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2015 (7) TMI 827

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..... ar as jetties operated by the Board are concerned, the Board itself defrays such expenses. It is only in cases like the present where the jetty is primarily meant for loading and unloading goods belonging to a particular private party that repair and maintenance expenses are to be borne by the private party and not by the Board. It is in this circumstance that we find that there is no service, therefore, rendered by GMB to UCL. Authority given to perform any of the services must first and foremost be under terms and conditions as may be agreed upon by the Board and the private person. Further, under sub-Section (4) of Section 32, it is the private person who is then authorized to charge or recover any sum in respect of such service rendered. This is conspicuously absent in the aforesaid agreement. There is no doubt on a reading of the agreement that it is the Board itself that charges or recovers wharfage charges from the licensee - UCL and does not authorize UCL to recover such charges from other persons. This being the position, it is clear that no service is rendered by a port or by any person authorized by such port and, therefore, the very first condition for levy of servic .....

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..... . The amount of rebate/concession granted in wharfage charges amounting to 80% allowed to the licensee should, therefore, be included for purposes of calculation of service tax. Equally, the amount that was demanded on account of lease rent for waterfront usage was also confirmed, together with interest and penalty, which was imposed on the assessee. 3. In appeal from this order, CESTAT by its judgment dated 1.8.2013 reversed the Commissioner s order holding that no service at all was rendered by the Gujarat Maritime Board in relation to any vessel and, therefore, no amount was payable by way of service tax. Equally, on an analysis of the agreement between GMB and UCL, it was held that 20% of wharfage charges which was payable under the agreement was really payable as licence fee/rental and, therefore, the balance 80% being of the nature of licence fee/rental and not being of the nature of payment for services rendered would equally render the payment bad in law. 4. Shri Yashank Adhyaru, learned senior advocate appearing on behalf of the revenue has taken us through the Gujarat Maritime Board Act and the Finance Act, 1994. It is his contention that on a conjoint reading of th .....

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..... collected. 6. It is important first to advert to the Finance Act, 1994 under which the charge is laid for service tax. Section 65(82) defines port service as under:- Port service means any service rendered by a port or other port or any person authorized by such port or other port, in any manner in relation to a vessel or goods; 7. Such service tax is leviable under Section 65(105) (zn) which reads as follows:- Taxable service means any service provided or to be provided- (zn) to any person, by a port or any person authorized by the port, in relation to port services, in any manner; Further, under Section 67 of the said Act, the value of any taxable service shall be the gross amount charged by the service provider for such service provided or to be provided by him. 8. The relevant provisions of the Gujarat Maritime Board Act are as follows:- 35. Power to permit erection of private wharves, etc. within a port subject to conditions: (1) No person shall make, erect or fix within the limits of a port or port approaches any wharf, dock, quay, stage, jetty, pier, place of anchorage, erection or mooring or undertake any reclamation of foreshore within .....

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..... ing, 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 charge of the goods for the purpose of performing the service or services and shall give a receipt in such form as the Board may specify. (3) Notwithstanding anything contained in this section, the Board may authorize any person to perform any of the services mentioned in sub-section (1) on such terms and conditions as may be agreed upon. (4) No person authorized under sub-section (3) shall charge or recover for such service any sum in excess of the amount leviable according to the scale framed under Section 37, 38 or 40. (5) Any such person shall, if so required by the owner perform in respect of the goods any of the services and for that purpose take charge of the goods and give a receipt in such form as the Board may specify. (6) The responsibility of any such person for the loss, destruction or deterioration of goods of which he has taken charge shall, subject to the other provisions of this Act, be that of a bailee under Section 151, 152 and 161 of the Indian Contract Act, 1872 (IX of 1872). (7 .....

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..... rein 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 port charges, notified by government/Board under the Indian Ports Act, 1908/Gujarat Maritime Board Act, 1981 and allied legislations/regulations from time to time. (e) CAPTIVE JETTY would mean a Jetty constructed for landing and shipping by a port based industry, located in Gujarat for landing and shipping of their Captive Industry Raw Materials for manufacturing or their finished products that are manufactured by the Licensee, from the constructed Jetty for that specific industry. 2. The Board has granted permission to the licensee for continuing with construction and use of the Captive Jetty at the site demarcated on the plan, a layout of which has been annexed to this agreement. 3. The Licensee shall pay and continue to pay for the license granted under this Agreement a license fee of ₹ 10,000/- (Rupees Ten Thousand only) per annum to the Board regularly on or before the 30th day of April every year during the currency of this agreement. 12. The ownership of the structure .....

