handling service are services 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.
Therefore we hold that both the show cause notices are barred by limitation. We do not agree with the interpretation of the expression goods advanced by the appellants to support their case that movement of limestone and rejects was not transportation of goods. We hold that movement of limestone and rejects in the mining area undertaken by the appellants are covered by the entry mining of mineral, oil, gas and that the said activity cannot be taxed under cargo handling service for the period prior to introduction of the levy under the category mining of mineral, oil, gas on 1 June 2007.
7. In the result we set aside the impugned order and allow the appeal filed by TEPL.
(Operative portion of the order was pronounced
in open court on 2.4.2009)
(P. KARTHIKEYAN) (JYOTI BALASUNDARAM)
Member (T) Vice President
Rex
CCE Vs. Giriraj Brothers 2008 (10) STR 549 (Tri. Del.)
5.?We have carefully considered the submissions. At the outset, we note that the contract is for a series of activities starting from mining to delivery of the lime stone to the designated place of the client. The findings of the Commissioner (Appeals) that the loading is incidental to mining and transportation, appears reasonable. We feel that the respondent cannot be considered as an agent in the context of rendering the service of cargo handling. The cargo handling, even if taken as a separate service rendered, the same is rendered to the respondent himself in completing the entire work assigned to the respondent by the contract. In the circumstances, we do not find any reason to interfere with the decision of the Commissioner (Appeals).
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