TMI Blog2016 (2) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... he GMB to the appellant and the demand of service tax on Stevedoring and Lighterage charges, under port service, on the appellant, prior to 01.7.2010, cannot be sustained. The question of demand of Service Tax on barge charges and the handling charges connected therewith would not arise at all with effect from 10-10-2007 as they form an integral part of the transaction value for levy of customs duty. Even for the period prior 10-10-2007, the same position would apply for the reason that the import transaction is complete only when the goods reach the customs barriers and the bill of entry for home consumption is filed. The demand of Service Tax alongwith interest on Lighterage and Stevedoring services rendered by the Appellant in relation to vessel or goods at the Magdalla/Hazira Port under 'Port services' would be upheld from 01.07.2010 and the extended period of limitation cannot be invoked. The demand of tax alongwith interest prior to 01.07.2010 and penalties are set aside. - Decided partly in favor of assessee. - Appeal No.ST/10892/2013-DB; Application No.ST/EXTN/14742/2014 - Order No. A/10080/2016 - Dated:- 4-2-2016 - MR. P.K DAS, MEMBER (JUDICIAL) AND MR. P.M. SALEE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f cargo in barges from the mother vessel anchored at the anchorage of the port to the barge/jetty and vice versa. 4. On the first issue (i.e. Stevedoring charges), it is submitted that the Stevedoring services rendered to Domestic Tariff Area (DTA) unit of M/s Essar Steel, they were discharging Service Tax under the category of Cargo Handling Services. The definition of Cargo Handling Services specifically excluded the handling of export cargo and therefore, they were not paying Service Tax on Stevedoring services in respect of loading, unloading and handling of export cargo. 4.1 On the other issue (i.e. Lighterage charges), the transportation of goods through barges (sea), till 31.08.2009, there was no taxable head of services on lighterage charges. It is submitted that the Superintendent of Central Excise, by letter dt.23.09.2009, directed the Appellant to pay Service Tax on lighterage charges under the head of Transport of Coastal Goods and Goods Transport Through National Waterways and Inland Water Services (in short Transport of Coastal Goods) and they started discharging Service Tax as per the direction of the Department under the new head w.e.f. 01.09.2009. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Tribunal in various cases, held that in this situation, the demand of Service Tax for the extended period of limitation cannot be sustained. The learned Advocate submitted the written submissions in detail alongwith the compilation of case laws and the various provisions of the Finance Act, 1994. 6. On the other hand, the learned Authorised Representative for the Revenue reiterates the findings of the Adjudicating authority. He submits that the Stevedoring Lighterage services are covered under the Port services since 2001. He submits that M/s Essar Steel was authorised by the Port to render the services in the port. On perusal of the various provisions of GMB Act and the agreement between M/s Essar Steel and the Appellant, would clearly show that the Appellant is authorised by the Board for rendering the services. He particularly drew the attention of the Bench that the Appellants raised charges for Stevedoring Lighterage services to M/s. Essar Steel are in conformity with the schedule of Board. It is submitted that the issue is squarely covered in favour of the Revenue by the decision of Hon'ble Gujarat High Court in the case of Kandla Shipchandlers Ship Repai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard (GMB) in terms of GMB Act, 1981. M/s Essar Steel had been licenced to set up a captive jetty at Hazira within the Magdalla Port in terms of the concession agreement entered between GMB (licensor) constituted by the Government of Gujarat under GMB Act, 1981 and M/s Essar Steel (licencee). M/s Essar Steel had two manufacturing facilities at Hazira at Domestic Tariff Area (DTA) and others and Special Economic Zone (SEZ). M/s Essar Steels (Hazira) Ltd got approval as SEZ unit vide letter dt.26.10.2006 issued by the Office of Development Commissioner, Kandla Special Economic Zone, Ministry of Commerce Industry, Gandhidham. By letter dt.24.08.2009, the Chartered Accountant on behalf of GMB informed the Superintendent of DGCEI that authorization was only issued to M/s Essar Steel at Magdalla to perform services in the Port under Section 32(3) of the Gujarat Maritime Board Act, 1981. 10. On 01.04.2006, the Appellants had entered into Stevedoring, Lighterage and Transshipment Contract with M/s Essar Steel for the Lighterage and transshipment of finished steel goods from the Cargo Handling Terminal of the M/s Essar Steel, Hazira and the mother vessel for both inward and outward ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Tax from 01.09.2009 under the head of Transport of Coastal Goods and Goods Transport through National Waterways and Inland Water Service. Further, Stevedoring and Lighterage services to the said SEZ unit of M/s Essar Steel, no Service Tax was paid, which was exempted by virtue of Section 26(1)(e) of the said Act, 2005 read with Rule 36 of the said Rules. 