TMI Blog2011 (9) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... ost of laying down of railways lines, instead of being borne by the Government of India, is to be borne by the private parties. The Railways operates the said railways and after recovering all the operation cost, pays balance amount to the investors.- Held that:- it is the railways who have provided services to the appellants. Similarly, maintenance of the assets which are admittedly assets of the appellants does not amount to providing any business support services to the railways. - not liable to service tax. Vacant land - held that:- it is use of the vacant land, which stands provided by the appellants to various lessees alongwith the facilities, the same would not fall even within the taxable services of rent of immovable property. The demand on this count is accordingly not sustainable. Rule 6(3) of Cenvat Credit - Exempted service or non taxable service - the appellant took plea that they are not providing taxable as well as exempted services. The services which are considered to be exempted are, in fact, are non taxable services. In such a case, the provisions of Rule 6(3) (c) of Cenvat Credit Rules, 2004 would not get invoked. - Held that:- It is not being disputed the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the category of "Port services, "Goods Transport Services", "Management Consultancy", "Consulting Engineering Services", "Sponsorship Services" and "Storage warehousing services". 4. As the appellants are paying service tax on all the above services, they are availing the benefit of cenvat credit of service tax paid on various inputs and input services utilized by them for providing output services. The cenvat credit of duty paid on various input services are also being availed by them. 5. The appellants were issued two show cause notices both dated 23.10.09 raising demand of service tax against the appellants on various grounds. The details of the allegations made in the show cause notices and the demands therein are being tabulated below:- TABLE-A Sr. No. Charges leveled ST demanded Other actions proposed 1 Non-payment of service tax under the Port Services on the income received under the head of 'Ship Chandler's Fee' 1,33,1,148 1) Penalty under Sec.76,77 7 78 of Finance Act,1994 2) Interest under Sec.75 of the Finance Act, 1994 2 Non-payment of service tax under the Port Services on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Recovery of an amount under Rule 6(3) read with Rule 14 of Cenvat Credit Rules,2004 and Sec.68 73 of the Finance Act, 1994 20,55,18,774 -------- do------- 7 Recovery of cenvat credit under Rule 14 of Cenvat Credit Rules,2004 and Sec.68 73 of the Finance Act, 1994 4,84,27,002 --------do------ 8 Recovery of interest for excess availment/utilization of Cenvat Credit on capital goods. 35,943 6. The Commissioner adjudicated both the show cause notices by a common order, which is impugned before us. Vide his impugned order, certain demands proposed in the notice were confirmed alongwith imposition of penalties, while other were dropped. It may be mentioned here that while confirming the demands, the benefit of cum tax value was extended by the adjudicating authority. The said confirmation of demand is impugned by the assesse and the dropping of demand is impugned by the Revenue. For better appreciation of the various heads under which demand stands confirmed, we reproduce below Table 17, 18 and 19 from the impugned order. Table 17: Service Tax Not Paid and Held Payable Sr.No Descrip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such charges received by the appellants from the MICT are on account of providing of various services to MICT, which fall under the category of 'support services of business and commerce' as defined under section 65 (104c) of Finance Act, 1994. Accordingly, the demand of around Rs.8.90 crore stands confirmed against the appellants. 8. As per the appellants, sub concession agreement grant certain right to MICT, which is clear form the perusal of the various clauses of the said agreement and which does not involve rendering any service which can be categorised as "Business Support Service" exigible to service tax under the said category. The appellants submitted that the appellant is a company promoted by the Government of Gujarat and Adani Group and has been set up primarily to implement the Mudra port. The Department of Port and Fisheries and Government of Gujarat notified a Build, Own, Operate., Transfer Policy (BOOT) for private sector participating for the development of the ports in the State vide Government of Gujarat Resolution dated 29.7.97. Pursuant to the signing of concessional agreement between Gujarat Maritime Board and the notice, the Gujarat Maritime Board has gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, which are required to be met by them in terms of agreement, it cannot be said that they are running any business support service to MICT. Shri Nankani, learned Advocate further argued that it is for the rights given under Article 2.1 that MICT pays royalty at the rate of 10% of the gross Revenue with guaranteed royalty in terms of Article 9.2.1.1 read with Article 9.2.2 which are reproduced below:- "9.2.1 "From the Date of Commencement of Operations, in accordance with the time specified in Sub-Section 9.2.4 below, the Sub-Licensee shall pay the Licensee the Terminal Royalty net of all taxes, levies and dues thereon (excluding any tax on the income of the License) on a monthly basis at the rate often (10) per cent of the Gross Revenue. Should the Sub-Licensee be required to withhold any tax on the Terminal Royalty, the Sub-Licensee shall promptly make payment of the same, and provide to the Licensee proof of deductions and payments made to the tax authorities." 