Allcargo Logistics Ltd vs Commissioner Of Service Tax IV, Mumbai

Brief facts of the case are that the appellant is operator of container freight station and custodian of goods which are imported and which are meant for export as authorized under Section 45 of Customs Act, 1962. They are also having a centralized Service Tax registration for providing various services including cargo handling service, storage and warehousing service etc. The imported goods remain in the custody of the appellant till such time the importer completes the formalities required under Customs Act, 1962 such as filing of Bill of Entry, examination of goods, assessment and payment of customs duty. Appellant is custodian of the imported goods till such time the goods are delivered to the importer. In certain cases where nobody turns up to claim the imported goods, appellant is required to resort to the provisions of Section 48 of Customs Act, 1962 which provides for sale of such unclaimed imported goods after 30 days of unloading of such goods into Container Freight Station and after seeking permission from the Customs authorities. In respect of the goods which are cleared and claimed by the importers, appellant collects warehousing charges and discharges services tax liability on the service of warehousing and also on the service of cargo handling. In cases where the unclaimed goods are sold, as provided under Section 48 of Customs Act, 1962, the proceeds of the said sale are dealt with as provided under Section 150 of Customs Act, 1962. Section 150 of Customs Act, 1962 has provided that out of the sale proceeds, firstly payment of expenses for the sale are to be paid; then payment of the freight and other charges are to be paid; then payment of duty on the goods sold is to be paid; then payment of the charges in respect of the goods sold due to the person having the custody of the goods is to be paid; then payment of any amount due from the owner of the goods to the Central Government is to be paid, and the balance, if any, is to be paid to the owner of the goods. From the sale proceeds of unclaimed imported goods, appellant pays customs duty, auction expenses and VAT and the remaining amount is retained by the appellant in their books of account for specified period to be paid to the owner of the goods, if claimed. In case the owner of the goods does not turn up after the specified period, the retained amount was getting added to the profit of the appellant prior to April 2011. The view of Revenue is that the amount retained by the appellant is consideration for providing service and, therefore, from the period from 01.04.2009, through various periodical show cause notices, Revenue has raised demand of service tax on such amount retained by the appellant out of the sale proceeds of unclaimed imported goods. For the period from 01.04.2012 to 31.03.2013, such show cause notice dated 26.08.2013 was issued to the appellant. As per the said show cause notice, after deducting customs duty paid andauction expenses are paidand payment of VAT is effected, the amount retained by the appellant for the financial year 2012-13 was Rs.2,79,88,156/-. On the said amount treating the said amount as consideration for providing service, service tax demand of Rs.34,59,336/- was raised under the provisions of Section 73 of Finance Act, 1994.On similar lines, for the financial year 2013-14 considering the amount retained by the appellant to the tune of Rs.6,98,48,642/- as consideration for providing service, service tax demand of Rs.86,33,292/- was raised under the same provisions of the Act. Show cause notice dated 26.08.2013 was replied through reply dated 13.12.2013 and the other show cause notice was replied through reply dated 28.05.2015 by the appellant.In both the replies to the show cause notice, appellant contended that the entire proceeds were sale of goods on which VAT was paid and, therefore, the proceeds cannot be subjected to the provisions of Service Tax. In addition, they have also relied on CBEC Circular F.No. B11/1/2002-TRU dated 01.08.2022, para 12 of Annexure IIof the said circular and submitted that CBEC has clarified that under such circumstances, service tax will not be leviable. In addition, they have also relied on few precedent decisions of this Tribunal on the issue. Both the show cause notices were adjudicated through single impugned order-in-original wherein the original authority did not appreciate the argument put forth, and confirmed the demand of service tax of Rs.34,59,336/- for the year 2012-13 and Rs.81,19,564/- for the year 2013-14 and imposed penalties. Aggrieved by the said order, appellant is before this Tribunal.

Heard the learned counsel for the appellant. Learned counsel for the appellant has reiterated their submissions that were made before the original authority through the replies to the show cause notices. Learned counsel for the appellant has also brought to the notice of this Bench the contents of para 13. 14 of the impugned order-in-original wherein the original authority has taken note of the issue being decided by this Tribunal in favour of the appellant in their own case for the earlier period. Learned counsel for the appellant has submitted that the learned original authority has taken note of earlier decisions of this Tribunal in their own case reported as [2015] 62 taxmann.com 313 (Mumbai-CESTAT). Further, learned counsel for the appellant has submitted that the original authority has taken note that the appellant has placed reliance on Tribunal’s decision in the case of Mysore Sales International Ltd. reported in 2011 (22) STR 30 (Tri.-Bang.) and various other judgments.

