9911796707
TMI Blog2010 (5) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement, IGTPL agreed to pay an amount of Rs. 40.80 crores in eight annual instalments towards the transfer of the assessee's equipment to IGTPL. On28-3-2005CPT received an amount of Rs. 12.12 crores from IGTPL towards this license fee. CPT did not pay service tax due of Rs. 1,23,62,400/- on the above receipt. This amount included advance license fee of Rs. 10.08 crores from1-4-2005to31-3-2006and 1st year upfront charges of Rs. 2.04 crores. It was tentatively decided that CPT had permitted IGTPL to do the container handling at the port premises of CPT for a consideration which constituted taxable value under port services. The assessee had received upfront charges of Rs. 2.04 crores and had intimated that the transfer of its equipment to IGTPL was by way of sale. However, the authorities held the view that the ownership of the property was not absolute transfer from CPT to IGTPL. 1.2 CPT had entered into an agreement with IGTPL to develop and operate a terminal named the Rajiv Gandhi Container Terminal (RGCT) in the port area. The agreement was for a period of 30 years. As per the agreement IGTPL shall pay to the assessee, royalty every month @33.3% of the gross revenue ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d management including necessary developments, modifications and augmentation of facilities at RGCT, commensurate with traffic; and (2) Development, construction, operation and management of International Container Transshipment Terminal at Vallarpadam/Puthuvypeen Kochi" He found that the impugned activities constituted service rendered in relation to vessel or goods. The appellant was compensated by way of providing remuneration in the form of license fee every year for handing over the commercial operation relating to vessels and goods at the project site. As regards the contention that the payment received towards upfront charges related to sale of goods totaling Rs. 40.80 crores, the Commissioner found that there was no sale of goods in instalments. The charges were stretched over a period of time and it was only transfer of equipments for the purpose of use by the authorized person in discharging their commercial operations in relation to goods and vessels. Accordingly, the activity involved was port services and the consideration received liable to service tax. He held that royalty received by the assessee for allowing the licensee to carry out port services was exigib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom clients for port services rendered by it. The payments by IGTPL to the appellant were irrespective of whether or not any service was rendered by IGTPL to its clients. It was apparent that the said payments had nothing to do with the provision of any service by the appellant to IGTPL. The demand of service tax therefore was not justifiable. (ii) As regards the upfront charges, the Commissioner had failed to appreciate that this amount was paid towards cost and use of appellants' equipment. The agreement stipulated a transfer of ownership of the equipment belonging to the appellant upon IGTPL making payment in installments over a period of eight years. As the transaction in question was one of sale and the amount received from IGTPL was part of the sale consideration, there was no justification for imposition of service tax on the said amount. They had pointed out to the Commissioner at the time of hearing that the appellant had accounted the amounts received as sale consideration in its books of account. The fact that the appellant received legal advice that it was not required to pay sales tax under Kerala Govt. Sales Tax Act, as it could not be held to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for storage of goods. Even when goods were stored, storage was not at the instance of the appellant and hence there was no scope for levying service tax. 4. During hearing, the learned counsel for the appellants reiterated the arguments raised in the appeal. As regards the royalty received by CPT from IGTPL, it is submitted that the assessee received 1/3rd of the revenue earned by IGTPL through its operations at the port. IGTPL developed and operated the Rajiv Gandhi Container Terminal under agreement which was valid for 30 years. IGTPL paid service tax on the value of taxable services provided by it to its clients. The royalty amount collected from IGTPL was not liable to service tax as also the license fee, the rent received for construction of jetties, license fee received for use of its land, upfront charges received from IGTPL and estate rent received for providing facilities for storage of import/export goods. As the demand was not sustainable, demand of interest and penalty also were not sustainable. The receipts in question figured in the audited accounts of the assessee and the department collected the relevant information from the audited accounts of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by way of a license without the prior written permission of the Licensor. Provided further that, no encumbrance shall be created by the Licensee over the Licensor's Equipment, except that the Licensee may dispose off in any manner such Licensor's Equipment, with the prior approval of the Licensor (such approval shall not be unreasonably withheld by the Licensor. For the purpose of making its decision, the Licensor shall hold discussions with the Licensee, and consider factors such as the remaining useful life of the Licensor's Equipment sought to be disposed off and appropriation of the value received on disposal against the remaining installments of the Upfront Payment." In terms of this clause, ownership/lease hold rights of the equipment of the appellant shall stand transferred to the licensee from the date of receipt of first installment of the upfront payment. The leasehold rights and ownership of crane leased from M/s. ABG Heavy Industries Ltd., was also passed on to the licensee. The consideration received was accounted in the financial records of CPT as sundry debtors and the value of the assets written off at the written down value of Rs. 7.6 crores. Even if the equipme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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