2026-VIL-416-CESTAT-CHD-ST
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SERVICE TAX CESTAT Cases

Service Tax – Supply of naturally bundled service under ‘Cargo Handling Service’ – Bifurcation of charges under ‘Rail freight’, ‘Terminal Handling Charges’ and ‘Goods Transport Agency Services’ - The respondent provided various services such as transportation by road, transportation by rail, and cargo handling services to its customers under different contracts. While some contracts had a composite rate for all services, the respondent billed the customers separately for each service availed. The department alleged that the respondent artificially bifurcated the value of services to avail lower abatements and evade service tax - Whether the services provided by the respondent constitute a bundled service classifiable under "Cargo Handling Service" or can be treated as separate identifiable services – HELD – The respondent's services were separately identifiable and the customers were free to choose the services as per their requirements. The department failed to establish that the essential character of the services was cargo handling rather than transportation. The principle laid down by the Supreme Court is that the apparent tenor of the agreements should reflect the real state of affairs, and the department cannot construe the contract differently. The bifurcation of charges in the invoices was not artificial and the services were not naturally bundled - Revenue has to find out the essential character of the service for the purposes of bringing the assessee within the frame work of the said activity. Department has not discharged its onus and the attempt to classify the services as a composite or bundle of services is contrary to the provisions of the Finance Act,1994. In the impugned case, though all the services are rendered under one contract, individual services are identifiable and are separately charged. Thus, revenue has not discharged burden of proving either that the services are bundled services, not identifiable separately or that the essential character is that of cargo handling - For post 01.07.2012 also the essential elements of services being same, remaining separately identifiable and separately charged, Revenue has not made out any case for bundling of the Services - The services should be classified under the respective specific descriptions rather than as a bundled service under "Cargo Handling Service". The impugned order is a reasoned, logical and thus legally maintainable - The Department's appeal is dismissed
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