11. The relevant definition of the Finance Act, 1994, Board Circular etc as referred by both sides are reproduced below:- (A) The definition of Port Service before its amendment on 01.07.2010 under Section 65(82) of the Act, 1994: Any service rendered by a port or other port or any person authorised by such port or other port in any manner, in relation to a vessel or goods. Taxable service under Section 65(105)(zn) of the Act, 1994 means any service provided or to be provided, to any person, by a port or any person authorised by the port, in relation to port services, in any manner. (B) The Port Service has been amended w.e.f. 01.07.2010 as under:- Port Service means any service rendered within a port or other port, in any manner. Taxable service means any service provided or to be provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity would now not be a pre-condition for the levy. (D)`Cargo Handling Service means loading, unloading, packing or unpacking of cargo and includes (a) cargo handling services provided for freight in special containers or for non-containerized freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and cargo handling service incidental to freight and (b) service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking, but does not include handling of export cargo or passenger baggage or mere transportation of goods. (E) Definition of Service Tax under the category of Transport of Coastal Goods and Goods Through National Waterways and Inland Water Services leviable from 01.09.2009:- (zzzzl) to any person, by any other person, in relation to transport of- (i) coastal goods; (ii) goods through national waterway; or (iii) goods through inland water Explanation - For the purposes this sub-clause,- (a) coastal goods has the meaning assigned to it in Clause (7) of Section 2 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 performing the service or services and shall give a receipt in such form as Board may specify. (3) Notwithstanding anything contained in this section, the Board may authorise 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 authorised under sub-section (3) shall charge or recover for such service any sum in access 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 the bailee under sections 151, 152, and 161 of the Indian Contract Act, 1872. (7) After any goods have been taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (3), a Board may, with the previous approval of the Central Government, enter into any agreement or other arrangement, (whether by way of partnership, joint venture or in any other manner) with, any body corporate or any other person to perform any of the services and functions assigned to the Board under this Act on such terms and conditions as may be agreed upon.] (4) No person authorised under sub-section (3) shall charge or recover for such service any sum in excess of the amount 6[specified by the Authority, by notification in the Official Gazette. (5) Any such person shall, if so required by the owner, perform in respect of goods any of the said 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 sections 151, 152 and 161 of the Indian Contract Act, 1872 (9 of 1872). (7) After any goods have been taken charge of and a receipt given for them under this section, no liability for any los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd ship manufacturing activity may also be done in the port area, for which purposes, the facility may be provided by the port, but that will not make the same as port services. It has been held that the expression or any other services in respect of vessels has to be extended to the services which are connected with the movement of the vessels. It is nobodys case that the repairing of vessels in the dry dock is connected with the movement of the vessels. The Tribunal allowed the appeal of the Assessee. (b) M/s Velji Sons (Agencies) P. Ltd Vs CCE Bhavnagar-2007 (8) STR 236 (Tri-Ahmd) In that case, the Appellants were engaged in Customs House Agent service, which was within the service net w.e.f. 1997. The Appellant was paying the Service Tax under the category of Customs House Agents services. A Show Cause Notice dt.15.07.2005 was issued, proposing demand of Service Tax for the period July 2003 to January 2005 on the ground that the services provided by the Appellant would come under Port services w.e.f. 01.07.2003. The appellants were licensed by Gujarat Pipavav Port Limited for hiring of barges, cranes, fork lifts relating to goods or vessels. The Adjudicating autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal was upheld by Hon'ble Karnataka High Court as reported in 2009 (13) STR 7 (Kar) (Commissioner of Central Excise, Mangalore vs. Konkan Marine Agencies). The Hon'ble High Court, after considering Section 42 of the Major Port Trust Act, 1963 and the definition of Cargo Handling Service, held as under:- 13. Cargo handling service has been defined in Section 65(23) in the Finance Act, 1994. The said definition reads as under : Cargo Handling Service means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport and cargo handling service incidental to freight, but does not include handling of export cargo or passenger baggage or mere transportation of goods. 