Case: UNION OF INDIA Vs. COASTAL CONTAINER TRANSPORTERS ASSOCIATION

4. Necessary facts, in brief, are as under :First respondent is an association, whose members are transport operators engaged in the business of transportation of goods entrusted by the customers. By way of impugned show cause notices, the appellants have proposed to demand service tax from the respondents under the category of cargo handling service, while it is the case of the respondents that the service which is being provided by them, falls under the taxable category of goods transport agency. The respondents, to bolster their case, have placed reliance upon circulars dated 06.08.2008 and 05.10.2015 issued by the Central Board of Excise and Customs (CBEC)Based upon the intelligence gathered by the officers of Rajkot Regional Unit, which revealed that several business entities including respondent nos.2 and 3 who are engaged in doing the business of cargo handling in west coastal region but had got themselves registered under good transport agency, by taking approval from the competent authorities, searches were conducted in the premises of respondent nos.2 and 3. It is alleged that during such searches several incriminating documents, including the quotations submitted by the respondent- companies to their customers were seized and statements of the Directors were recorded as per the provisions of Central Excise Act, 1944 read with the provisions under Finance Act, 1994. Subsequently, the show cause notices dated 08.10.2015 and 30.09.2015, were issued to respondent nos.2 and 3, which are impugned in the writ petition filed before the High Court.5. It is the case of the appellants that the respondents, with a view to evade payment of service tax, have split the whole transactions into three parts, i.e., from the place of consignor to Kandla/Mundra Port by road, from Kandla/Mundra Port in Gujarat to Kochi/Tuticorin Ports in South India by sea route and from Kochi/Tuticorin Ports in South India to the place of the consignee by road. It is the further case of the appellants that if the respondents are registered under the category of cargo handling service, no abatement would have been admissible and whole of the transaction from the consignor to consignee would be covered under the taxable services which attract higher rate of service tax6. On the other hand, it is the case of the respondent – original petitioners in the writ petition that the show cause notices, impugned in the writ petition, have been issued contrary to the provisions of Finance Act, 1994 and also contrary to the circulars issued by the CBEC itself from time to time. It is the further case of the respondents that when they receive orders from customers there is a clear understanding between the customers and them, that they merely provide service of transportation of goods by road, whereas services at port area and transportation of goods through waterways would be provided by shipping lines. The respondents would raise a bill for transportation of goods by road and debit note for recovery of expenses which they incur for shipping lines for providing services at port area and transportation of goods through waterways. It is also their case that they would not add any margin while recovering money from their customers towards port and shipping line charges7. In the writ petition filed before the High Court, a preliminary objection was raised on behalf of appellant nos.2 and 3 with regard to maintainability of the petition. Firstly, it was pleaded that as the writ petition itself was directed against the show cause notices, such petition was not maintainable. Secondly, on the ground that as the controversy relates to classification of services and even if the show cause notices were to culminate into final order, appeal would lie before the Supreme Court, as such, High Court, in exercise of writ jurisdiction, should refrain from entertaining the petition which involves a classification dispute. It was pleaded that it was not either a case oflack of jurisdiction or a case where the principles of natural justice are violated, so as to entertain the petition in which only show cause notices were challenged8. On the other hand, it was the case of the respondent-original writ petitioners that there is no absolute prohibition for not maintaining the petition under Article 226 of the Constitution of India, even at the stage of show cause notice. It was their case that even taking the contents, as mentioned in the show cause notices, the contract does not amount to providing cargo handling service as defined under Entry 23 of Section 65 of the Act. By placing reliance on Circular No.B11/1/2002-TRU dated 01.08.2002 issued by the CBEC, it was the case of the respondents that cargo handling service means loading, unloading, packing or unpacking of cargo and includes cargo handling services, services provided for freight in special containers or in non- containerised freight, services provided by container freight terminal or any other freight terminal, for all modes of transport or any other service incidental to freight. It was their case that the respondents were notpacking or unpacking, as such, it cannot be classified under cargo handling service9. Before the High Court, it was the case