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..... erms 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 safety of the structure or for any other purpose, carry out inspection every six months from the date of issue of the Completion Certificate. The Licensee shall carry out maintenance and repairs to the structure at its own cost, whenever so directed by the Board upon inspection. No alteration or extension of the Jetty shall be done without prior permission of the Board in writing PROVIDED that this clause shall not preclude the Board from carrying out inspection at any time, instead of every six months. 16. The Licensee shall at its own cost repair and maintain the jetty in good order and condition to the satisfaction of the Board during the tenure of this agreement and on the failure of the Licensee to do so, the Board shall be entitled, but not bound, to do so at the cost of licensee. This condition however, does not entitle the Licensee to refrain from carrying out repair or maintain the Jetty in good order and condition and it is further agreed that non-perfo .....

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..... anding 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 Clause 24) made by the Captive Jetty holder, and the same shall be calculated in a prescribed format. Once the Capital Investment is recovered through the Rebate, the Captive Jetty holder shall have to pay thereafter, landing and shipping fees at the normal rate as per the Schedule of Port Charges in force from time to time prescribed for captive jetty. B. The Licensee shall also be entitled, as in the normal case to a concession in payment of landing/shipping fees for coastal transportation of the cargo from one port under the Board to another port under the Board @ 25% and from one port under the Board to another Indian Port or vice-versa @ 15% or at the rate as may be applicable from time to time. C. No Rebate will be given in respect of any other charges to be levied under Indian Ports Act and under Gujarat Maritime Board Act. The parties shall have to pay all the port charges at the rates specified in Schedule of Port Charges in force from time to .....

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..... 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 accordance with the provisions of the Indian Arbitration and Reconciliation Act, 1996 or any statutory modification or re-enactment thereof for the time being in force. 36. The agreement shall remain in force for a period of twenty five years or till such time as the aggregate of REBATE availed off by the party equals the amount of the construction of the Jetty whichever is earlier from the date of commissioning of Jetty. PROVIDED further that even after aggregate of rebate availed of by the Licensee equals the amount of construction of Jetty, the Licensee will be allowed to use the Jetty for captive purpose subject to full payment of full wharfage charges so long as the project of the Licensee for which the permission is granted exists or continues to exist, i.e., continues to function. It is agreed and understood by the Licensee that out of the terms Jetty the terms applicable for the purpose of this Agreement may be retained in this A .....

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..... 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 of the agreement is to be 25 years from the date of commissioning of the jetty or such time as the rebate availed of by the party equals the construction cost of the jetty whichever date is earlier. However, even after the rebate and the construction cost square off, the licensee will be allowed to use the jetty for captive purposes subject to full payment of wharfage charges so long as the project of the licensee i.e. the cement plant of the licensee continues to function. 11. The question which arises on a reading of the said agreement is, therefore, whether any service is rendered by GMB or by any person authorized by GMB in relation to a vessel or goods. The agreement makes it clear that it is the duty of the licensee, i.e., UCL to maintain the jetty in good order and condition during the tenure of the agreement. (See: clauses 15 and 16 set out above). Further, it is UCL that is to provide all se .....

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..... 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 sought to be collected as wharfage charges. This amount would necessarily include all amounts that are spent for keeping the said jetty in good condition including dredging so that vessels can berth alongside the jetty. It is clear that so far as jetties operated by the Board are concerned, the Board itself defrays such expenses. It is only in cases like the present where the jetty is primarily meant for loading and unloading goods belonging to a particular private party that repair and maintenance expenses are to be borne by the private party and not by the Board. It is in this circumstance that we find that there is no service, therefore, rendered by GMB to UCL. 13. The other limb of Shri Adhyaru s argument is that in any case UCL is a person authorized by GMB within the definition of port service and that, therefore, in any case the Section would be attracted as there is no doubt that whar .....

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