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M/s. HML Agencies (P) Limited Versus Commissioner of Central Excise, Customs & Service Tax

2016 (6) TMI 623 - CESTAT BANGALORE

Scope of the term and taxability of Port Service - Authorized operations - Held that:- By reading the provisions in respect of definition of port services , as it was defined for the period prior to 1.7.2010 and for the period after 1.7.2010 and also after making a reading of corresponding taxable service(s) under Section 65(105)(zn) and (zzl), it is clear that various services which were rendered within the port area by the appellant in question, the said services cannot be called and categoris .....

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M/s. HML Agencies (P) Ltd., Mangalore 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, Techn .....

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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 Finance Act, 1994 and imposed various penalties under Sections 76, 77, and 78 of Finance Act, 1994 and Rule 7C of Service Tax Rules, 1994 read with Section 70 of Finance Act, 1994. 2.1 The impugned order has inter alia held that the respective services provided by the appellant during the period of A .....

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High Court of Karnataka vide its Order dated 25.2.2012 in Writ Petition No.13152 of 2009 (T-TAR) rejected Revenue s writ petition and remitted the matter to the Tribunal for consideration on merits in accordance with law. 3. The appellant has been represented by the Sr. Advocate, Mr. K. S. Ravi Shankar. The appellant in its appeal and learned Sr. Advocate during the hearing held on 6.6.2016 has inter alia argued as follows: Demand under Goods Transport Agency: (i) To attract levy of service tax .....

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appellant had engaged transportation for an individual then the appellant is liable to pay service tax. Demand under Customs House Agent Service: (ii) They were executing turnkey contract and the said contract cannot be vivisected and hence the respondent has erred in vivisecting and demanding service tax on CHA service. Cargo Handling Service: (iii) The demand of service tax under Cargo Handling Service is unsustainable as the respondent has bifurcated the indivisible turkey contract into bits .....

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he 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 .....

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o separate break-up in respect of the amount collected, towards service charges. The appellant submits that they are discharging service tax by adopting the above value as per guidelines/clarifications provided in the Trade Notice No.39/97-CE (Service Tax 39)/97 dt.11.6.1997 at para 2.5. The appellant herewith reproduces para 2.5 of the Trade Notice for convenience of reference: In many cases the custom house agent undertakes turnkey imports and exports where a lump sum amount is charged from th .....

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on the above 15%. Board has also issued clarification vide F. No.B.43/1/97-TRU dated 6.6.97 to the same effect. (vi) The appellant submits that the taxable service definition of port services as in Section 65(105)(zn) per se cannot be made applicable to the facts of this case for the reason that the appellant was not authorised by the Port Trust to render port service. The appellant submits that as per the taxable service definition port service means any service provided to any person, by the p .....

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The respondent has enlarged the meaning of port services to hold that any service by an authorised person in any manner in relation to vessel or goods can 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 .....

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rvices 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 transportation of limestone and the loading/unloading was only incidental and therefore the activities were not covered under the category of cargo handling servic .....

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f NMPT (licensing of stevedoring) Regulations of Major Port Trust Act, 1963. The stevedoring license being granted to CHA would not imply that the CHA becomes a port, just as license to practice medicine given to a doctor would not make the doctor the medical council. The appellant submits that the impugned order has grievously erred in holding that the certificate granted by the Manager Port is to carry on the activity of Port Services. (ix) The appellant submits that the Respondent has purport .....

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ust and the same was paid by the appellant. (x) Entire demand of Revenue is clearly barred by limitation. The demand of service tax in the impugned order is an attempt to justify the unjustifiable stand of the revenue, and the finding of suppression of facts with intent to evade tax with a view to invoke the extended period and penalise the appellant, are legally untenable. (xi) The department had registered the appellant under the category of CHA as early as during 2002, and a sudden shift in s .....

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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 .....

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Steel Limited vs. State of Orissa: 1978 (2) E.L.T. J.159 (SC), wherein it was held that penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard to its obligation. (xv) The appellant submits that no penalty could have been imposed for the reasons that there is no liability to differential tax and there is neither culpable mental state nor mens rea. The appellan .....

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ner (Appeal No.ST/442/2008) which have also been discussed in the said Order in para 5. He argued that prior to 1.7.2010, when the definition of port services was amended, the present appellant is not liable to pay any service tax under the category of port services . He also referred to the decision of Hon ble Delhi High Court in the case of Airport Retail Pvt. Ltd. vs. UOI: 2014 (35) S.T.R. 659 (Del.). He again submitted that the facts in their case are similar to the appeal No.ST/442/2008 fil .....

