Transportation of goods along with ancillary service of handling goods not be taxed as Cargo Handling Service

The Supreme Court has ruled that the primary service of transporting goods, even when it includes ancillary handling and related activities, should not be taxed as Cargo Handling Service. This decision upholds a previous ruling by the CESTAT, Ahmedabad, which stated that while the definition of cargo handling service includes loading, unloading, and services incidental to freight, mere transportation of goods does not fall under this category.

The Hon'ble Supreme Court in the case of C.C.E. & S.T. Surat v. Arkay Logistics Ltd. [Diary No. 9104 of 2024 dated March 22, 2024] dismissed the Civil Appeal filed by the Revenue Department thereby holding that, primary service of transportation of goods along with ancillary service of handling of goods and related activities would not be taxed as Cargo Handling Service.

Facts

Arkay Logistics Ltd. ("the Respondent") filed an appeal before the CESTAT, Ahmedabad against the Order-in-Original dated January 22, 2013 ("the Order") passed by the Revenue Department ("the Appellant") wherein the service tax liability was imposed by the Appellant with respect to the handling and transportation of goods by multi-modes, the Respondent provided various services such as loading/unloading/stacking of goods at respective rail or port yard, road transportation from plant to rail/port head, transportation of goods by rail or sea and from destination to M/s. Essar Steel Ltd. (“the Client”) various depots/stock- point/job-workers premises which appeared to be falling within the purview of Cargo Handling Service.

The CESTAT, Ahmedabad, in the case of Arkay Logistics Ltd. v. C.C.E. & S.T. Surat [Service Tax Appeal No. 10961 of 2013] vide order dated April 3, 2023 (“the Impugned Order”) allowed the appeal filed by the Respondent, thereby stating that, as per the definition of cargo handling service enumerated in Section 65(105)(zr) of the Finance Act¸ 1994, the loading, unloading, handling of cargo for all modes of transport and any other service incidental to freight would be covered within the definition of "cargo handling". The definition also states that, mere transportation of goods would not be considered as Cargo Handling Service.

Relying upon the judgment of CESTAT Delhi in the case of Hira Industries Ltd. v. Commissioner of Central Excise, Raipur [ST/294/2008 dated February 22, 2012] and judgment of CESTAT Kolkata in the case of Commissioner of Service Tax v. HEC Ltd. [Service Tax Appeal No. 71223 of 2013 dated August 24, 2017] stated that, the primary activity carried out by the Appellant involves transportation of goods via road/rail/sea. The activities incidentally even if involves some loading and unloading of goods while carrying out principal activities under the contracts, such incidental activities would not give the entire activity the character of cargo handling services. Therefore, the Hon’ble Tribunal held that the aforesaid activity carried out by the Respondent would not fall within the purview of Cargo Handling Service. Aggrieved by the Impugned Order passed by the Tribunal, the Appellant filed an appeal before the Hon’ble Supreme Court.

Issue

Whether transportation of goods along with ancillary services be taxed as Cargo Handling Service?

Held

The Hon’ble Supreme Court in the case of Diary No. 9104 of 2024 dismissed the civil appeal filed by the Appellant and reaffirmed the judgement passed by the Hon’ble Tribunal.