Supreme Court of India while disposing the Civil Appeal No. 3106 of 2008 of The Deputy Commissioner, Central Excise & Another Versus Sushil & Company on on 13th April 2016 has decided upon the question of law as to
whether the contract in question, whereby labour is supplied by the respondent to M/s Birla Corporation Ltd., could be treated as ‘Cargo Handling Service’ within the meaning of Entry 23 of Section 65 of the Act.
1.the contract entered into between the respondent and the customer, namely, M/s Birla Corporation Ltd., the respondent was to supply manpower for working at the packing plant as per the customer’s requirement.
2.The contractor-respondent was to ensure that manpower deployed on the work given by customer’s officers is executed properly, diligently, uninterruptedly and to the satisfaction of the customer in the factory premises of its works.
3.No part of loading or unloading was assigned to the workers of the respondent-assessee upto transportation of the cement bags out of the factory. This work was, in fact, been performed by the automatic machines. It is through these automatic machines, the cement bags were loaded, unloaded, packed or unpacked and this included Cargo Handing 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 of transport and cargo handling service incidental to freight, but does not include handling of export cargo or passenger baggage or mere transportation of goods.
Cargo Handling Services
The entry 23 of Section 65 of the Finance Act,1994 defines Cargo Handling Services as under
Cargo Handling Service’ means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for no containerized freight, services provided by a contrainers freight terminal, for all mode of transport and cargo handling service incident to freight, but does not include handling of export cargo or passenger baggage or mere transportation of goods.”
Ratio- It held that
Two conditions for considering any service to be ‘Cargo Handling Service’ need to be satisfied
i ) there must be a cargo and
ii) independent involved service for loading-unloading or packing-unpacking of the cargo
The Honourable Supreme Court had dealt with the issue as under :
6. The High Court, on the interpretation of the aforesaid Entry, has observed that two conditions for considering any service to be ‘Cargo Handling Service’ need to be satisfied, namely;
(1) there must be a cargo i.e. a packed or unpacked commodity accepted by a transporter or carrier for carrying the same from one destination to another. It is only after the commodity becomes a cargo, its loading and unloading at the freight terminal for being transported by any mode becomes a cargo handling service, if it is provided by an independent agency and;
(2) the service provider must independently be involved in loading-unloading or packing-unpacking of the cargo.
7. The aforesaid meaning given by the High Court while interpretating Entry 23 of Section 65 is perfectly in order and justified. On that basis, we have to see whether the twin conditions mentioned therein are satisfied in the present case or not.
The Honourable Supreme Court endorsed the decision of CESTAT , Delhi in J & J Enterprises Vs. Commissioner of Central Excise, Raipur,” reported in 2006 (3) S.T.R. 655.& CBEC clarificatory instructions, being F.No.B11/1/2002-TRU dated 01.08.2002 .The relevant paragraphs 3 and 15 read as under :-
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 srevices 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 othre firms that are engaged in the business of cargo handling services.
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15. Another doubt raised in relation to cargo handling services is that whether individuals undertaking the activity of loading or unloading of cargo would be leviable to service tax. For example, if someone hires labour/labourer for loading or unloading of goods in their individual capacity, whether he would be liable to service tax as a carto handling agency. It is clarified that such activities will not come under the purview of service tax as a cargo handling agency.”