of appellant nos.2 and 3 that w.e.f. 01.07.2012, the scheme of service tax has changed and the negative list regime has been brought into force. It was their case that the circulars issued prior to the amendment in the parent Act would not be applicable subsequent to such amendment. It was their case that with a view to evade payment of service tax, the respondents have split the whole transaction into three parts. If the respondents were registered under the category of cargo handling service, no abatement would have been admissible, as the whole of the transaction from consignor to consignee would be covered under taxable service. Reference was made to Section 66F of the Act which provides the principles of interpretation of specified descriptions of services or bundled services, more particularly, to sub-section (3) thereof which provides for the manner of determination of the taxability of bundled service. Clause (b) thereof provides that if various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single servicewhich results in highest liability of service tax. By referring to the definition of cargo handling service, as stood prior to its substitution by Finance Act, 2008, it was submitted that the earlier definition of cargo handling service did not include transportation and w.e.f. 16.05.2008, the definition of cargo handling service came to be amended by including the service of packing together with transportation of cargo or goods, with or without one or more other services like loading, unloading, packing, unpacking10. Precisely, it was the case of the appellants that once members of the respondent-association undertake the responsibility to deliver goods from consignor to consignee and more particularly, when they are also providing cargo handling service, with the help of other service providers, the service provided by them would fall within the ambit of cargo handling service, inasmuch as the help from other service providers does not change the nature of service that is being provided by them. It was also stated that shipping lines raise bills in the name of respondents and if any service tax has been charged, the respondents would be within their rights to take cenvat credit of the same in accordance with therules and regulations. However, that would not change the nature of services rendered by them11. While considering the contentions advanced on both sides, the High Court has over-ruled the objection of maintainability of the petition and has recorded a finding that the services rendered by the members of the respondent-association are classifiable under goods transport agency but not under cargo handling service. High Court has referred to the definition of cargo handling service under Section 65(23) of the Act, Circular No.B11/1/2002-TRU dated 01.08.2002 and by referring to the instructions dated 06.08.2008 issued in circular no.104/7/2008-S.T. and circular bearing no.186/5/2015-S.T. dated 05.10.2015, has held that even after introduction of new regime w.e.f. 01 st July 2012, the activity of the respondents falls within the classified category of goods transport agency but not cargo handling service. High Court has further held that so far as the service of loading and unloading at the port and shipping of goods from one port to other is concerned, the respondents are the recipients of such service from the shipping lines and/or cargo handling service on behalf of the customers. The High Court hasheld that so far as the service rendered by shipping line is concerned, the shipping line issues invoice in favour of the respondents, who, in turn, issue debit note to the customer without adding any charge in respect of such service. Further, it is held that, if transportation is to be included in cargo handling service, packing is an essential ingredient of the same. In conclusion, it is held by the High Court that in view of the binding circulars issued by the CBEC, the service rendered by the respondents has to be considered on the basis of main service provided by them, viz., good transport agency and it is not permissible for the appellants to take a stand contrary to such circulars. The High Court has held that the notices impugned in the writ petition, are contrary to the binding circulars issued by the CBEC, in such circumstances, respondents are entitled to invoke the writ jurisdiction of the court. Further, it is held that as there are no factual disputes and only legal issue is required to be decided and by placing reliance on the judgment of this Court in the case of Deputy Commissioner, Central Excise & Anr. v. Sushil and Company (2016) 13 SCC 223 , has over-ruled the objection of maintainabilityof the writ petition raised by the appellants. With the aforesaid findings, the High Court has taken the view that no useful purpose would be served in relegating the respondents - original writ petitioners to the adjucating authority for adjudication pursuant to show cause notices which were issued without any legal basis, while allowing the writ petition filed by the respondents, quashed the notices dated 08.10.2015 and 30.09.2015 and further rejected Civil Application No.6679 of 2016 filed by the appellants raising the preliminary objection with regard to maintainability of the writ petition.