Heard the learned AR. He has submitted a copy of the case law of this Tribunal in appellant’s own case which was referred to by learned original authority in para 13.14 of the impugned order. He has submitted that the said case law is not applicable in the present case.

We have carefully gone through the record of the case and submissions. For the sake of clarity, we reproduce the final order of this Tribunal as reported at [2015] 62 taxmann.com 313 (Mumbai-CESTAT) relied upon by the appellant, taken note of by the original authority and argued as not applicable in the present case by Revenue during the hearing. We reproduce the said order as follows:-

“These appeals are directed against order in original number 08-09/SR (08-09) COMMR/RGD/09-10 dated 31 December 2009. As revenue and assessee are aggrieved by the said order, hence the appeals are disposed by a common order.

Heard both sides and perused the records.

The issue in this case is regarding the service tax on an amount which is shown as income in the balance sheet of the appellant. Appellant herein is registered with the Department under the category of cargo handling, storage and warehousing services, business support services, and goods transport agency services. The appellant herein is permitted to store the imported goods in the bonded warehouse and after complying with necessary Customs formalities and payment of various dues, duties and other charges, the importers are given delivery of imported goods by the appellant. Sometimes in respect of some consignments, importers failed to take delivery and as per the procedure after waiting for 30 days. appellant disposes the consignments by conducting auction and discharge all the government dues and expenditure incurred for such auction. The balance amount is kept back with the appellant and is returned to the importer if he approaches the appellant. Till the importer claims the balance amount the amount is shown as income in the balance sheet. It is a case of the revenue that service tax liability arises on this amount.

The service tax liability is sought to be fastened under the category of storage and warehousing services. We find that the issue is no more res Integra as this Tribunal in the case of Mysore Sales International Ltd. v. Asstt. CCE&ST [2011] 31 STT 161, India Gate Way Terminal (P.) Ltd. v. CCE [2011] 33 STT 72 (Mag.)/15 taxmann.com 55 (Bang - CESTAT) had held that Board's Circular No. 11/1/2002-TRU dated 1/8/2002 will be applicable and no service tax liability arises on such amount which remains balance with the assessee. This ratio is followed by this Bench in the case of Maersk India (P) Ltd. v. CCE&C [2012] 37 STT 685 (Mum. - CESTAT. We find that the facts of the case in hand are similar to the facts in the cases where this Tribunal has taken a view in favour of the appellant.

Learned Departmental Representative would submit that Honourable High Court of Delhi in the case of Associated Container Terminals Lid. v. Union of India 2008 (226) ELT 169 (Delhi) has held that amount which is collected by the warehouse keeper would be first adjusted towards warehousing charges, as per this ratio, the amount that is in balance with the appellant is nothing but amount received for warehousing charges.

We do not agree with the proposition put forth by the DR as dispute in this case is not whether the balance amount retained would be towards warehousing charges or otherwise. The facts of that case are totally different than the facts in the case in hand.

Revenue is in appeal against the impugned order for non-imposition of penalties. As the issue is now squarely covered by the judgements of this Tribunal, we find that the impugned order to the extent it is contested by the assessee needs to be set aside and we do so and set aside the demand, accordingly, question of revenue's appeal does not survive.

In sum, assessee's appeals are allowed and revenue's appeal is rejected.”

On going through the precedent decision of this Tribunal in appellant’s own case, it is very clear that the said decision is in favour of the appellant and exactly on the same issue for earlier period. Judicial proprietary and decorum requires that co-ordinate Bench must follow precedent decision passed by another Bench of this Tribunal but we have little bit reluctance in completely following the said decision in which distinction between charges received towards ‘ storage and warehousing’ and “ balance of auction proceeds of abandoned goods” is not forthcoming and also there is change of law post 2011 effected through introduction of negative list for the part period, coupled with insertion of proviso to section 150 (2) of the Customs Act with effect from 08.04.2011. The distinction that is noticeable from the previous order of the adjudicating authority, that was assailed and disposed of by this Tribunal vide its Order passed on 08.07.2015 in Appellant’s own case and the order that is assailed here in the present appeal can be summarised in the following ways.

