The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad, has ruled that transportation of goods cannot be classified as Cargo Handling Service merely because loading is involved in the process.
Setting aside a service tax demand of ₹2.01 crore against R.P.L. Projects Limited, the tribunal held that coal transportation was the predominant activity, while loading was only incidental to it.
A bench comprising Judicial Member P.K. Choudhary and Technical Member K. Anpazhakan heard the company's appeal against an order passed by the Commissioner, CGST and Central Excise, Varanasi.
The tribunal observed, “A service which, on a consideration of its substance and predominant character, is transportation of goods cannot be brought within the fold of Cargo Handling Service merely because the transportation necessarily involves loading of the goods into the vehicle. The mere presence of an incidental loading activity cannot displace the essential character of the transaction.”
The dispute concerned activities undertaken between April 1, 2015 and June 30, 2017. R.P.L. Projects was engaged in transporting coal within mining areas, principally for Northern Coalfields Limited (NCL). This included moving coal between locations within mining areas and from coal stockyards or pitheads to designated destinations, including NCL's Coal Handling Plant.
The coal was loaded into the contractor's tipping trucks using pay loaders before being transported to the specified destinations.
The department classified these activities as Cargo Handling Service and issued a show cause notice dated April 18, 2019, demanding ₹4.09 crore in service tax, along with interest and penalties. The adjudicating authority dropped ₹2.08 crore of the demand for 2015-16 as time-barred. However, it confirmed the remaining demand of ₹2.01 crore for the period from 2016-17 to June 30, 2017, and imposed a penalty of ₹20.10 lakh under Section 76 of the Finance Act, 1994.
R.P.L. Projects argued that it had been engaged primarily to transport coal. Loading was merely incidental to this activity. It also submitted that the service recipients, including NCL, had discharged service tax under the Goods Transport Agency (GTA) category.
The Revenue contended that the activities involved loading and handling in addition to transportation. It argued that they were therefore taxable as a cargo handling service.
The tribunal found that the company had been engaged to move coal between identified locations. Loading was necessary for transportation but was not the principal service. It also noted that the statutory definition of Cargo Handling Service excluded transportation of goods.
The tribunal further observed that the company had consistently treated the activity as transportation in its invoices and records. The service recipients, including NCL, had discharged service tax under the GTA category. The Department's acceptance of those payments was also brought to the tribunal's notice.
The classification issue had arisen in the company's own case for an earlier period involving substantially similar activities. The adjudicating authority had dropped the demand, and the tribunal upheld that decision in May 2018. The Revenue's appeal before the Supreme Court was disposed of on September 20, 2024, on monetary-limit grounds, following a revision of the threshold from ₹2 crore to ₹5 crore under a circular dated August 6, 2024.
The tribunal held that the subsequent period alone could not justify a different classification without any change in the nature of the activity or the applicable legal position.
It observed, “The mere fact that the present proceedings pertain to a subsequent period cannot, in the absence of any demonstrated change in the nature of the activity or in the legal position governing its taxability, furnish a warrant for adopting a contrary view in respect of the very same dispute. The impugned adjudication suffers from a legal infirmity inasmuch as it has proceeded to determine an issue afresh contrary to the binding decision rendered by this Tribunal in the appellant's own case, without bringing on record any material circumstance distinguishing the present proceedings from the earlier ones.”
The tribunal set aside the service tax demand of ₹2.01 crore and the penalty of ₹20.10 lakh. The appeal was allowed with consequential relief, if any, as per law.
For Appellant: Prashant Shukla, Advocate
For Respondent(s): Manish Raj, Authorised Representative