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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

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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.

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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

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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

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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

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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

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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.

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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

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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