(i) The previous order of the Tribunal passed in appeal no. ST/176-191/2010 does not contain any reference to the period of dispute but since the Order-In-Original bears the date of disposal as 31.12.2009 (as noted in this CESTAT’s Order), the disputed period must be before 2009 while in the present appeal that would deal with the order which disposed of two show cause notice dated 26.08.2013 and 25.07.2014 covering period from F.Y. 2012-13 to F.Y. 2013-14 are for the major period covered under negative list and the common factor in between the adjudication of the first show cause and these subsequent two show cause notices is that these show cause notices of 2013 & 2014 are primarily Statement issued under section 73 (1) (A) of the Finance Act,1994, issued with reference to the first show cause notice dated 27.09.2010. Therefore, it is not understood as to which order of the Commissioner was assailed in the appeal of 2010 filed before this Tribunal. Be that as it may, there were more than one appeals filed in respect of said order by the Assessee Appellant while Respondent department also had filed an appeal, which was seemed to have been filed against non-imposition of the penalties where as going by the order of the Commissioner annexed to the appeal memo at page no. 55 to page no. 74, it can be that he had adjudicated SCNs for the period 2009-2010 and 2010-2011 vide Order-In-Original dated 29.01.2016 wherein it was noted by him that service tax in respect of “ Storage and warehousing services and cargo handling services” were already discharged by the Appellant and the balance of sale proceeds lying in the account of the Appellant, that could not be returned to the importer for his non-appearance after abandonment of goods, was not liable to service tax and he states to have followed the decision of Tribunal passed in 2015 (for the period before 2009), to state that no duty is payable on surplus sale proceeds of auction sale. This being the facts on record, it is not understood as to which order of the Commissioner was assailed before this Tribunal in 2009-2010 and why Appellant had not placed any reliance on the same order during the course of argument though produced proof of payment of Service tax on protest and only referred it in the last page of its written submission filed on 18.04.2024, apparently in response to the written submission of learned AR filed on dated 15.01.2024 in which he has distinguished the said order of the Tribunal passed in 2015 in respect of the present Appellant for the said period.

(ii) Even while accepting that Appellant had succeeded in the said appeal that was disposed of by this Tribunal in 2015 but the relief granted to it was limited to the balance amount kept back with the Appellant that could not be returned back to the importer for his non-appearance but in the instant case, learned Commissioner has confirmed duty only on the amount that was realised by the Appellant against “ storage and warehousing services” for the period 2013-2014 by accepting Appellant’s bifurcation statement submitted through letter dated 26.05.2014 wherein liability of 41,56,380/- booked in the book of accounts was treated to be surplus amount that is required to be returned to the importer and the balance surplus of Rs. 65,692,262/- was shown as income towards storage and warehousing charges (para 23 of the OIO) but for the period 2012-2013, Appellant did not provide the bifurcation for which, the entire amount of Rs. 27988156/-was taken by the Commissioner as charges towards “storage and warehousing service” and no (Nil) amount was expected to be returned to the importer.

(iii) As pointed out above, Learned Commissioner also had disposed of SCNs for the period 2009-2010 and 2010-2011 vide its order dated 29.01.2016 and there is no reference made by either of the parties against preferring of any appeal in respect of the said order and what is referred by the Appellant in its appeal memo at page no. 18 is supported by no factual detail to relate that any appeal was filed against that adjudication order. Moreover, what is referred in the synopsis as decision of the Tribunal passed on 22.04.2016 is actually not in relation to the present dispute but in respect of availment of CENVAT credit by the Appellant against service tax paid under protest on service and surplus money received by it from auction of goods abandoned by the importer and the same demand was confirmed against the Appellant by the Commissioner as well as by this Tribunal. It would come to substantiate further that Appellant had paid service tax previously in respect of proceeds of those abandoned cargo and availed CENVAT credit that was held to be inadmissible by CESTAT.

