Local Iron Ore Transport Not Taxable As Cargo Handling Service: CESTAT Kolkata

On 9 January, the Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) reiterated that that service tax cannot be levied on local transportation of iron ore by classifying it as a “Cargo Handling Service” when the activity is essentially one of transportation.

A Bench comprising Judicial Member Ashok Jindal and Technical Member K. Anpazhakan allowed the appeal filed by M/s Mata Dadhimati Transport and set aside the service tax demand and the equivalent penalty imposed on it under Section 78 of the Finance Act, 1994, by the Commissioner of CGST & Central Excise.

The dispute arose from contracts awarded to the appellant for local transportation of iron ore fines from stockyards to railway sidings within six kilometres, along with separate contracts for wagon loading. While the appellant had discharged service tax on wagon loading under “Cargo Handling Services,” it did not pay service tax on the transportation component, taking the view that it was classifiable as a Goods Transport Agency (GTA) service, where the liability rests on the service recipient under the Service Tax Rules, 1994.

The Department issued a show-cause notice alleging non-payment of service tax on transportation charges. The demand was confirmed by the adjudicating authority and upheld by the Commissioner (Appeals).

The CESAT agreed with the appellant that local transportation up to six kilometres falls under GTA services, and the liability to pay service tax lies on the service receivers, not the service provider. Referring to M/s S.K. Mineral Handling Private Limited v. CGST & Central Excise, the Bench held that the appellant is not liable under “Cargo Handling Services.”

Accordingly, the service tax demand on local transportation charges was quashed.

For Appellant: Ritika Kurmy

For Respondent: S.K.Jha