SIGNODE INDIA LIMITED Vs. COMMR.OF CEN.EXCISE & CUSTOMS-II
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 6038-6039 of 2007, Judgment Date: Mar 08, 2017
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).6038-6039 OF 2007
SIGNODE INDIA LIMITED ...APPELLANT(S)
VERSUS
COMMR.OF CEN.EXCISE & CUSTOMS-II ...RESPONDENT(S)
JUDGMENT
RANJAN GOGOI, J.
1. Heard learned counsels for the parties and perused the relevant
material.
2. The liability of the appellant to service tax on the basis that the
service rendered by the appellant amounts to “cargo handling service”
within the meaning of Section 2(23) of the Finance Act, 1994 [as amended by
Finance (No.2) Act, 2004] is the core issue that arises for determination
in these cases.
3. The appellant seeks to disclaim such liability by contending that the
service rendered by it amounts to a “packaging activity” which has made
exigible to service tax by amendment to the Finance Act, 1994 and by
insertion of Section 65 (76b) and Section 105(zzzf) with effect from
16.06.2005. The appellant has been paying service tax on the aforesaid
basis i.e. service rendered by it amounts to a packaging activity and no
dispute on this score has been raised by the Revenue.
4. The appellants though granted the facility of centralized
registration with effect from 10.10.2004 have been found to be liable to
pay service tax on its activity by the Kolkata Bench of the Customs,
Excise, Service Tax Appellate Tribunal (for short, 'the Tribunal') for the
period prior to 2005, whereas in respect of the very same activity it has
been found to be not so liable by the Bangalore Bench of the learned
Tribunal, which order has since been affirmed by the High Court of Andhra
Pradesh being the jurisdictional High Court in respect of the lis decided
by the Bangalore Bench of the learned Tribunal.
5. To appreciate the issues arising in the present case, Section 65(23)
which defines “cargo handling service”; Section 65(105)(zr) which deals
with the “taxable service rendered by a cargo handling agency”; Section 65
(76b) which defines “packaging activity” and Section 65(105)(zzzf) which
makes “service rendered in connection with packaging activity” exigible to
the service needs to be extracted below :-
“Section 65-In this Chapter, unless the context otherwise requires:-
(23) “cargo handling service” means loading, unloading, packing or
unpacking of cargo and includes cargo handling services provided for
freight in special containers or for non-containerised freight, services
provided by a container freight terminal or any other freight terminal, for
all modes of transport and cargo handling service incidental to freight,
but does not include handling of export cargo or passenger baggage or mere
transportation of goods;
(76b) “packaging activity” means packaging of goods including pouch
filling, bottling, labelling or imprinting of the package, but does not
include any packaging activity that amounts to “manufacture” within the
meaning of clause (f) of Section 2 of the Central Excise Act, 1944.
Section 105 – “taxable service” means any service provided or to be
provided:-
(zr) to any person, by a cargo handling agency in relation to cargo
handling services;
(zzzf) to any person, by any other person, in relation to packaging
activity.”
6. Sections 65(76b) and 65(105)(zzzf) were both inserted by the Finance
Act, 2005 with effect from 16.06.2005. The above amendment, to our mind, is
sufficiently indicative of legislative intent that packaging activity is
different from cargo handling activity. A view, which would make the
appellant liable to tax for the pre-amended period (prior to 16.06.2005) on
the basis that the activity undertaken by it involves rendering of cargo
handling service would run counter to the expressed legislative intention
in a situation where its liability, for the post amendment period, on the
basis that the appellant is engaged in “packaging activity” has not been
disputed by the Revenue.
7. At this stage notice must also be had of the fact that there is no
dispute on the fact that the liability sought to be fastened on the
appellant is on account of the activity undertaken by the appellant in the
manufacturing unit of the principal manufacturer, namely, Tata Refractories
Limited. It is also not in dispute that such activity is prior to the goods
leaving the factory gate and the charges paid to the appellant for
rendering the service forms a part of the assessable value of the
manufactured goods of the principal manufacturer, namely, Tata Refractories
Limited. In such a situation, we will really have to discern what is the
distinction between the two expressions “Cargo Handling Service” and
“Packaging Activity”, as defined in the respective provisions of the Act.
8. A careful reading of Section 65(23) of the Act, which defines Cargo
Handling Service would go to show that though the word packing is included
therein, the same is referable to the word “Cargo” whereas in Section
65(76b) “Packing Activity” is defined to mean “Packaging of Goods”.
9. The distinction between the two expressions, namely, “cargo” and
“goods” in the two different provisions of the Act becomes evident if cargo
is understood to denote goods which are ready for transportation whereas
packaging of goods is a stage prior i.e. before they became cargo and in
fact on completion of such packaging the goods become cargo. The position
becomes more clear if the dictionary meaning of the word “cargo” is taken
into account, as set out below:
As per Black' Law Dictionary, the word “cargo” means “Goods transported by
a vessel, airplane, or vehicle; According to Oxford Dictionary of English,
“cargo” means goods carried on a ship, aircraft, or motorvehicle and as per
Webster's Comprehensive Dictionary, “cargo” is Goods and merchandise taken
on board a vessel.
10. Admittedly, the appellant has nothing to do with the transportation
of goods which it packs within the factory unit of the principal
manufacturer prior to the goods leaving the factory.
11. There is yet another aspect of the case which would require a
mention. In a Circular bearing F.No.B.11/1/2002-TRU dated 01.08.2002 issued
by the Central Board of Excise and Customs, services liable to tax under
the category of “cargo handling services”, has been clarified to mean
services provided by cargo handling agencies which is, in effect what
Section 105(zr) provides for.
12. Clause 3 of the circular is in the following terms:
“3. The services which are liable to tax under this category are the
services provided by cargo handling agencies who undertake the activity of
packing, unpacking, loading and unloading of goods meant to be transported
by any means of transportation namely truck, rail, ship or aircraft. Well
known examples of cargo handling service or services provided in relation
to cargo handling by the Container Corporation of India, Airport Authority
of India, Inland Container Depot, Container Freight Stations. This is only
an illustrative list. There are several other firms that are engaged in
the business of cargo handling services.”
Clause 3, extracted above, makes the position abundantly clear that
even the department had understood services provided by Cargo handling
agencies undertaking the activities of packing, unpacking, loading and
unloading of goods meant to be transported by any means of transportation,
namely truck, rail, ship or aircraft as services liable to tax as “cargo
handling services”.
13. Clause 3.2 of the circular makes it clear that mere transportation of
goods is not covered in the category of cargo handling. Clause 15 of the
circular also makes it clear that an individual undertaking the activity of
loading or unloading the cargo would not be liable to pay service tax on
such activity as being an activity undertaken by a cargo handling agency.
14. It is nobody's case before us that the appellant is a cargo handling
agency. All activity undertaken by the appellant, though related to packing
activity, is at a stage when the goods are yet to clear the factory gate as
manufactured goods for onward transportation.
15. In the light of the discussions that have preceded, we are of the
view that prior to the amendment made by the Finance Act of 2005 with
effect from 16.06.2005, the appellant would not be liable to pay service
tax on the service rendered by it in terms of Section 65(23) read with
Section 105(zr) of the Act.
16. The demand raised on the appellant may be understood in the aforesaid
light and all reliefs as may be due in terms of the above be granted
forthwith.
17. The appeals, consequently, are allowed and the order of the Tribunal
is set aside.
................,J.
(RANJAN GOGOI)
.................,J.
(NAVIN SINHA)
NEW DELHI
MARCH 08, 2017