(iv) The said order for the period 2009-2011 having remained unchallenged, it was supposed to operate as Res-Judicata as well as binding precedent on the adjudicating authority and also this order of CESTAT passed in 2015, referred above as in both the orders duty on balance amount of auction of unclaimed imported goods was held to be not imposable under the Finance Act and learned Commissioner in his order that is assailed here also had given the same finding that surplus proceeds of auction sale of imported goods cannot be charged to service tax.

(v) There are references to precedent decision of this Tribunal in para 4 of the said order of this Tribunal passed in 2015. Going by the ratio of these decisions, it can be said that those were passed either on the basis of the fact that there was ‘no recipient of service’ since the importer had abandoned the cargo or else it is a ‘sale of goods’ that is subjected to VAT and therefore no service tax is imposable. In this connection is noteworthy to mention here that recipient of service was all along there for whom the surplus amount of sale proceeds was kept reserved, to be refunded and only because he could not be traced out physically, it can never be considered that recipient of service was not in existence. The above observation was apparently made on the basis of the board circular of circular 11/01 of 2002 referred above and therefore, the said observation is without any rational basis that can never be treated as ratio decidendi to make it a binding precedent. Moreover, sale of cargo was not the purpose for which auction was made but the purpose of auction was to realise the amount that was due towards statutory duties like Customs and services rendered by different agencies/units and how the amount is to be distributed is dealt in section 150 of Customs Act, that also deals with the payment of charges in respect of goods sold due to the person having the custody of goods and this “storage and warehousing services” unit is a custodian of such goods, who need not be necessary a cargo handler. More importantly, the proviso introduced to Section 150 (2) clearly commands that if balance of sale proceeds after payment of all dues including dues of the Central Government (in the instant case service tax), could not be returned back to the owner of the goods within six months due to certain impossibility, then surplus sale proceeds should be paid to the Central Government unless the Commissioner of Customs allow extension of such further for such payment. It is, therefore, not understood as to why Appellant, who can be treated merely as a custodian of the surplus amount, is eager to contest the service tax dues without paying the same to the Government when section 150 sub-clause 2(e) and its proviso dictates it make such payment. We are, therefore, of the considered view that the judgments on which this Tribunal placed reliance in para 4 of its order of 2015 could not be applied as a judicial precedent to the period post 01.07.2012 where definition of service has become immaterial, though not redundant, and when surplus money that can be retained by the custodian of the goods namely the Appellant only for six months after payment of Central Government dues.

(vi) In the said order passed by this Tribunal on 08.07.2015 in ST/176-191/2010 in Appellant’s own case, there is a reference to circular no. 11/1 of 2002-TRU dated 01/08/2002 which was held to be applicable in Appellant’s case to justify no service tax liability on it but a close reading of the said circular would go to justify that demand against the Appellant was against “storage and warehousing services” along with balance amount retained by the Appellant that was payable to the importer and confirmation of demand was made only in respect of “storage and warehousing services”, while the said circular has dealt with cargo handling services and its para 12 clarifies that ‘no cargo handling’ services can be said to have been rendered in case of abandoned cargo which were auctioned by custodian of goods and the grounds cited therein was that there was no person available to whom service was rendered. This aspect of recipient of service was already dealt in the previous para of this order but what is important to note here is that the said circular in respect of cargo handling service is to be read conjointly with para 5 (annexure 2) of the circular which clarifies that ‘port services’ would include ‘cargo handling services’ and therefore when port service would have been charged to service tax, cargo handling services cannot be charged separably as an independent component. But that is not the case in the present factual scenario since duty was demanded on “storage and warehousing services” which is subjected to service tax under section 65 (102) read with its corresponding charging section of the Finance Act, 1994.

