SIGNODE INDIA LIMITEDversusCOMMR.OF CEN. EXCISE & CUSTOMS - II

                         [2017] 6 S.C.R. 997

                                                                            ,--
                    SIGNODE INDIA LIMITED                                   A
                                   v.
           COMMR.OF CEN. EXCISE & CUSTOMS - II
                (Civil Appeal No. 6038-6039 of 2007)
                           MARCH 08, 2017                                   B

           [RANJAN GOGOi AND NAVIN SINHA, JJ.]
Finance Act, 1994:
        ss.2(23), s.65 (23), s.65 (76b), s.65(105)(zr) and s.65 (105)
(zzzf) - Service tax - Service rendered by appellant in the                 C
manufacturing unit of Principal manufacturer - Liability sought to
be fastened on the appellant on ground that service rendered by
appellant 01nounted to "cargo handling service", however, appellant
claimed that service rendered by it amounts to a "packaging
activity'', which has become exigible to service tax by amendment
                                                                            0
to Finance Act, 1994 and by insertion of s.65(76b) and
s.65(105)(zzzf) with effect from 16.06.2005 - Tribunal found
appellant liable to pay service tax for its activity for period prior to
2005 - Held: Cargo is understood to denote goods which are ready
for transportation whereas packaging of goods is a stage prior -
Activity undertaken by the appellant, though related to packing              E
activity, is at a stage when the goods are yet to clear the factory
gate as manufactured goods for onward transportation - 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 - All activity undertaken by          F
 the appellant is related to packaging activity - ''packaging activity"
 uls.65(76b) and "service rendered in relation to packaging activity"
 u/s.65(105)(zzzj) were inserted by the Finance Act, 2005, which is
 sufficiently indicative of legislative intent that packaging activity is
 different from cargo handling activity - Making appellant liable to
 tax for pre-amended period (prior to 16. 06. 2005) on basis that the        G
 activity undertaken by it involves rendering of cargo handling
 service would run counter to the express legislative intention, in a
 situation where liability of appellant for post amendment period in
  ''packaging activity" has not been -even disputed by the Revenue -
                                                                             H
                                 997
          •
998             SUPREME COURT REPORTS                     [2017] 6 S.C.R.



A     Therefore, the appellant would not be liable to pay service tax 011
      the service rendered by it in terms of s.65(23) r/w. s.65(105)(zr) of
      the Act prior to amendment made by the Finance Act, 2005.
            ss.65 (23), s.65 (76b}, s.65(105)(zr) and s.65 (105) (zzzj) -
      Distinction between the expressions "Cargo Handling Service" and
 B    "Packaging Activity" - Held: Cargo is understood to denote goods
      which are ready for transportation whereas packaging of goods is
      a stage prior i.e. before they become cargo and in fact on completion
      of such packaging the goods become cargo - Circular
      no.F.No.B.111112002-TRU dated 1.8.2002 issued by CBEC -
      Clause 3.
 c
              Allowing the. appeals, the Court
            HELD: 1. Sections 65(76b) and 65(105)(zzzt) were both
      inserted by the Finance Act, 2005 with effect from 16.06.2005.
      The said amendment is sufficiently indicative of legislative intent
 D    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
 E    the basis that the appellant is engaged in "packaging activity"
      has not been disputed by the Revenue. [Para 6) [1001-E-F)
         2.1 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
 F principal manufacturer. 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. In such a situation, what to discern is the distinction
 G between the two expressions "Cargo Handling Service" and
   "Packaging Activity", as defined in the respective provisions of
   the Act. [Para 7) [1001-G-H; 1002-A)
            2.2 A careful reading of Section 65(23) of the Act, which
      defines Cargo Handling Service would go to show that though
 H    the word packing is included therein, the same is referable to
  SIGNODE INDIA LIMITED v. COMMR. OF CEN. EXCISE &                    999
                     CUSTOMS-II

