M/S. B.M. Chapalkar And Company vs Commissioner Of Central Excise& ...

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.ST/679 &729/10-Mum (Arising out of Order-in-Appeal No.AKP/251/NSK/2010 dated 31/08/2010 passed by Commissioner of Central Excise & Customs (Appeals), Mumbai) For approval and signature: Honble Mr.M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) 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? ========================================

M/S. B.M. Chapalkar And Company, Appellant Appeal no. (ST/729/10-Mum) Vs. Commissioner of Central Excise& Customs, Respondent Nashik Commissioner of Central Excise& Customs, Appellant Nashik, (Appeal no. ST/679/10-Mum) Vs. M/S. B.M. Chapalkar And Company Respondent Appearance: Shri.A.K. Coswani Adde. Comm(AR) for Appellant Shri. Bharat Raichewdani, Advocate for Respondent CORAM: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

Date of Hearing : 05/08/2015 Date of Decision : 05/08/2015

ORDER NO

Per: M.V. Ravindran

These two appeals are directed against order-in-appeal no. AKP/251/NSK/2010 dated 31-08-2010.

2. Revenue is aggrieved by the impugned order that the first appellate authority has not upheld the tax liability of services rendered under Business Support Services and Cargo Handling Services as also non imposition of penalties; while the appellant ssessee is aggrieved by the impugned order that the first appellate authority has confirmed the demand of service tax under Cleaning Agency Services.

3. We have heard both sides and perused the records.

4. On perusal of records, it transpires that the appellant was awarded with a contract for Cleaning Services by Nashik Thermal Power Station. The appellant is service tax payer under the category of Cleaning Agency Services and Business Support Services. It is the case of the Revenue that during the period October 2003 to March 2008, there was an escapement of tax under Cleaning Agency Services, Business Support services and Cargo Handling Services. The adjudicating authority has confirmed demand raised on all these services. The first appellate authority has set aside the demands on Business Support Services and Cargo Handling Services but confirmed the demands under Cleaning Agency Services.

5. Learned counsel submits that the appellant has been engaged in Cleaning agency services and all the activities which have been awarded to them under the contract. He would take us through the contract in detail. It is his submission that the Cleaning services as to be done by the appellant would not fall under the category as it is in respect of conveyer etc. We do not agree with the contentions raised by the appellants assessee. On perusal of agreement entered into with Nasik Tharmal Power Station, we find that the Cleaning services which were expected our of appellant is very clear that there is no doubt the appellant has been awarded contract for Cleaning of plant, machinery, buildings etc. At the same time, we also find that the contract which is awarded to the appellant, also has elements of loading and unloading of Coal, to our mind, value in respect of such loading and other activities may not be covered under the category of Cleaning Agency Services. While upholding the demand raised under the category of cleaning services, we remand the matter back to the adjudicating authority for limited question of requantification of the demand, interest and penalties by reduction of the value indicated for loading and unloading of coal, movement of coal etc.

6. As regard the appeal of Revenue against setting aside of the demands raised under Business Support Services and Cargo Handling Services, we find that the first appellate authority has recorded following findings.

9.1 Service tax of Rs. 10,41,271/- on business support service has been demanded in the SCN considering gross value of Rs. 2,98,72,104/-. After careful reworking, JC has arrived at revised gross value of Rs. 2,80,33,390/-. And thereby reduced the demand to Rs. 8,21,865/- from Rs. 10,41,271/-. SCN alleges that appellant has provided the services off removal, collection loading transportation and unloading of coal mill rejects, RCF coal and ash from the unit and these activities appear to fall under the category of Business support service. To this, contention of appellant is that the activity performed by them does not have any contention of appellant is that the activity performed by them does not have any ingredients of the definition of above service. They have also enclosed sample copy of work order No. CGM/NTPS/Plan-II/W-3083/47/RC-6313/09125 issued by Maharashtra State Power Generation Company Ltd. (MSPGCL), Nashik Thermal Power Station, Elkhart. The work order is issued for the work of removal, collection, loading, transporting and unloading of coal mill reject, RCF Coal and ash from units 3,4 & 5 Stg. II. In order to see whether this work is covered or not, the definition of Business Support Service given under Section 65 (104c) of Finance Act, 1994 is required to be referred to, which is as under:-

Section 65 (104c) support services of business or commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing off purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing off transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.

Explanation.- For the purposes of this clause, the expression infrastructural support services includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security.

9.2 Further Board vide letter No. 334/4/2006-TRU dated 28-02-2006 circulated clarification giving scope of new services brought under the net. Para 3.13 relates to above service, which is reproduced below:-

3.13Business Support Services: Business entities outsource a number of services for use in business or commerce. These services include transaction processing, routine administration or accountancy, customer relationship management and tale-marketing. There are also business entities which provide infrastructural support such as providing instant offices along with secretarial assistance known as Business Centre Services. It is proposed to tax all such outsourced services. If these services are provided on behalf of a person, they are already taxed under Business Auxiliary Service. Definition of support services off business or commerce gives indicative list of outsources services.

