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2022 (9) TMI 393 - HC - Service TaxLevy of service tax - Port service or not - amount collected under the Way Leave Agreements entered with Petitioners - nature of the Way Leave Agreements - permissions of Respondents to laydown/construct and maintain four oil pipe lines and a steam pipe line at Wadala Estate and Elphinstone Estate at Petitioners’ own costs - payment of lincence fees would construe a port service or not? - HELD THAT:- The Way Leave Agreements are agreements that essentially provide permission to Petitioners to construct and maintain at its own cost oil and steam pipe lines subject to payment of licence fee. The arrangement is clear that Mumbai Port Trust is not constructing or maintaining the pipe lines but is only giving a licence or permission to Petitioners to construct and maintain the pipe lines. The opening page of the Way Leave Agreement says “Way Leave Agreement for laying and maintaining four oil pipe lines and a steam pipe line at Wadi Bunder on the Elphinstone Estate”. Admittedly as provided in the agreement, Respondents have been charging only an annual fixed fee from the time the agreement was entered into as late as upto 2001. Copies of the bills annexed to the Petition also indicate that these are fixed charges irrespective of whether any oil cargo passes through the pipe lines and irrespective of the quantity of the oil cargo that passes. The agreement also clearly indicates that pipe line laid was to be used for only Petitioners’ cargo and not for any third party - the Respondents were only charging a licence fee for giving permissions to Petitioners to carry out construction/laying down of pipe line work on the port land and nothing else. Elaboration was particularly necessary since the Way Leave Agreements provide for laying of pipe lines at the cost of Petitioners and maintenance by Petitioners of the pipelines. Even annual compensation payable was called licence fees. Further, the services provided for under Section 42 of the Major Port Trusts Act, 1963, Respondents levy and collect charges based on the Port-Scale of Rates, that later came to be approved by Tariff Authority for Major Ports (TAMP). The License Fees paid by Petitioners was not as per the Port Scale of Rates. Therefore, the nature of the Way Leave Agreements cannot be stated to be for Port Services under Section 42 of the Major Port Trusts Act, 1963. Whether the fee payable to Respondents under the Way Leave Agreements for granting permission to Petitioners to lay/construct and maintain its own pipe lines was for a port service defined under the Finance Act, 2001? - HELD THAT:- The Hon’ble Apex Court in ALL INDIA FEDERATION OF TAX PRACTITIONERS & ORS VERSUS UNION OF INDIA & ORS [2007 (8) TMI 1 - SUPREME COURT] held service tax is a value added tax. For Respondents to be entitled to levy service tax or become liable to pay any service tax to the Government of India, Respondents must render a service and to render a service it must do some activity which amounts to value addition. In our view, merely granting a licence/permission to a person to carry out construction of pipe lines or maintain its own pipe lines on land belonging to Respondents would not amount to a service or port service. In the case at hand, it is Petitioners who have laid the pipe lines and have been maintaining the pipe lines. The pipe lines also do not belong to Respondents because the agreement itself provides that on termination of the Way Leave Agreements Petitioners are bound to remove the pipe lines and restore the land at its own cost. Therefore, it cannot be stated that Respondents are providing port services under the Way Leave Agreement. Respondents are also not doing any activity which amounts to value addition. Where a private party itself is constructing and maintaining a facility on land belonging to port authority the mere grant of permission by the port authority to use its land for the construction and maintainance of the facility does not amount to rendering any port service and therefore would not attract service tax - the Way Leave Agreements cannot be said to fall under any other category of service that was taxable at the relevant time, i.e., the period between 16th July 2001 and 1st March 2002. Petition disposed off.
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