TMI Blog2016 (6) TMI 623X X X X Extracts X X X X X X X X Extracts X X X X ..... alore during the relevant period, they cannot be made liable to pay service tax under the category of port services. Consequently the impugned order confirming the demand along with interest and imposing penalties under various provisions of Service Tax Law i.e., the Finance act, 1994 is hereby set aside - Decided in favor of assessee. - ST/166/2008 - Final Order No. 20433 / 2016 - Dated:- 14-6-2016 - Shri S. S. Garg, Judicial Member And Shri Ashok K. Arya, Technical Member For the Appellant : Mr. K. S. Ravi Shankar, Sr. Advocate For the Respondent : Mr. Pakshirajan ORDER Per Ashok K. Arya The appellant viz., M/s. HML Agencies (P) Ltd., Mangalore is in appeal before this Tribunal against the Order-in-Original No.2/2008 dated 5.2.2008 (passed on 31.1.2008) by Commissioner of Central Excise, Mangalore. 2. The impugned order passed by Commissioner has confirmed the demand of Service Tax of ₹ 6,47,51,236/- and Education Cess of ₹ 12,07,563/- in respect of the two show-cause notices in terms of Proviso to Section 73(1) read with Section 68 of Finance Act, 1994 and Rule 6 of Service Tax Rules, 1994 along with the interest under Section 75 of Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal position that turnkey contracts cannot be vivisected. The appellant relies on the Tribunal s decision in Daelim Industrial Co. Limited vs. CCE: 2003 (155) E.L.T. 457 (T), wherein it was held that turnkey basis contract cannot be vivisected and part of it be subjected to service tax. Demand of duty under Port Service: (iv) The respondent has proceeded on an erroneous footing in re-classifying services rendered inside the port as port services and services rendered outside the port under cargo handling services with reference to export of iron ore. The appellant submits that handling shipment of iron ore fine is also an activity of CHA service and the appellant has already paid the service tax under the category of CHA, which fact is not in dispute or doubt. The appellant respectfully submits that at no point of time the appellant has rendered the service of cargo handling or port services. The impugned order is therefore bad in law. (v) The appellant submits that the respondent has grossly erred in classifying the services under Cargo Handling Service or under Port Service. The appellant submits that they had obtained registration under the category of Custom House Agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be construed as rendering of service under the category of port services. (vii) The appellant would rely on the following Tribunal decisions in support of their contention that their activities do not attract tax under port services and that they have discharged service tax in accordance with law. a. Homa Engineering Works vs. CCE: 2007 (9) S.T.R. 373 (T), wherein it was held that repair of vessels at dock by contractor for its customer, was not port service by a person authorised by the port. b. Velji P. Sons (Agencies) P. Ltd. and Anr. Vs. CCE: 2007 (8) S.T.R. 236 (T), wherein it was held that service provided by CHA would not fall under the port service category. This case was affirmed by Apex Court and reported in 2008-TIOL-68-SC-ST. c. Konkan Marine Agencies: 2007 (8) S.T.R. 472 (Tri.-Bang.) wherein it was held that handling services and stevedoring operations would not fall under port services; and export cargo would not come under cargo handling service The departmental appeal was dismissed by the Hon ble High Court of Karnataka in CEA No.12/2008 dt. 13.3.2008. d. CCE vs. Laxmi Trading Co.: 2008-TIOL-68-SC-ST, wherein it was held that the contract was for tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted the revenue from refusing to register them under that head, assess them under that category, accept their returns under the said head, audit them under that head, accept taxes on service of CHA. (xii) All material facts were within the knowledge of the Department from the inception as the appellant was a registered assessee since the year 2002, and were paying tax and filing returns as prescribed by law and the appellant was subjected to audits and adjudication in the past. (xiii) The appellant submits that when service tax itself is not payable, the demand of interest would automatically fail. The appellant relies on the Supreme Court decision in Pratibha Processors vs. UOI: 1996 (88) E.L.T. 12 (SC), wherein it was held that interest is an accessory of the principal (tax) and if tax fails interest also fails automatically. (xiv) The appellant submits that there is no finding or any evidence to prove culpable mental state or mens rea attributable to the appellant. The appellant submits that there is not even an iota of evidence brought on record against them, to establish that they had acted contumaciously, dishonestly or in deliberate defiance of law. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned order. 5. We have carefully gone through the facts on record as well as the submissions of the appellant and the Revenue in detail along with the case laws cited. 5.1 The appellant viz., HML Agencies Pvt. Ltd. has been providing in addition to CHA services other services in the category of transportation of goods by road, cargo handling service, stevedoring, clearing and forwarding, etc., in the port area. The services which were being provided by the appellant in the port area and which were provided on the strength of consolidated contract by the appellant have been held to be under the classification of port services in terms of Section 65A(2)(b) of Finance Act, 1994 by the impugned order. 