Interpretation of 'Cargo Handling Service' under Entry 23 of Section 65 of the Finance Act, 1994.

ORDER :

The respondent-assessee herein is the holder of a Certificate of Registration in Form ST2 under Section 69 of the Finance Act, 1994 (hereinafter referred to as, "the Act"). This Certificate was given to him on 29.10.2004 under the category 'Business Auxiliary Service'. The respondent also obtained registration as `Manpower Recruitment Agency' under the Act with effect from 01.07.2005.

2. During the course of audit of accounts of M/s. Birla Corporation Ltd. for the period August 2003 to January, 2005, the appellant-department found that the said company had entered into a contract with the respondent-assessee. After taking possession of a copy of this contract, the officer of the respondent-assessee namely, one Kailash Sharma was examined. On the basis of the statement given by him, the Department took a prima facie view that the contract was for the purpose of packing, loading and unloading etc. of the goods, for which labour was supplied by the respondent to M/s Birla Corporation Ltd. On this basis, a show cause notice was issued to the respondent-assessee alleging that the respondent was a service provider and, by clever means, it was a modus operandi to evade service tax as it was raising two separate bills for the same work i.e. in one bill, the respondent was charging the amount of payments made to labour and by another bill, other expenses were raised and in this manner, service tax was not paid. The show cause notice further alleged that the aforesaid alleged services provided by the respondent to its customers amounted to 'Cargo Handling Service', on which the respondent was liable to pay service tax.

3. The respondent challenged this show cause notice by filing a writ petition in the High Court, inter alia, contending that no services were provided by the respondent by entering into the aforesaid contract, as it was only supplying labour and the labour was not doing any work of packing, unpacking, loading and unloading of any cargo. The High Court, by the impugned Judgment, has accepted the plea of the respondent, resulting into allowing the writ petition and quashing the show cause notice. It is this Judgment of the High Court, the validity of which is questioned by the appellant-Department in the present appeal.

4. Before coming to the issue at hand, we may record the statement of Mr. A.K. Sanghi, learned senior counsel appearing for the appellant-Department, that it was not appropriate for the High Court to deal with the said writ petition, bypassing the adjudicatory machinery provided under the Act, more so when the statutory appeals against the adjudication orders are also provided. However, we find that the High Court has simply gone by the contract in question, which was entered into between the respondent and M/s. Birla Corporation Ltd. and taking into consideration all the averments, which were made in the show cause notice, on the basis of admitted facts, it has come to a conclusion that even when the allegations in the show cause notice are accepted, the said contract does not amount to providing any 'Cargo Handling Service' as defined under Entry 23 of Section 65 of the Act. Therefore, we are of the opinion that the High Court did not commit any mistake or illegality in entertaining the writ petition when no disputed questions of fact were involved and the legal issue was to be decided on the basis of the facts, as admitted by the parties, which were so specifically recorded by the High Court itself.

5. Coming to the issue 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. This Entry reads 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 containers freight termi