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TMI Blog2015 (7) TMI 827X X X X Extracts X X X X X X X X Extracts X X X X ..... efer to it in a little detail hereafter. 2. It is alleged that service tax was payable on wharfage charges by GMB collected by them from their licensee UCL under the taxable category of "port services". The revenue authorities initiated investigation against GMB for under-valuation and short payment of service tax. Ultimately, a show cause notice dated 6.3.2009 was issued to collect 80% of service tax payable on wharfage charges which was not paid by the assessee. This was for the period 1.10.2003 to 31.3.2006, the differential amount being a sum of Rs. 1,67,45,620/-. A further amount of Rs. 12,53,076/- was also demanded for the period 2003 October upto 2007-2008 on account of the provision of direct berthing facilities provided for captive cargo of a ship size of 10,000 DWT and above on account of lease rent for use of the waterfront. By the order in original dated 16.7.2009, the Commissioner, Central Excise held that it is clear that the nature of service provided, which is wharfage, is squarely covered under the head "port services" as defined in the Finance Act, 1994. The amount of rebate/concession granted in wharfage charges amounting to 80% allowed to the licensee should, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded at the said jetty. According to learned counsel, the Gujarat Maritime Board was the owner and in control of the said jetty throughout the term of the agreement and all findings to the contrary by the Tribunal were incorrect. 5. Shri P.P. Tripathi, learned senior advocate appearing for the respondent countered all the aforesaid submissions and supported the Tribunal judgment. According to learned counsel, the very basis for service tax was absent in the present case as there is no service rendered of any kind by his client the respondent on the facts of the present case to UCL nor has UCL been authorized by GMB to render any service mentioned in Section 37 of the Act and that, therefore, the authority to levy service tax was absent. He also argued that the 20% of wharfage charges that was paid under the agreement was really only a measure to calculate what is in fact payable as licence fee and that, therefore, the agreement read as a whole would lead to the conclusion that no service was in fact rendered by the respondent and, therefore, no service tax could be collected. 6. It is important first to advert to the Finance Act, 1994 under which the charge is laid for service ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orterage of goods on any such place; (d) wharfage, storage or demurrage of goods on any such place; (e) any other service in respect of vessels, passengers or goods excepting the services in respect of vessels for which fees are chargeable under the Indian Port Act, 1908 (15 of 1908). (2) Different scales of rates and conditions may be framed for different classes of goods and vessels and for different ports. 32. Performance of services by Board or other person:- 1) The Board shall have power to undertake the following services:- (a) stevedoring, landing, shipping or transshipping passengers and goods between vessels in port and the wharves, piers, quays, or docks belonging to or in the possession of the Board; (b) receiving, removing, shifting, transporting, storing or delivering goods brought within the Board's premises; (c) carrying passengers within the limits of the port approaches, by such means and subject to such restrictions and conditions as the State Government may think fit to impose; and (d) piloting, hauling, mooring, re-mooring, hooking or measuring of vessels or any other service in respect of vessels. (2) The Board may, if so requested by the owner, take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and use of a Captive Jetty at Port Pipavav in the State of Gujarat on a license basis for the purpose of handling, storage and transportation of raw-materials for manufacturing and finished products that are manufactured by the Licensee and for the purpose of the Board as well; AND WHEREAS the Board and the Licensee have already entered into License agreement which is modified and this license Agreement in modification of previous Agreement is entered into by and between the Board and the Licensee as appearing hereinafter; AND WHEREAS in consideration of the Licensee constructing a Captive jetty as aforesaid at its cost initially to be adjusted against the Rebate, that may be granted by the Board, the Board as empowered under Section 35 of the Gujarat Maritime Board Act, 1981 granted to the Licensee a license or permission for construction/use of the captive Jetty on the said port at the place aligned, demarcated, provided and approved by the Board upon the terms and conditions specified herein on Build, transfer, Operate and Maintain basis; NOW IT IS AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS: (c) 'PORT CHARGES' would mean port charges specified in schedule of po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebate and concession is granted by the Board against the cost of construction, the equivalent amount at the relevant time shall be utilized by the Licensee in repayment of loan so that at the end of the period of this agreement when the Licensee may not have right of rebate under this agreement, then the construction is free of any liability in respect of such loan. PROVIDED further that the Bank or financial institution granting loan to the licensee shall not have any right against the Board. PROVIDED further that in the event of a declaration of War in the Country or any Emergency or on account of national security or any other circumstances, the Board is entitled to exercise all rights in such kinds of situation and emergency. The Bank or financial institutions shall not be entitled in such event to exercise any right under loan documents even in respect of such construction. The Licensee shall obtain "No Objection Certificate" of the Board for the loan and for the terms and conditions on which the loan is sanctioned, and shall be bound to see that the relevant Clauses in pursuance of this Agreement are incorporated in loan documents. 