With the above observations concerning the factual and legal position for not simply going by the previous judgment, on which we thought on placing reliance, there is a requirement to look into the factual developments that occurred during the relevant period and also during its prior period. To start with, it has be to placed on record that Appellant was paying service tax under protest after being summoned by the Superintendent (preventive) Central Excise, Raigad, as could be inferred from the covering letter of the Appellant dated 10.11.2006, 17. 07.2008, 08.08.2008 and 13.10.2008, annexed to the appeal memo from page no. 16 onwards. Appellant had paid service tax under protest for the period February 2004 to 17.07.2008 but such protest was with regard to auction surplus of abandoned cargo in which service tax was stated to be not payable since no service was provided to any person by the Appellant. This stand might have been taken by the Appellant by following the Board circular of 2002 but taking note of the said circular this Tribunal vide its order passed in 2015 for the period of 2009, allowed the appeal of the Appellant only to the extent of surplus lying in their account from auction sale proceeds. Accordingly, the very same Commissioner Mr. M.R.R. Reddy vide his order dated 29.01.2016 also had allowed Appellant’s appeal in respect of periodical show cause notice dated 27.09.2010 and 27.09.2011 for the period from F.Y. 2009-2010 and 2010-2011 against duty demand on unclaimed auction sale proceeds and also set aside the interest and penalty imposed on the Appellant (page 322, 334 of the appeal memo) but he himself as Commissioner had confirmed service tax on the entire amount only for the period 2012-13 by indicating that no balance amount was available to be returned to the importer as Appellant had not indicated any amount as liability in its book of accounts even when he bifurcated the “storage and warehousing services” and the amount payable to the importer in the same Order-In-Original for the period 2013-14. It could be appropriate only when “storage and warehousing” charges would have far exceeded the entire sale proceeds of the abandoned cargo put under auction during the relevant period but due to non-availability of the data at this end, no definite finding is possible.

As revealed from the appeal memo, Appellant also had relied on the decision of this Tribunal passed in the case of M/s. Trans India Logistics Park limited and pleaded the same in its written note of the argument as a decision passed in its favour without any reference as to if the present Appellant and the said Trans India Logistics Park Limited are one and same or sister concern of each other but the said order was passed in respect of availment of CENVAT credit on certain services which were exclusively used for auction of abandoned goods that was held to be inadmissible by the Adjudicating Authority by holding such auction sale as trading activity. When Appellant challenged the same on the ground that trading as exempted services was introduced in the definition only after 01.04.2011 for which those availment of credits were admissible for the prior period, this Tribunal has set aside the Appellant’s appeal by holding that the credits were availed in respect of activities which were not treated as services. Placing reliance on this decision the Appellant could no absolved its liability for the reason that trading is a sale of goods which is outside the purview of the service tax in view of operation of Article 366 (29A) of the Constitution of India but as observed above activity of trading is not the purpose of the entire process of auction, when the same is meant to discharge the liability including liability that had arisen from availment of services of custodian of goods etc., in terms of section 150 of the Customs Act.

Now going to the factual developments that occurred during the period and its pre and post period is that Appellant had been granted relief by this Tribunal in respect of non-payment of service tax on surplus amount of auction retained by it for payment to the importer up to year 2009 vide its Tribunal order of 2015 which, to our considered opinion can be treated as a precedent decision for the reason enumerated above but not the basis of its finding. Further, basing on the same decision, Appellant was granted relief by the Adjudicating Authority vide its order dated 29.01.2016 for the period from 2009-2011 only on the service tax demand raised against surplus value generated from auction and retained by it and not “storage and warehousing charges” and appellant has apparently accepted the same as no argument is led by its counsel in that respect. Change of law occurred both in service tax laws after introduction of negative list by broadening the horizon of service tax network and also by amending section 150 of the Customs Act in making deposit of surplus money, retained by the auctioneer, with the Government within six months, if the importer did not come for want to receive the same. With protest upto the year 2008 and without protest thereafter, Appellant had discharged its service tax liability in respect of “storage and warehousing services“ upto the present dispute that arose from April 2011. It is, therefore, not understood as to why Appellant has change its stand in not making payment of service tax against receipt of the amount towards “storage and warehousing services” rendered by it and clubbing both the amount of these services as well as surplus that was retained on behalf of the exporter and showing the same as non-taxable income in its account statement and therefore, we are of the firm opinion that Appellant is liable to pay service tax on “storage and warehousing services” for the period under dispute and it would not suffer any loss on that account as the entire amount retained by him would otherwise go back to the Government treasury in view of the operation of section 150 clause 2(e) read with its proviso. Therefore, no irregularity is noticeable in the order passed by the Commissioner of Service Tax-IV, Mumbai who also has followed this Tribunal’s order passed in 2015 for the earlier period. Hence the order.

The Order

The appeal is dismissed and the order passed by the Commissioner vide Order-in-Original No. 89-90/STC-IV/MRRR/15-16 dated 21.03.2016 is hereby confirmed.