Court's reasoning:
17. It is the case of the appellants that if service as a whole, is taken into consideration, it falls within the classifiable category of cargo handling service but not goods transport agency. On the other hand, it is the case of the respondents that they only undertake road transportation, and so far as cargo handled by shipping agencies is concerned, they prepare bills in the name of the respondent companies and in turn respondents issue debit note to their customers to the extent of charges payable to the shipping agencies, as such their service falls in the category of goods transport agency but not cargo handling service. While it is the case of the respondents that, show cause notices issued run contrary to circulars dated 06.08.2008 and 05.10.2015 issued by the CBEC, it is the case of the appellants that such circulars are not applicable to the respondents, and the circulars are applicable only when transportation is only by road. In the writ petition filed before the High Court, appellants have filed civil application by raising preliminary objection with regard to the maintainability of the petition under Article 226 of Constitution of India at the stage of show cause notices. Such objection is also rejected by the High Court by recording a finding that there are no factual disputes and also in view of the judgment of this Court in the case of Deputy Commissioner, Central Excise & Anr. v. Sushil and Company (supra)18. As we are not in agreement with the view taken by the High Court, in entertaining the writ petition against show cause notices, we refrain from recording any finding on contentious issues which arise for consideration. If any finding is recorded by this Court at this stage, same will prejudice either of the parties. Having regard to the contentions raised, it cannot be said that there are no factual disputes. Applicability of the circulars dated 06.08.2008 and 05.10.2015 is also in serious dispute. Further the classifiability of service rendered by a particular assessee is to be considered with reference to facts of each case depending upon nature of service rendered and the contract entered into. Therecannot be any general declaration, as prayed for. The judgment of this Court in the case of Deputy Commissioner, Central Excise & Anr. v. Sushil and Company (supra) also cannot be applied to the facts of the case on hand to come to the conclusion that the services rendered by the respondents will fall in the category of goods transport agency but not cargo handling service. In the aforesaid judgment, the contract was only for supply of labour and it was the specific case of the assessee that such labour was not doing any work of packing, unpacking, loading, unloading of any cargo. In view of such written contract for limited services referred above, this Court has held that such service cannot be held to be cargo handling service. The said judgment is distinguishable on facts and same cannot be applied to the case on hand, so as to accept the case of the respondents that their service is to be classified in the category of goods transport agency but not cargo handling service. Further, learned senior counsel appearing for the respondents, Dr. Singhvi, also placed reliance on a judgment of this Court in the case of Paper Products Ltd. (supra) in support of his argument that circulars issued by the CBEC are binding on departmentalauthorities and they cannot take a contrary stand. It is true that circulars issued by the CBEC are binding on the authorities, but at the same time, such circulars are applicable or not, is a matter which is to be considered with reference to facts of each case. When it is the case of the appellants that such circulars referred above would apply only in case of road transportation but not otherwise, then it is a case for consideration by competent authority on receipt of the explanation but same is no ground to quash the show cause notices. In that view of the matter, we are of the view that the judgment of this Court relied on by learned senior counsel in the case of Paper Products Ltd. (supra) also would not render any support19. On the other hand, we find force in the contention of the learned senior counsel, Sri Radhakrishnan, appearing for the appellants that the High Court has committed error in entertaining the writ petition under Article 226 of Constitution of India at the stage of show cause notices. Though there is no bar as such for entertaining the writ petitions at the stage of show cause notice, but it is settled by number of decisions of this Court, where writ petitions can be entertained atthe show cause notice stage. Neither it is a case of lack of jurisdiction nor any violation of principles of natural justice is alleged so as to entertain the writ petition at the stage of notice. High Court ought not to have entertained the writ petition, more so, when against the final orders appeal lies to this Court. The judgment of this Court in the case of Union of India & Anr. v. Guwahati Carbon Ltd. (supra) relied on by the learned senior counsel for the appellants also supports their case. In the aforesaid judgment, arising out of Central Excise Act, 1944, this Court has held that excise law is a complete code in order to seek redress in excise matters and held that entertaining writ petition is not proper where alternative remedy under statute is available. When there is a serious dispute with regard to classification of service, the respondents ought to have responded to the show cause notices by placing material in support of their stand but at the same time, there is no reason to approach the High Court questioning the very show cause notices. Further, as held by the High Court, it cannot be said that even from the contents of show cause notices there are no factual disputes. Further, the judgment of this Court in the case ofMalladi Drugs & Pharma Ltd. v. Union of India 2004 (166) ELT 153 (S.C.) , relied on by the learned senior counsel for the appellants also supports their case where this Court has upheld the judgment of the High Court which refused to interfere at show cause notice stage.