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Shipping Ltd. vs. CCE: 2015 (38) S.T.R. 1148 (T) (iii) Airport Retails Private Ltd. vs. UOI: 2014 (35) S.T.R 695 (del.) (iv) Delhi International Airport P. Ltd. vs. UOI: 2015 (37) S.T.R. 3 (SC) 4. The Revenue was represented by learned AR, Shri Pakshirajan, who reiterated the findings given in the impugned 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 .....

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ned 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 undis .....

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ility under the category of CHA on 15% of the gross value of the bills raised by them for the services rendered to their customers. Revenue s contention is that the entire amount, which is collected by the appellants from their customers, should be taxed under Port Services . The adjudicating authority, while coming to the conclusion that the appellants herein had rendered the Port services , as in almost all cases, recorded the following findings : 27. The issue relates to classification of ser .....

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service in relation to a vessel or goods, and (ii) provided by port, other port or a person authorised by port or other port. The services rendered by the port or a person authorized by the port are not defined in the Act. Therefore, any service rendered within the port premises by the port or by any person authorized by the port is to be treated as Port Service . The Service provider is issued with a Stevedoring Licence and Clearing & Forwarding Agency Licence by NMPT to perform stevedoring .....

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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 .....

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ods . So the emphasis here is on the person authorized and not on the service authorized . 30. In the above mentioned clarification even though Management Committee at Paradeep Port is not authorized by the port for rendering its services within the port, yet it was considered by the Board that as long as the contractors utilized by Management Committee for rendering their services are issued licenses or permits by the Paradeep port, it should be treated as authorized by the Port Trust for rende .....

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has preferred to perform certain services and permitted/authorized to do the remaining services by stevedore. For example, Section 42 of the Major Port Trust Act, 1963 specify performance of service by Board or other person. Section 42(1) says that a Board shall have power to undertake the following services :- (a) landing, shipping or transhipping passengers and goods between vessels in the port and the wharfs, piles, quays in docks belonging to or in the possession of the Board; (b) receiving, .....

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nistration under the Indian Railways Act, 1890 (9 of 1890) (e) piloting, hauling, mooring, remooring, hooking, or measuring of vessels or any other service in respect of vessels (f) developing and providing, subject to the previous approval of the Central Government, infrastructure facilities for ports. 31. Thus, removing, shifting, transporting, storing or delivering goods brought within the port premises are either to be done by Port or by any person authorized by the port. Since transporting, .....

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ore, 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) .....

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n appeal No. ST/75/2007, which was disposed of by Final Order No. 884/2007, dated 6-8-2007 as reported at 2007 (8) S.T.R. 472 (Tri.-Bang.). While allowing the appeal filed by the assessee therein, the Bench recorded findings, which, we may respectfully reproduce : 6. We have gone through the records of the case carefully. The point at issue is whether the services rendered by the appellants amount to Port Services and whether they are liable to pay Service Tax in terms of the Finance Act, 1994. .....

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s . However, when we examined the issue in terms of Section 42 of the Major Port Trust Act, we find, that in terms of that Section, the major port is supposed to carry out a number of activities and there is provision in terms of the said section for the port to authorize any other person to render such services after taking prior approval of the Central Government. In the present case, the appellants strongly contend that the services rendered by them are not on behalf of the ports but on their .....

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of a port to directly render 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 i .....

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, 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 the Bench had considered the provisions of Section 42 of the Major Port Trust Act and also the definition of the Port services under Section 65 of the Finance Act, 1994 while allowing the appeal filed by assessee. Aggrieved by such an order, Revenue preferred an appeal to the H .....

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under : 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. 16. According to the learned Counsel for the appellant since the assessee is a licence holder, therefore he would be the person authorized within the definition of port service as mentioned hereinabove. 17. We do not agree to the aforesaid contentions advanced by the learned Counsel for appellant for the simple reason that d .....

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the case of Konkan Marine Agency as to the same will not fall under the category of Port services . It can be seen that all along, the assessee therein was functioning under stevedoring licence issued by the Port Trust. In the cases before us today, it is a common trait which revolves around the fact that the appellants herein were having the stevedoring licence and were functioning under the said licence and are to be considered as providing services as authorised by the port. We are of the con .....

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endered 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 .....

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r other port) or by a person authorised by such Port or other Port ...... CESTAT, Bangalore s decision in Aspinwall & Co. Ltd. (supra) supports our above stand. 5.3.3 The corresponding taxable port service(s) in this regard have been mentioned in Section 65(105)(zn) and 65(105)(zzl) which were substituted accordingly by the Finance Act, 2010 (w.e.f. 1.7.2010). The said taxable port services in respect of a port and in respect of other port have been defined under Section 65(105)(zn) and (zzl .....