9.2.2 "In the event of Sub-Licensee, for any reason whatsoever, being unable to attain the Traffic Projection, the Sub-Licensee shall pay Royalty on 40 per cent of the Traffic Projection by applying the rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracted assets. The contracted assets stands defined in article 1.1 meaning thereby the assets specified in annexure 2 (which includes building, plant and machinery, paving and others). Article 2.2 is to the effect that the company shall make a reasonable effort to obtain any approval wherever required, from the GMB for the construction, development or deployment of such additional assets at the container terminal, which shall be constructed or installed by MICT without any additional cost to the company. The adjudicating authority has observed that the said seeking of approval by the company from the GMB at the behest of MICT amounts to rendering of business support service. Similarly, the fact that the company shall provide all vessel related services and the MICT being entitled to unfettered use of the infrastructure facilities amounts to providing of infrastructure support to MICT. Similarly, the adjudicating authority has referred to various other articles of the agreement wherein the appellant company is required to establish rail line and providing rail connectivity to the MICT and also provide support by maintaining railway network within the port limit, and ensure that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent services, accounting and processing of transactions, operational assistance for marketing, infrastructural support services and other transaction processing. Explanation - For the purpose of this clause, the expression "infrastructural support services" includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security." As per the said definition, the services to fall under the said category are required to be services in relation to the business or commerce of other person i.e. service receiver. Inclusive clause of said definition detailed certain services falling under the said category. The adjudicating authority has held that the services provided by the appellants get covered by inclusive portion relating to infrastructure support service. The explanation attached to the section 65(104c) is to the effect infrastructure support service includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security." 12. As is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration to the appellants but has observed that the same is on account of developing infrastructure for MICT and for providing various infrastructure support. We note such that such infrastructure development by the appellants was an obligation on their part created under the agreement between them and Government of Gujarat, and it cannot be held the same was primarily and basically for MICT. The appellants have been given the right to develop Mundra Port and it was for the development of port that such infrastructure facilities were being created by them. The terms of the agreement between the appellants and MICT clearly shows that MICT was given a sub licence in exercise of power created under the concessional agreement with Government of Gujarat and Gujarat Maritime Board to handle business of container terminal. Hence, we are of the view that no services, falling under the category of support services of business or commerce, were being provided by the appellants to MICT. As such, we hold that the demand of service tax of on this count is not justified. Accordingly demand of tax of Rs.7,93,40,617/- alongwith consequent penalty is set aside. 13. In respect of serial No.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of railways lines and other related infrastructure, the appellant is maintaining its own assets and is not providing any service to the Indian Railways, who are operating port line, railway system, carrying out movement of goods and passengers, in accordance with agreement entered into between the appellants and railways. As such, by referring to various clauses of the agreement, he has concluded that the receipt from the North Western Railways are towards the cost of the railway lines laid down by the appellant and maintenance of the same is by the noticee, who himself is owner of the receipt of railway lines. As such, he concluded that there appears no factors and ingredients which suggest that any support in relation to business or commerce of the Indian Railways stands provided by the appellants. He has also held that the appellants cannot be said to have provided any infrastructural support to Railways to support commerce and business of the Railways, inasmuch as by making railways lines, in terms of new policy of the Government, Railways lines, stands handed over to the Ministry of Railways for running of the railways. The above reasoning adopted by the adjudicating au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service, the railways demanded investment form the appellants towards the cost of laying of railways lines, which cost would be recovered by the appellants from the railways on account of sharing revenue from the railways. Infrastructural facilities mentioned in the explanation to definition of business support services are mainly such infrastructural service like providing of office etc. for third parties to operate the same and as such, to support business of third parties. Investing in the railways lines so as to enable the railways to run on the Adipur Mundra port lines cannot be held as providing of any infrastructural services so as to boost the business of the service receiver. In fact as already observed, by agreeing to run railways between Adipur Mundra port, it is the railways who have provided services to the appellants. Similarly, maintenance of the assets which are admittedly assets of the appellants does not amount to providing any business support services to the railways. As such, we find no infirmity in the view adopted by the Commissioner on this count and accordingly reject the appeal filed by the Revenue. 