TMI Blog2008 (8) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... g been filed by the department. Most of the assessees are aggrieved by demands of service tax (with interest) on services classified as Port services as also by imposition of penalties. In the cases of other assessees, the challenge is not only against demands of service tax on services classified as Port services but also against demands of service tax on one or more of the following other services viz., Business Auxiliary Service', Clearing Forwarding Agent's Service , Goods Transport Agent's Service', Customs House Agent's Service and Steamer Agent's Service'. The two appeals of the revenue are for imposing higher amounts of penalty under section 76 of the Finance Act, 1994 on two of the assessees. 2. Examined the records and heard both sides. The arguments for the assessees were led by Sr. Advocates, S/Sh. A.P. Datar and N.Venkataraman and those for the revenue by the Special Consultant, Shri K.P. Sridhara Raman. The main issue addressed before us was whether it could be held that the assessees' activities (other than stevedoring) within port area, on which service tax was demanded under the head Port services , were to be class ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... according to the ld. consultant, the definition of port service under section 65(82) of the Finance Act, 1994 was to be interpreted without reference to anything contained in the Major Port Trusts Act except section 2(q) thereof [definition of port']. It was argued that the definition of port service under section 65(82) of the Finance Act, 1994 was wide enough to encompass any service rendered in any manner by a Port or any person authorized by the Port in relation to a vessel or goods. There was no warrant for taking the view that any service to be classified as port service under section 65(82) of the Finance Act for the purpose of levy of Service Tax should be one specified under section 42(1) of the Major Port Trusts Act. In the absence of any list of port services specified under the Finance Act, any service rendered within a port area by the Port or by any person authorized by the Port was to be treated as 'port service in terms of section 65(82) of the Act. He submitted that services such as cargo handling service, transportation of goods, storage of goods etc. rendered within port area would also be appropriately covered under port services. In this connect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port area and whether, in respect of the activities of the former on which the department demanded service tax under the head Port services , identical demand of tax was raised on the main contractors also, etc. We shall now proceed to deal with the main issue with reference to the case of M/s. SICAL taken as a sample. 5. M/s. SICAL were undertaking stevedoring activities in Chennai Port under a licence issued by the Port Trust and they were paying service tax on these activities acknowledged as port services under section 65(82) of the Finance Act, 1994. After a verification of their documents and connected enquiries, the Directorate-General of Central Excise Intelligence (DGCEI) found (a) that they were providing port services to their customers at the ports of Chennai, Paradip etc., (b) that, in respect of the services rendered at Chennai Port, they were paying service tax only on stevedoring charges and had not discharged tax liability on intercarting (transportation) charges, equipment hire charges, plot rent, demurrage, cargo weighment charges, despatch money etc., which were collected from customers for the respective services rendered in the port, (c) that, in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder sections 76 to 78 of the Act. The payment of over Rs. 1.4 crores already made by the party was proposed to be appropriated towards the above demand. M/s. SICAL contested the demands and proposals on numerous grounds raised in their reply to the above notice. After hearing them, the Commissioner confirmed demand of over Rs. 7.3 crores (service tax + education cess) against the party after holding against them on merits but acknowledging a mistake in quantification of demand in the SCN. The Commissioner also appropriated the amount already paid by the party, towards the above demand. Penalties were also imposed on the party under sections 76 and 78 of the Finance Act, 1994. 