2026-VIL-325-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax - Classification of Service, Scope of Cargo Handling Service or not – Contract for design, finance, construct, own, operate and maintain a Lignite Transportation System - The appellant was responsible for end-to-end handling and transport of lignite—from removal at stockpile, loading and road transport to railway sidings, transfer via conveyors and silos into wagons, rail transport to the power plant, and final unloading and conveyance to storage or plant systems, including providing required equipment and railway sidings at both ends - Department formed a view that the activities undertaken by the appellant classifiable under “Cargo Handling Service” - Whether the activities undertaken by the appellant qualify as 'Cargo Handling Service' under Section 65(23)(b) of the Finance Act, 1994 and whether the extended period of limitation was correctly invoked – HELD - For a service to be classified as 'Cargo Handling Service', it is imperative that the service provider should be engaged in the activity of "packing" together with the transportation of cargo or goods -The service of cargo handling would acquire its essential characteristic so long as the principal activity of packing is undertaken together with transportation, irrespective of whether or not the ancillary services of loading, unloading and unpacking are undertaken. If only the mere transportation of goods is undertaken along with one or more activities of loading, unloading and unpacking, then too it would not get covered under clause (b) of Section 65(23), as the main function of packing remains absent - In the absence of any evidence that the appellant undertakes the activity of packing together with the transportation of goods, the service rendered by the appellant would itself not come within the ambit of Section 65(23)(b) as “cargo handling service”. the Adjudicating Authority has erred in finding that the amendment made to Section 65(23) brings the appellant within the ambit of ‘cargo handling service’ - The impugned order is set aside and the appeal is allowed - Extended period of limitation - The extended period of limitation cannot be invoked in the absence of any positive act of the appellant which proves the intention to evade service tax. The relevant facts regarding the activities of the appellant were already within the knowledge of the Department since 2003 and mere non-filing of returns without proving the intent to evade payment of service tax cannot amount to suppression of facts. The Department itself was confused about the classification of the activities undertaken by the appellant, as evidenced by the issuance of two show cause notices proposing different categories, which precluded the invocation of the extended period of limitation.
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