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ame is rendered wholly within other port. It is to be noted that definition (meaning) of the taxable services in a port and in other port , both have the similar Provisio, which says that the provisions of Section 65A will not be applicable, when any service is being rendered wholly within a port or within other port . Its implication is that for the classification for these taxable services normal provisions of Section 65A are not applicable. In other words, all the services which are rendered .....

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ior to 1.7.2010 and for the period after 1.7.2010 and also after making a reading of corresponding taxable service(s) under Section 65(105)(zn) and (zzl), it 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 .....

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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 appeal filed by the assessee against an order holding that the services rendered by the assessee would fall under Port services , the Tri .....

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authorized by such port. The services being provided by the appellant are handling, stevedoring, loading, unloading, tug hire and labour arrangement. Admittedly, such services are not required to be provided by the Port under The Major Port Trusts Act, 1963. A perusal of the Section 35 of the said Act, as reproduced in the case of Homa Engineering Works, clearly shows that power of the Board to execute the works and provide appliances do not include the above activities being undertaken by the a .....

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to port services (emphasis supplied). In any case, we find that there is no authorization by the Port to the appellant to conduct the services on his behalf. Licenses issued by the Port authorities cannot be considered as authorization. Such licenses are issued by the Port authorities to all the persons working in the Port to ensure the safety and security of the Port Area and does not confer any power or authority of the Port on the person so issued with the licence. If the licences issued by t .....

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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 hel .....

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tions. Hence, the licences issued by Ports to various agencies (under Sec. 123 of MPTA) should not be confused with the authorization (may be by way of licence) issued under Section 42 of MPTA . The difference between authorization under Section 42 of MPTA and a licence issued under Sec. 123 is clearly understood if the functioning of private container terminals (e.g. P & O) terminal in Navaseva in Mumbai, Visakha Container Terminal at Visakhapatnam etc.) operating in various major ports and .....

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ized by Visakhapatnam Port Trust to handle the container cargo that is coming to Visakhapatnam Port. Here the TAMP has fixed the scale of rates, under Sec. 48 of MPTA, by way of Notification published in the Gazettes of India (which is mandatory requirement under Sec. 42 of MPTA). The Stevedores and other port service providers, issued with licences by Ports, have not conferred with functional authority as seen in the case of private agencies maintaining container terminal or berths. This differ .....

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os. 2429-2430 of 2008 along with an application for condonation of delay before the Hon ble Supreme Court. Their lordships on 24-3-2008 passed the following order. Delay condoned. The Tribunal, relying upon its own decision in the case of M/s. Homa Engineering Works v. CCE, Mumbai, has allowed the present appeal filed by the assessee. 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 .....

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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 .....

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ed by the Parliament and the President gave assent to it on 8-5-2010. It would imply that the modified/altered or expanded definition of Port services would definitely encompass the services rendered by the appellants herein, but from 8-5-2010. It is an admitted fact that the relevant period in all these cases is prior to 8-5-2010. Hence, the contentions raised by the counsels for all the appellants that the Finance Act, 2010, has removed the lacuna in the earlier port services, is correct. 18. .....

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pping vs. CCE, Rajkot: 2014 (36) S.T.R. 569 (Tri.-Ahmd.). CESTAT, Ahmedabad in the said decision has held that the services rendered by anyone within the port would be taxed under the head of port services only w.e.f 1.7.2010, when there was amendment to the port services as discussed earlier. In other words, any service rendered by anyone unless it was by the Port itself or unless there was proper authorisation for port services only could not be taxed under the head of port services . Therefor .....

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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 .....

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Therefore, findings and the conclusion made by Hon ble Delhi High Court in the said case are relevant and applicable mutatis mutandis to the present facts and subject matter of this appeal. We, therefore, refer to the observations made in the said case by Hon ble Delhi High Court. In the respective paragraphs, the Hon ble Delhi High Court has observed as under: 39. In our view, the license arrangement between DIAL and the petitioner could not be subject to service tax under Clause 65(105)(zzm) p .....

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letting of immovable property, then by virtue of Section 65A(2)(a) the same would be considered as taxable service under Clause 65(105)(zzzz) and could not be classified as airport services under clause (zzm) of Section 65(105) of the Act. 40. In addition to amending Clause (zzzz) of Section 65(105), the Finance Act, 2010 also brought about an amendment in Clause 65(105)(zzm). However, this amendment was not retrospective and came into effect from 1-7-2010. The said clause as amended by Finance .....

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to determine whether any service rendered within the airport or civil enclave was more appropriately covered by any specific clause of Section 65(105) of the Act. Thus, after 1-7-2010, if any service which was otherwise taxable under the Act was rendered within the airport or civil enclave the same could be chargeable to service tax as airport services . 42. In view of the above discussion, even if the transaction between DIAL and the petitioner is considered as a simple letting out of immovabl .....

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