14. A bare reading of the aforesaid definition further makes it clear as day that in any case handling of export cargo would not attract service tax at all. After having gone through the aforesaid definition, it leaves no amount of doubt in our mind that such a service tax could not have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods undertaken by the respondent CHA in the port premises cannot be subjected to tax classifying the same as Port Services . (f) M/s South India Corporation (Agencies) Ltd Vs CCE Visakhapatnam-I-2010 (17) STR 170 (Tri-Bang) The appellants were holders of a stevedoring licence issued by M/s Visakhapatnam Port Trust (VPT) and are not persons authorized by the Port. The appellants are basically Custom House Agent (CHA). They also undertake the loading and unloading of cargo. Stevedoring work inside port undertaken based on licence issued by port. The Tribunal, following the earlier decision in the case of Konkan Marine Agencies (supra) allowed the appeal of the Appellant on merit as well as on limitation. 16. The appellant strongly relied upon the decision of the Tribunal in the case of M/s Shreeji Shipping Vs CCE ST, Rajkot 2014 (36) STR 569 (Tri-Ahmd). In that case, the appellant was registered with the Service Tax authorities on 23-1-2003 as a cargo handling agent and discharging the Service Tax on the value of stevedoring, unloading and loading charges. They have paid the Service Tax on the entire charges collected by them for various services like ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s effected from 1-7-2010 are extracted herein below for the ease of reference. 65(82) Port Services means any service rendered within a port or other port, in any manner 65(105) to any person, by any other person, in relation to port services in other port, in any manner; Provided that the provisions of Section 65A shall not apply to any service when the same is rendered wholly within other port; The explanatory memorandum to the Finance Bill, 2010 explaining the said changes has clarified that the definition of port service and other port service was being amended to provide that an authorization from the port authority would not be a pre-condition for taxing the said services and further that all services provided entirely within the port would be taxable under the said head. The said amendment clearly brings out the legislative intent of not taxing services other than those provided by a port or a person authorized by the port prior to 1-7-2010. .. . . . . . . 20. The ld. Counsel for the Revenue has contended that the decision of the Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra), Petitioner No.1 is an association of shipchandlers. The Petitioner Nos. 2 3 are individual agencies undertaking certain task with respect to vessels reached at major and other ports in the State. Members of Petitioner No.1 provide various services such as supply of provisions to the crew of the vessels and minor repairs of the vessels, as required. The Superintendent of Service Tax, by a communication dt.02.03.2004 to the President of Petitioner No.1 Association stated the service provided by the Member of Petitioner No.1 Association amounts to port service as defined in Section 65(105)(zn) of Finance Act, 1994 and they are liable to register themselves under Section 69 of the Act, 1984 and to pay tax accordingly. The Petitioners strongly relied upon the decision of the Tribunal in the case of M/s Homa Engineering Works (supra), which was over-ruled by Hon'ble High Court. The relevant portion in the case of Kandla Shipchandlers and Ship Repairers Association (supra) are reproduced below:- 10. It is not in dispute that the members of the petitioner-Association are authorized by the port authorities constituted under the Major Port Trusts Act, 1963 to provide such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In the said decision, the Tribunal referred to the provisions contained in the Major Port Trusts Act, 1963 and formed an opinion that repair of the vessel not being done by the port, it cannot be stated to have been authorized by the port. It was held as under: 11. As such, we find that the powers of the Board to execute the work and provide compliance in terms of section 35(1) are not to the effect so as to carry out the repairing activity themselves. Understandably, the vessel which come on the port after sailing for a considerable period, would require minor/major repairing activities on account of the damages or mechanical faults incurred on account of vagaries of sea and for the subject purposes dry docks and workshops are established in the port for the purposes of rectifying the defect and to make the vessel seaworthy. However, extension of above facility does not mean that it is the duty of the Board to undertake the repairing activity themselves. In fact, under the said section, the port is required to provide facility for repair and not to undertake the repair itself. Ship breaking activities and ship manufacturing activities may also be done in the port area, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e port is either obliged or exclusively required to perform under the Major Port Trust Act, 1963. The term in relation to in the