15. The Board may, in order to decide the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Licensee has any ownership or transferable right in the property and the Licensee is not entitled to levy any charges or compensation from the Board. 21. It is agreed that subject to what has been stated herein, the Licensee shall be liable to pay all the port charges and all other dues payable by the Licensee to the Board, and the Licensee shall not be eligible to get any other rebate or concession except that which is mentioned in Clause 22 and 24. 22. It is agreed that in consideration of the Licensee constructing the Jetty at its own cost initially, the Board has agreed to grant rebate, to be adjusted against the cost of construction, as under: A. The Licensee shall have to pay landing/shipping fees (popularly known as wharfage charges) @ 20% of the actual landing and shipping fees specified in the Schedule of Port Charges prescribed for Captive Jetty. The landing and shipping fees shall be calculated for this purpose as per the schedule of landing and shipping fees, as may be revised or amended from time to time. This concession shall be called 'REBATE' and it will be set off as aforesaid against the Capital Investment (cost of construction as mentioned in Clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not complied with, the Board shall give another Notice to terminate this agreement if the said breach is not complied with within a period of further 15 days and that on the expiry of such period of 15 days, the agreement shall automatically be deemed to have been terminated without further notice. Upon such termination of the agreement, the Board shall be entitled to take control or otherwise dispose off all or any part of the Jetty that may have been constructed, as well as the site thereof in such manner and may give the same to such person or party as may be decided by the Board and the Licensee shall not be entitled to any compensation, nor shall the Licensee have then a right in respect of the superstructure or the land/sea on which the Jetty was constructed, provided that even if the cost of construction of the Jetty is not adjusted against the aggregate of the amount of rebate availed off by the Licensee, the Licensee shall not be entitled to any refund. In case of any dispute or difference by and between the Licensee and the Board, the same shall be referred to the Arbitration of Secretary of the Government in Ports and Fisheries Department and it shall be held in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be adjusted against the cost of construction of the jetty by paying 20% of wharfage charges specified in the schedule of charges prescribed for captive jetties. This concession is to be called a rebate and to be set off against the cost of construction of the said jetty. Once the entire cost of construction is recovered through the rebate, the licensee will have to pay thereafter wharfage charges at the full rate prescribed in the schedule of port charges for captive jetties. H. For direct berthing facilities provided for captive cargo in ships which call at the jetty of 10,000 DWT and above, an amount of Rs. 25,00,000/- will be charged as lease rent for waterfront use. I. It is the licensee UCL that will provide all services at or around the jetty including dredging, navigation, etc. and if this is not done then the Board may on its own provide such facilities at the risk and cost of the licensee UCL. J. The licence is terminable on breach of the terms and conditions of the agreement or of any infraction of law. Upon such termination, the Board shall be entitled to take control or otherwise dispose of all or any part of the jetty that may have been constructed. K. The period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll that is necessary is that a wharf be provided by the Board. The very provision of such wharf would entitle the Board to levy a fee which is nothing other than wharfage charges collected under the Schedule of rates mentioned hereinabove. To appreciate this argument we set out the definition of 'wharf' and 'wharfage' from Black's Law Dictionary as under:- Wharf. A structure on the shores of navigable waters, to which a vessel can be brought for loading or unloading. Private wharf. One that can be used only by its owner or lessee. Public wharf. One that can be used by the public. Wharfage 1. The fee paid for landing, loading, or unloading goods on a wharf. 2. The accommodation for loading or unloading goods on a wharf. We are afraid that we are unable to agree with Shri Adhyaru for the reason that though GMB is the owner of the jetty under the said agreement, yet for providing the service of allowing a vessel to berth at the said jetty, it is necessary for GMB itself to keep the said jetty in good order. Wharfage charges are collectible because they are in the nature of fees for services rendered. The expenses that are defrayed by the Board for the maintenance of the jetty is so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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