MUMBAI, AUG 01, 2014: A service tax demand of Rs.10,75,21,055/- is confirmed with interest and penalties against the appellant by the CST (TAR), Mumbai.

The demand is confirmed on the ground that the appellants received consideration for providing the following taxable services but had not paid Service Tax:-

(i) Break Bulk Fees in respect of cargo handling service

(ii) Software cost for projects as Management, maintenance and repair of software services

(iii) Insurance Charges under 'General Insurance Services'

(iv) Network Membership Fees as 'Management Consultancy Services'

(v) Group Centre and Regional Office expenses - classifiable under 'Management Consultancy Services'

(vi) ISO Exp. as 'Technical Inspection and Certification Services'

Before the CESTAT, it is submitted that the appellant had paid appropriate service tax in respect of all the services except Break Bulk Fees (BBF). They produced evidence regarding deposit of service tax of Rs.6,23,13,126/- which, the appellant claims, has not been taken into consideration by the adjudicating authorityon the ground that the same has not been produced during investigation. The appellants are not contesting these demands except that raised in respect of Break Bulk Fees by treating the same as Cargo Handling Services.

It is submitted that in respect of the demand of Rs.5,89,32,761/- on BBF, in the show cause notice, the demand is made on the ground that the activity undertaken by the appellant comes under 'transport of goods by air service'. Inasmuch as the taxable service means 'any service provided by an aircraft operator, in relation to transport of goods by aircraft' and they are not an aircraft operator. Moreover, the demand is confirmed in the adjudication order treating this activity as “Cargo handling service” hence the impugned order is beyond the scope of show cause notice. So also, the consideration which is in respect of BBF is in respect of exported goods hence the appellants are not covered under 'cargo handling service'.

The Bench observed -

++ In the SCN the demand of Service Tax is made in respect of BBF under 'transportation of goods by air service'. As per the provisions of the Act, taxable service means any service provided or to be provided to any person, by an aircraft operator, in relation to transport of goods by aircraft. Admittedly, the appellants are not aircraft operators.

++ The adjudicating authority in the impugned order confirmed this demand under 'cargo handling service'. The appellants were not put to notice regarding confirming the demand under the category of cargo handling service whereas in the show cause notice the demand was on the ground that the appellants were providing transportation of goods by air service.

++ In these circumstances, we have no hesitation to say that the impugned order is beyond the scope of show cause notice. In these circumstances, the demand of Rs.5,89,32,761/- is not sustainable hence set aside. Consequential penalties are also set aside.

As regards the deposit of the amount of Rs.6,23,13,126/-, the Bench observed that the appellant had supplied the details of payment made of ST to the DGCEI and, therefore, the same needs to be verified by the adjudicating authority afresh and who would thereafter decide the issue of consequential penalties.

The matter was remanded to the said extent and the appeal was disposed of.

(See 2014-TIOL-1386-CESTAT-MUM)