5.2 The CESTAT Bangalore in its decision in the case of Aspinwall Co. Ltd. (supra) has analysed similar facts in case of one of the appellants therein viz., Alvares Thomas. In this regard, we refer to the discussions and observations of CESTAT Bangalore made in the said case. The said decision, in its para 12, refers to the facts similar to the facts present in this appeal. We, therefore, are reproducing para 12 and further paras from the said decision below: 12. The und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it cannot be treated as Port Services as port has not authorized them to render such services. It is not disputed that the service provider is licensed and permitted to render stevedoring service. Port is a notified area and does not provide free access to general public. For entry into the port premises, Port Trust has specified certain restrictions. Rendering of any service within the port would be possible only with permission or authorization issued by the Port. The service provider has obtained a stevedore licence from the Port Trust, for rendering stevedore service. All the services within the port are either required to be done by port or by persons permitted/authorized by the port. A person who is licenced or authorized to render stevedore service is also authorized to render other allied and ancillary operations as evident from the nature of service rendered by the service provider. The statutory definition under Section 65(82) says that port services 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 . So the emphasis here is on the person authorized and not on the servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Port or by any person authorized by the port. Since transporting, removing and shifting of goods are not done by NMPT, the service provider performs the above services on the strength of stevedore licence which is nothing but an authorization to enter the port premises and render services. If the service provider was not authorized by the Port to perform the above services, Port Trust would have raised objection or would not have allowed them to perform the services in the port premises other than simple stevedoring (loading unloading) operation. Therefore, it should mean that the above services performed by the service provider are with the explicit approval of port authorities only . 13. As can be seen from the above reproduced findings of the adjudicating authority, which is more or less the same in all the orders, relies upon two propositions to classify the services rendered by the appellants under Port services viz. (i) that the services are rendered by the appellants within the port area of the new Mangalore Port or Karwar Port and (ii) Section 42(1) of the Major Port Trust Act, 1963 indicates that a Board shall have power to undertake the services, which they can lic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the services of ship repairing. Interpreting Section 42 and the provisions of the Service Tax in the Finance Act, the Mumbai Tribunal even held that the Board s circular issued on this behalf is not in accordance with law. Moreover, the appellants have produced a letter from the Mangalore Port Trust which clearly say that the appellants are rendering the services directly and not on behalf of the port (emphasis supplied). In these circumstances, there is much force in the appellant s contention that services rendered by them would not amount to Port Services . In other words, it would only be Cargo Handling Services . But, the appellants would not come within the ambit of taxation, because in respect of Cargo Handling Services , the cargo in relation to exports are excluded from the purview. Since the appellant is only handling the export cargo, he would not be liable to Service Tax even under the category of Cargo Handling Services . In these circumstances, we do not find any merit in the order of the Commissioner and therefore, we set aside the same and allow the appeal of the appellants with consequential relief. 14. It can be seen from the above reproduced findings that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment being not stayed by the Hon ble Supreme Court, will squarely applies to the cases in hand 5.3 Here let us refer to the definition of port service given in Section 65(82) of Finance Act, 1994. The definition of port services before the amendment made by the Finance Act, 2010 (14 of 2010) dated 8.5.2010 (made effective from 1.7.2010) as given in the Section 65(82) was: Port Service means 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 5.3.1 After the said amendment made by the Finance Act, 2010 dated 8.5.2010 (made effective from 1.7.2010), the definition of port service in Section 65(82) is: Port Service means any service rendered within a port or other port, in any manner. 5.3.2 From above definitions of Port Service before the amendment of 1.7.2010 and after the said amendment of 1.7.2010, we find that prior to 1.7.2010 focus/emphasis was on any service rendered by a port or other port or any person authorised by said port or other part. But in the definition of Port Service after the amendment of 1.7.2010, the focus/emphasis is on any service rendered with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is clear that various services which were rendered within the port area by the appellant in question, the said services cannot be called and categorised as port service for levying service tax when the definition of port service during the relevant period did not exactly cover such services which were rendered by them for transportation of goods , handling of cargo , etc., within Port area. In this regard, we again quote from CESTAT, Bangalore s decision in case of Aspwinwall Co. Ltd. (supra). CESTAT Bangalore in the said decision has also quoted the decision of Velji P. Sons (Agencies) P. Ltd. (supra). We herein below accordingly reproduce paras 16.1, 16.2, 17 and 18 from the said decision of CESTAT, Bangalore. 