15. As against the demand in respect of serial no.3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x agreements. It is seen that the various activities held by the Commissioner having been provided under the business support services are in relation to Dredged channel, Marine and port facilities, access to main road, usage of Railway, use of existing basic telecom infrastructure, drainage and sewerage lines, tapping point for electrification and providing of other already available facilities. Nevertheless, we note that the agreements are basically and primarily for allowing the use of the vacant plots so as to have access to their area of work. Admittedly, the basic facilities for use of said vacant plots are required to be provided by the appellants. The same cannot be held to be covered by the business support services. We find that no justifiable reasons for the Commissioner to drop the demand in respect of nine parties and to confirm in respect of six agreements where the agreements were basically for providing vacant land for use of the same. The threadbare examination of the agreements, whereas in some cases alongwith identical facilities, some more might have been provided was not called for. 18. In any case and in view of the matter, we note that Explanation 1, appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loaded at the port sooner than the provided for in the agreement between charter and ship owner. The appellants have contended that the since the dispatch money is in the nature of reward to the charter for loading or unloading more rapidly than provided for i.e. in less time than the stipulated May days', the same would not be for rendering port services. Similarly, for cargo documentation fees, the appellants have contended that the said amount is nothing but charges for use of weigh bridge. Such weigh bridge facility could have been outsourced but they have provided the said facility in the port area itself. The same has got nothing to do with the port services. As against above, the Commissioner has referred to definition of port service, as appearing in the section 65 (82) of the Finance Act, 1994 which means service rendered by a port or any person authorised by the port, in any manner, in relation to a vessel or goods. Inasmuch the vessel priority income and dispatch money is in relation to the vessel, being rendered by the appellant company, the same would fall under the port service. Learned Advocate, Shri Nankani, has though reiterated the said arguments advanced befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any, in respect of the said category falling within the limitation period. However, as we have already observed that there was bonafide doubt on the part of the assessee and no malafide can be attributed to them, imposition of penalty would not be justified. The same are required to be set aside and we order accordingly. 23. As regards confirmation of service tax in respect of renting income, service tax payable on services received from outside India, service tax payable on hot work charges appearing against serial no.9,10,11 12 of Table 17, learned Advocate, Shri Nankani appearing for the appellants submitted that they are not contesting the same on merits. As such, the service tax confirmed against the said serial numbers is upheld. 24. As regards, serial No.1 and 2 of Table 18, it is seen that the demands stands confirmed against the appellants by denying the benefit of cenvat credit availed in respect of rail, sleeper, fish plates and bitumen by following the earlier decision of the Tribunal in the same appellants' case reported as 2009 (13) STR 178 (Tri.) Learned Advocate fairly agree that the ratio of the said Tribunal's decision is applicable but submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid rule was amended with effect from 1.4.2008 as per clarification issued by the Board vide Circular F.No.137/72/08-CE dt.21.11.08, the appellants again became entitled to utilize all the accumulated credit with effect from 1.4.08. As such, he held that in view of the amended law consequent to the amendment carried out in terms of Notification no.1O/08-CE (NT) dated 1.3.08 and the specific clarification given by the Board, the amount remained unutilized as on 1.4.08 were eligible as credit with effect from 1.4.08. Accordingly, instead of confirming the credit denial as proposed in the notice, he has observed that the said credit was again available to the appellant with effect from 1.4.08, the same stands regularized by the Government. However, he held that the appellants are liable to pay interest on the same, inasmuch as during the relevant period they were not entitled to use cenvat credit. He accordingly confirmed the interest in respect of the same. As regard penalty, he observed that it is peculiar circumstance in which, an amount has been wrongly utilized in excess, but is subsequently regularized by the Government through legislative amendment. He also referred to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As regards serial no.2 of Table 19, we find that the Commissioner by accepting the appellants' contention that non service activity provided by them cannot be considered as exempted has dropped the demand of 8% of value of such service. It is seen that the Revenue is not appeal against such dropping of the demand of 8% of the value of exempted services provided to other than SEZ unit. As such, the said part of the order is not required to be interfered. 27. As regards serial no.3 of the Table 19, the demands stands confirmed against the appellants on the findings that they are required to pay an amount equal to 8% of the value exempted services provide to SEZ unit. Learned Advocate has submitted that the provisions of Central Excise Act, 1944 and consequently, the provisions of Cenvat Credit Rules, 2004 are not applicable to SEZ unit which is deemed to be outside to Central Excise jurisdiction in terms of Section 53 of SEZ Act, 2005. As such, the services rendered to developer or unit of SEZ are not exempted services and therefore the question of demanding 8% of the value of such service does not arise at all. However, we find that the services provided to SEZ unit or develop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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