the word "Cargo" whereas in Section 65(76b) "Packing Activity"        A
is defined to mean "Packaging of Goods". [Para 8] [1002-B]
      2.3 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 B
prior i.e. before they became cargo and in fact on completion of
such packaging the goods become cargo. 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. [Paras 9, 10] [1002-C-F]
                                                                      c
       3. In a Circular 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 65(zr)
provides for. Clause 3, makes the position abundantly clear that
even the department had understood services provided by Cargo D
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". Clause 3.2 of the circular makes it clear that mere E
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.All activity
undertaken by the appellant, though related to packing activity, F
is at a stage when the goods are yet to clear the factory gate as
manufactured goods for onward transportation. 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 65(105)(zr) of the
Act. [Paras 12-15] [1002-F-G; 1003-A-F]                              G
      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6038-
6039 of 2007.
      From the Judgment and Order No. A-1570 & 1572/KOL/07 dated
10.08.2007 of the Customs, Excise & Service Tax Appellate Tribunal,
Kolkata in Service Tax Appeals No. EDM-806/04 and EDM-06/06.          H
1000            SUPREME COURT REPORTS                           [2017] 6 S.C.R.



 A           V. Lakshmikumaran, Yogendra Aldak, Karan Sachdev, M. P.
       Devanath, Kartik Kurmy, Praveen Kumar, S. B. Sharma, Ashok Anand,
       Advs. for the Appellant.
              K. Radhakrishna, Sr. Adv:, Ms. Nisha Bagchi, Ms. B. Sunita Rao,
       Ms. Pooja Sharma, B. V. Balaram Das, Arind Kumar Sharma, Advs.
 B     for the Respondent.
             The Judgment of the Court was delivered by
             RANJAN GOGOi, J. 1. Heard learned counsels for the parties
       and perused the relevant material.

 c           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
 D
       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
 E     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
 F     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 /is
       decided by the Bangalore Bench of the learned Tribunal.
 G           5. To appreciate the issues arising in the present case, Section
       65(23) which defines "cargo handling service"; Section 65(1 OS)(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 s~rvice needs to be extracted below:-
 H
  SIGNODE INDIA LIMITED v. COMMR. OF CEN. EXCISE &                                1001
                     CUSTOMS-II

      "Section 65-In this Chapter, unless the context otherwise requires:-        A
      (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       B
      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                    c
       "manufacture" within the meaning of clause (t) 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        D
       handling services;
       (zzzf) to any person, by any other person, in relation to packaging
       activity."
       6. Sections 65(76b) and 65(105)(zzzt) were both inserted by the
                                                                                  E
Finance Act, 2005 with effect from 16.06.2005. The above amendment,
to our mind, is sufficiently indicative oflegislative 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             F
legislative intention in a situation where its liability, forthe 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     G
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
                                                                                  H
1002            SUPREME COURT REPORTS                          [2017] 6 S.C.R.



 A     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.
 B            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''.

 c            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
 D     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 carded on a ship,
              aircraft, or niotorvehicle and as per Websters Comprehensive
 E            Dictionary, "cargo" is Goods and merchandise taken on board
              a vessel.
              I 0. 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.
 F
              11. There is yet another aspect of the case which would require a
       mention. In a Circular bearing F.No.B. J 1/1/2002-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
 G     what Section I OS(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
 H
  SIGNODE INDIA LIMITED v. COMMR. OF CEN. EXCISE &                               1003
                     CUSTOMS-II

      meant to be transported by any means of transportatiop namely              A
      truck, rail, ship or aircraft. Well known examples of cargo handling
      service or services provided in relation to cargo handling by the
      Container Corporation oflndia, Airport Authority oflndia, Inland
      Container Depot, Container Freight Stations. This is only an
      illustrative list. There are several other firms that are engaged in
                                                                                 8
      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 C
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     0
the activity ofloading 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         E
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             F
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.                                                               G
      17. The appeals, consequently, are allowed and the order of the
Tribunal is set aside.
Ankit Gyan                                                    Appeals allowed.