16.1 In the case of Velji P. Sons, the facts were: the assessee therein was rendering the services of hiring of the barges, cranes, forklifts and they were licenced by Gujarat Pipavav Port Limited to carry out such activities. Revenue was of the view that the services rendered by the appellant would relate to goods hiring vessel and hence would fall under the category of port services as defined under Section 65(42) of the Finance Act, 1994. While allowing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of the Major Port Trusts Act provides for authorization by the Board for various services specified by that Port in the Official Gazette. For such authorization if effective, the same should have prior approval of the Central Government and the person so authorized cannot charge any excess payments than the amount specified in the tariff authority for Major Ports, by Notification in the Official Gazette. The licenses issued to the appellant are not governed by the statutory requirement of Section 42 inasmuch as the appellant is free to charge any amount from its customers for the services being provided by it and such collections are not regulated by the Port. In this view of the matter, the licence given to the appellant cannot be held to an authorization (emphasis supplied). 8. Licence means a permission given for specific purpose; the licence holder cannot be interpreted as having the powers or authority of the person issuing the licence, unless the licence specifically mentions about it. To take a simple analogy the person issued with driving licence, under no stretch of imagination, can be said to be functioning as Road Transport Authority. Authorization may be issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. Against the aforesaid case in M/s. Homa Engineering Works v. CCE, Mumbai, Revenue has not filed any appeal in this Court. In view of this, this appeal is dismissed. No costs 17. It can be seen from the above reproduced ratio of the judgment of the Tribunal in the case of Velji P. Sons (Agencies) P. Ltd. that the facts, of that case and the facts in these cases before us are identical wherein various services were rendered by the appellants herein within the port area. Since the ratio of the judgment of the Velji P. Sons is squarely applicable in this case, the judgment had also having been upheld by the Hon ble Apex Court, the ratio is binding on us. It is also to be noted that the judgment of the Hon ble Supreme Court in the case of Velji P. Sons seems to have been accepted by the Government of India, which can be ascertained from the fact that the Government of India in Finance Act, 2010 expanded the scope of many existing services and one of them being Port services . The expansion of definition of Port services , which has been brought into play by the Finance Act, 2010, would seeks to include all services provided entirely within airport/port premise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCE, Mangalore vs. S. S. Maritime: 2011 (23) S.T.R. 114 (Kar.) wherein Revenue s appeal was rejected subject to the liberty given to the Revenue to approach the Hon ble Apex court. CESTAT Bangalore s decisions in the following cases also support our view in this issue: * South India Corporation (Agencies) Ltd. vs. CCE, Visakahaptnam-I: 2010 (17) S.T.R. 170 (Tri.-Bang.); * CCE, Visakhapatnam vs. Chowgule Brothers Pvt. Ltd.: 2010 (18) S.T.R. 164 (Tri.-Bang.); and * Kin-Ship Services (India) Pvt. Ltd. vs. CCE, Cochin: 2008 (10) S.T.R. 331 (Tri.-Bang.) 5.7 We wish to refer again to Hon ble Delhi High Court s decision in the case of Airport Retail Pvt. Ltd. (supra) wherein it was held that the respective services rendered within airport premises could not be charged service tax as airport services because the amendment made by the Finance Act, 2010 is prospective and is effective after 1.7.2010 only. It is to be noted that services rendered within the Port area , which is subject matter of the present appeal and services rendered within airport premises are comparable. Therefore, findings and the conclusion made by Hon ble Delhi High Court in the said case are rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered as a simple letting out of immovable property, the same would not fall within the taxable service of airport services under clause (zzm) of Section 65(105) prior to 1-7-2010. Since it is stated that the petitioner closed its operations w.e.f. 30-6-2010, the transaction between DIAL and petitioner would in any event not be exigible to tax as airport services. 5.8 We also wish to refer to CESTAT, Delhi s decision in the case of Airport Authority of India vs. CST, Delhi: 2015 (39) S.T.R. 35 (Tri.-Del.) as the observations made therein are relevant for the facts present in this appeal and give support to our views on the matter. In para 16.6 of said decision, CESTAT, Delhi observes as under: 16.6 ........................... During the period prior to 1-7-2010, when provision to Section 65(105)(zzm) making the provisions of Section 65A inapplicable to this clause was not there, the services specifically covered by other clauses of Section 65(105), even if provided by AAI or a person authorised by it in an airport/civil enclave, would be taxable as the service covered by the respective clauses, but w.e.f. 1-7-2010, even if a service, on the basis of Section 65A is cov ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