definition of Port services, must be seen as to expanding the scope of coverage of the Port service and cannot be confined to those services which are in relation to movement of vessels so as to exclude from its ambit the work of repair of vessels. In that case, there is no doubt that the petitioners were authorized by the Port to perform the activities in the Port, which were not included the work of repair of vessels. In this context, the Hon'ble High Court observed that the work of repair of vessels would be treated as included in the authorization as per the wide scope of definition of Port service. In the present case, we find that the undisputed fact is the Appellant were not authorized by the Port to perform any activity. It is seen from the letter dt.24.08.2009 of the Chartered Accountant on behalf of the Gujarat Maritime Board to the Superintendent of Central Excise, DGCEI that the authorization has been issued only to M/s Essar Steel Ltd under Section 32(3) of Gujarat Maritime Board Act, 1981. The Adjudicating authority observed that in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble High Court in the case of Kandla Shipchandlers Ship Repairers Association (supra) enlarged the scope of the definition of Port Service prior to 01.07.2010 to the extent the authorization need not necessarily be in respect of only those functions which the Board itself was required to perform under the Act. (Para 13.1 of the Judgment). The Hon'ble High Court categorically observed that the petitioners are authorized by the Port, which would include repair work of the vessels, even it may not be the function of the Board. It is already stated above that in the present case, there is no authorization in any manner to the Appellant, which is admitted by the Board. The point for consideration is that even there is no authorization by the Port in any manner, the service rendered by the Appellant would come under the Port Service. So, the submission of the learned Authorised Representative that the present case is covered by the decision of Kandla Shipchandlers Ship Repairers Association (supra) is mis-reading of the said case law. In other words, the present case is covered by the earlier decision of the Tribunal in the case of Shreeji Shipping (supra). In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mandatory. It is the cardinal rule of the interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. (b) Tata Chemicals Limited vs. Commissioner of Customs- 2015 (320) ELT 45 (SC) In law equally the Tribunal ought to have realized that there can be no estoppel against law. If the law requires that something be done in a particular manner, it must be done in that manner, and if not done in that manner has no existence in the eye of law at all. The Customs Authorities are not absolved from following the law depending upon the acts of a particular assessee. Something that is illegal cannot convert itself into something legal by the act of a third person. The learned Authorised Representative contended that the Stevedoring and Lighterage charges as shown in the contract between M/s Essar Steel Ltd and GMB are similar to the contract between the Appellant and M/s Essar Steel. The Adjudicating authority observed that the Appellant admittedly informed GMB of the contract and arrangement between the Appellant and M/s Essar Steel and the argument that they were not authorized by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a were nothing but cost of transportation. The relevant portion of the said decision is reproduced below :- 22. Learned counsel for the Revenue emphasized on Rule 9(2)(a) of the Rules in support of his contention that barging charges have also to be included in the value of the imported goods as they are also transportation charges. 23. On first impression the submission of learned counsel for the Revenue appears to be sound, because surely the transportation by barge is also part of the transportation of the goods. However, on a deeper analysis, we are of the opinion that the submission of the learned counsel of the Revenue is clearly untenable. Admittedly, all the contracts entered into with the foreign sellers are either CIF contracts or FOB contracts with Bills of Lading nominating Bombay/JNPT/Dharamtar as the ports of discharge. As such the cost of transport has already been included in the price paid to the seller under the CIF contract or an ascertainable freight determined and paid by the buyer from the foreign port to the Indian port. Hence, a further addition to the transport charges under Rule 9(2)(a) of the Customs Valuation Rules, 1988 is in our opinion clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portation of the goods from the mother vessel to the jetty and vice versa is not liable to tax. It has been observed that the activity of transshipment of import and export cargo from mother vessel to the jetty and vice versa is carried out by the barges (termed as Daughter Vessel) on account of draft not permitted the mother vessel to travel until the jetty at minor port. It is stated that first transportation of cargo from the mother vessel to the jetty is to be treated as continuation of journey of the goods in the import stream into India. The Tribunal in the case of United Shippers Ltd (supra) held as under:- 5.2 As regards the first issue, since the transaction involves a customs transaction and a service transaction, it is necessary to decide where the customs transaction ends and the service transaction begins. The issue as to what constitutes imports has been settled by the Honble Apex Court in the case of Garden Silk Mills Ltd. (supra), wherein the Apex Court held as follows :- Truly speaking, the imposition of import duty, by and large, results in a condition which must be fulfilled before the goods can be brought inside the customs barriers, i.e. before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of insurance; Provided that - (i) where the cost of transport referred to in clause (a) is not ascertainable, such cost shall be twenty per cent of the free on board value of the goods; (ii) the charges referred to in clause (b) shall be one per cent of the free on board value of the goods plus the cost of transport referred to in clause (a) plus the cost of insurance referred to in clause (c); (iii) where the cost referred to in clause (c) is not ascertainable, such cost shall be 1.125% of free on board value of the goods; Provided further that in the case of goods imported by air, where the cost referred to in clause (a) is ascertainable, such cost shall not exceed twenty per cent of free on board value of the goods: Provided also that where the free on board value of the goods is not ascertainable, the costs referred to in clause (a) shall be twenty per cent of the free on board value of the goods plus cost of insurance for clause (i) above and the cost referred to in clause (c) shall be 1.125% of the free on board value of the goods plus cost of transport for clause (iii). Provided also that in case of goods imported by sea stuffed in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record. In our considered opinion, we do not see any good ground to interfere with the judgment and order passed by the Tribunal. Accordingly, the Civil Appeals are dismissed. The submission of the learned Authorised Representative is that the above judgment is without any reason. In the case of Kunhayammed Vs State of Kerala - 2001 (129) ELT 11 (SC), the Hon'ble Supreme Court held that where an appeal or revision is provided against an order passed by a court, Tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. The Hon'ble Supreme Court in the case of Medley Pharmaceuticals Ltd Vs CCE Daman 2011 (263) ELT 641 (SC), held that doctrine of merger applicable if appeal dismissed in the absence of detailed reasons or without reasons when superior Court upholds decision of lower court from which appeal arose. The relevant portion of the decision is reproduced below:- 32. This Court has consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir service. The learned Authorised Representative on behalf of the Revenue submitted that if there is no exemption notification under the Finance Act, 1994, the Appellant would be liable to pay the Service Tax. He relied upon the decision of Hon'ble Gujarat High Court in the case of M/s Essar Steel Ltd Vs UoI 2010 (249) ELT 3 (Guj.). On the other hand, the learned Advocate on behalf of the Appellant submits that by virtue of Section 26(1)(e) of the SEZ Act read with Rule 31 of the said Rules, there was exemption from levy of Service Tax on the taxable service provided to a developer or a unit to carry on the authorized operation in state. He relied upon the following decisions:- i) Reliance Ports and Terminals Ltd Vs CCE-2013-TIOL-1473-CESTAT-MUM ii) Intas Pharma Ltd Vs CST-2013-TIOL-1091-CESTAT-AHM iii) Tata Consultancy Services Ltd Vs CCE-2012-TIOL-1034-CESTAT-MUM We find that it has already been held that the demand of Service Tax on Stevedoring and Lighterage services on the Port service prior to 01.07.2010 cannot be sustained. Hence, there is no need to look into this issue, which is merely academic one in the present appeal. 26. The Appellant also c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the various decisions, Board Circular etc. It is well settled that if the two views are possible and if the Assessee entertains a bonafide belief that they are not liable to pay tax, intention to evade payment of tax cannot be attributed. The Hon'ble Supreme Court in the case of Uniworth Textile Ltd Vs CCE Raipur 2013 (288) ELT 161 (SC) held that the extended period of limitation cannot be invoked for mere non-payment and requires a deliberate default on the part of the Assessee. It may be construed from the above facts that there was no suppression of facts with intent to evade payment of Service Tax. It is noticed that on the identical situation, the Tribunal in the case of Shreeji Shipping (supra) and United Shippers Ltd (supra) and other cases, as mentioned above, allowed the appeal on limitation also. Hence, the extended period of limitation cannot be invoked. So, the demand of Service Tax alongwith interest and penalties for the extended period of limitation is liable to be set aside. Hence, the imposition of penalties is unwarranted. 27. In view of the above discussion, we modify the impugned order to the extent the demand of Service Tax alongwith interest on L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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