9.3 From the definition and clarification, it is seen that activities covered under above category are all the outsourced services provided in relation to business & commerce. The indicative list off outsourced services given in the definition includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services and other transaction processing. Though this list is not exhaustive but illustrative, hence in order to expand the list, the activities which can be added to the list should off the same kind or nature off the activities listed. It is observed that activity of the appellant will be an odd man if included in the indicative list. Thus if rule of ejusdem generis is applied, the activity of appellant viz. removal, collection, loading, transportation and unloading of coal mill rejects/ach cannot be attached to the indicative list. The list clearly suggests that services covered are not mainly related to production/manufacturing activity rather it covers the services mainly in relation to marketing/accounting/administration/management. The appellant is providing service to Thermal power Station who is engaged in production/generation of electricity. I thereof ore hold that the activity of appellant viz. removal, collection, loading, transporting and unloading of coal mill reject, RCF Coal and ash for which service tax is demanded and confirmed under the category off Business Support service is not sustainable and order to this extent is required to be set aside.

10.1 Show cause notice was issued demanding service tax of Rs.18,68,069/- on Cargo handling service considering taxable value of Rs. 2,24,88,042/-.After careful reworking, JC has arrived at revised taxable value to Rs. 2,22,11,793/- and thereby reduced the demand to Rs. 18,64,805/- from Rs. 18,68,069/-. SCN alleges that the appellant is providing service of unloading off coal wagons tipplers and unloading of coal at ChP-III at Nashik Thermal Power Station, which appears to be Cargo handling service. Appellant stated that the coal is handled/moved from railway wagon to the site of Thermal Power Station with the aid of wagon tippling system to be fed in the boiler bunkers through conveyor system; that the word cargo is defined as goods and merchandise taken on abroad, vessel, aircraft etc and that another definition is Goods or merchandise conveyed in ship, airoplane or vehicle; that in their case no vehicle is used but using tippling system of unload. In order to see scope of the service, Section 65 (23) is reproduced below:-

Section 65 (23) cargo handling service means loading, unloading, packing or unpacking off cargo and includes,-

(a) Cargo handling services provided for freight in special containers or for non-containerized freight, services provided by a container freight terminal or any other freight terminal, for all modes off transport, and cargo handling service incidental of freight; and

(b) Service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking, But does not include, handling of export cargo or passenger baggage or mere transportation of goods.

10.2 The above definition suggests that it covers handling in relation to goods imposed as it specifically excludes export cargo. It also excludes handling of passenger baggage or mere transportation of goods. Clarification given under para 3, 3.1 and 3.2 in letter F. No. B 11/1/2002-TRU dated 01-08-2002 is also relevant and therefore reproduced below:-

3. 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 service 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.

3.1 The services provided in relation to export cargo and passenger baggage are excluded from tax net.

3.2 Mere transportation of goods is not covered in the category of cargo handling and is therefore not liable to service tax. As per above clarification the service of packing, unpacking, loading and unloading of goods meant to the transported by any means of transportation namely truck, rail ship of aircraft is covered. In the present case the appellant is providing the service of unloading of coal but not for the purposes of transportation but the unloading is done due to receipt of coal at Thermal Power Station. Nodoubt after unloading, the coal is stored at NTPS but same is not transported by any means of transportation namely truck, rail, ship or aircraft. It is shifted from unloading point to storage point by means of conveyor system. Hence, I find that activity of appellant is not covered under the category off Cargo handling service.

10.3 My above view is supported by Honble Rajstan High Courts decision in the case of S.B. Construction Co. Vs. Uol reported at 2006(4) STR 545 (Raj) in which it was held that since no vehicle is involved in handling/moving coal from railway wagons to the site of thermal Power station with the aid of wagon tippling system to be fed in boiler bunkers through conveyor system, the activity does not fall under the ambit of cargo handling services. Para of the said decision is reproduced below:-

10. In the instant case, the coal is handled/moved from fairway 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 petitioners 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.

10.3 On going through the above decision, it is seen that the petitioner viz. M/s S.B. Construction Company, has been awarded the contract similar to the contract awarded to the appellant in the present case. I therefore hold that the activity is covered by the above decision and same cannot be subjected to service tax. The adjudicating authoritys order confirming service tax to this extent therefore needs to be set aside.

7. Revenue has not contested the above factual findings as recorded by the first appellate authority by any contrary evidence. We, on perusal of records, find that the first appellate authority was correct in coming to the conclusion that the services rendered by the appellant will not get covered under Business Support Services and Cargo Handling Services. We find that the impugned order to that extent is correct and legal.

8. In sum, appeal filed by the appellant is rejected as indicated herein above and the appeal filed by the Revenue is also rejected.

(Dictated in Court)

(C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial)

akp

1 APPEAL No.ST/679 &729/10-Mum