Handling Of Container Can't To Be Covered Under Taxable Activity Of Cargo Handling: CESTAT

The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the handling of containers cannot be covered under the taxable activity of cargo handling.

The bench for Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that, as per the dictionary, cargo also means goods carried on a ship, aircraft, or motor vehicle. The empty containers are not the merchandise. Circular No. B11/1/2002-TRU has explained that empty containers cannot be treated as cargo. In light of these observations, the activity cannot even be called the taxable activity of the cargo handling service.

The appellant/assessee is registered with the service tax department for rendering taxable services as a customs house agent and storage and warehousing services.

The department observed that during the period from May 1, 2003, to July 16, 2003, the appellant had not paid service tax on the value of services rendered on account of the ground rent of empty containers, resulting in the non-payment of service tax. The noticeees were charging for the services rendered in respect of handling empty containers but have not paid the service tax for the same. Consequently, the service tax was found to have not been paid during the period from August 2002 to December 2003. The appellant was also observed to pay their service tax liability. The amount at the rate of 15% interest per year was opined to be the appellant's liability.

The appellant contended that the empty container was moved to the CONCOR warehouse for storage. The charges were collected for the godown rent of the warehouse from the respective shipping line, and no separate charges were collected for the movement of empty containers. Service tax has been discharged on the godown rent based on the cumulative tax value. If the shipping line has a pre-existing order from the customer, the empty container is moved immediately after de-stuffing to the outbound vehicle, and charges for handling the empty container from the CONCOR yard to the outbound vehicle are collected from the shipping line. No service tax has been paid on the activity, considering the same to be handling charges for the movement of the empty container.

The appellant contended that the department has erroneously relied upon Circular No. 60/9/2003 dated July 10, 2023, to assume that the activity of handling empty containers outside the storage area was covered under storage and warehousing of the containers.

The department contended that all the activities of making arrangements for space to keep the goods, loading, unloading, and stacking of the goods in the storage area, keeping inventory of goods, making security arrangements, providing insurance cover, etc., are covered under the taxable activity of storage and warehousing. Hence, the activity of handling the empty container is rightly held to be covered under the said activity.

The tribunal held that no doubt Circular No. 60/9/2003-ST dated July 10, 2003 clarifies that handling empty containers would be covered within the scope of Storage and Warehousing Services. However, for the applicability of this circular, the goods or empty containers should first have been stored or warehoused and should be handled within the said warehouse or storage space. Apparently, and admittedly, the same is not the case for the impugned demand. Hence, the appellant's activity of handling containers cannot be called a taxable activity of storage and warehousing.

Counsel For Appellant: R.P. Jindal

Counsel For Respondent: S.K. Meena

Case Title: M/s. Container Corporation of India Ltd. Versus Commissioner of Central Excise, Customs, Central Goods and Service Tax, Delhi –I

Case No.: Service Tax Appeal No. 50342 of 2018 [DB]

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