6. Both sides have interpreted the definition of port service under section 65(82) of the Finance Act, 1994 in their own ways. This definition reads as under: (82) '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. As per section 65(81) of the Finance Act, 1994, port has the meaning assigned to it in clause (q) of section 2 of the Major Port Trusts Act, 1963. It is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanction of the Central Government, authorize any person to perform any of the above services on such terms and conditions as may be agreed upon. The ld. Counsel have argued that the Board of Trustees of the Port Trust concerned did not authorize the assessees to perform any of the above services. The stevedoring licences issued by the Ports are not to be treated as authorization under section 42(3) to perform any of the above services. It has also been pointed out that there is no evidence of the previous sanction of the Central Government having been obtained by the Port to authorize any of the assessees to perform any of the above services. Referring to sub-section (3) of section 42 of the Major Port Trusts Act, the ld. counsel has also pointed out that, with the prior approval of the Central Government, the Board can enter into a partnership or joint venture with any body corporate or with any other person to perform any of the services specified under sub-section (1). With reference to sub-section (4) of section 42, it has been pointed out that no person authorized under sub-section (3) shall charge for the above services any sum in excess of the rates specified by TAMP by Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried out in dry dock were also taxable as port services . The demand of service tax raised in the notice was contested. When the dispute ultimately came up before the Tribunal, the revenue invoked section 35 of the Major Port Trusts Act to show that repairs and overhauling of the vessels were functions which the Board of Trustees could either perform themselves or authorize any other person to perform. On this basis, it was argued that such activities were to be treated as port services . On the other hand, the assessee argued that only those services which were specified under section 42(1) of the Act could be provided by the Board of Trustees by themselves or through an authorized person. Most of these services were in relation to goods and a few services were in relation to vessels. The Departmental Representative referred to the latter category of services mentioned under clause (e) of sub-section (1) of section 42 of the Act, reading: piloting, hauling, mooring, remooring, hooking, or measuring of vessels or any other service in respect of vessels'. He argued that the expression any other service in respect of vessels' was wide enough to cover the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered by them to their clients in the port area were not liable to be classified as port services' as those services were not required to be rendered by M/s. GPPL themselves under the Major Port Trusts Act. They also submitted that they were not authorized by the Port to provide the above services. When the dispute came up before the Tribunal, the party relied on Homa Engg. Works' case (supra). They also argued that the licence issued by M/s. GPPL for the aforesaid purposes was not to be construed as an 'authorization' under sub-section (3) of section 42 of the Major Port Trusts Act. All the arguments were accepted by the Bench with reference to various provisions of the Major Port Trusts Act and it was held that the functions performed by the CHA in Pipavav port were not port services defined under section 65(82) of the Finance Act, 1994. Accordingly, the demand of service tax was set aside. 9. The decision in Velji P. Sons (Agencies) (P.) Ltd.'s case (supra) was followed in subsequent cases of New Mangalore Port Trust v. CST [2007] 7 STT 285 (Bang.-CESTAT), Western (I) Shipyard Ltd. v. CCE ST [2007] 8 STT 338 (Mum. - CESTAT), BBR (India) Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Sons (Agencies) (P.) Ltd. 's case (supra) commenced after 14-5-2003 and, therefore, the question whether the party had rendered, at Pipavav, port services as defined under section 65(82) of the Finance Act, 1994 during the period of dispute ought not to have been examined with reference to anything contained in the Major Port Trusts Act. If necessary, only the relevant provisions of the Indian Ports Act, 1908 were to be invoked. With great respect to the Bench which dealt with Velji P. Sons (Agencies) (P.) Ltd. 's case (supra), we find that the decision in that case was rendered with reference to various provisions of the Major Port Trusts Act, which were not applicable at all. Further, the view taken in that case to the effect that the licence issued by the Port was not recognizable as authorization for purposes of section 42 of the above Act also does not appear to be correct. We note that, in the case of Konkan Marine Agencies (supra), the Bench accepted the appellants' plea that the stevedoring licence issued to them by the Mangalore Port Trust was a permission to undertake stevedoring operations within the port premises. In the instant cases also, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same is covered by the expression 'other port' occurring in the definition of port service under section 65(82) ibid. It appears to us that, as rightly submitted by the ld. Sr. Consultant for the Revenue, one need not look into other provisions of the Major Port Trusts Act or the Indian Ports Act for the purpose of interpreting the definition of port services given under the Finance Act, 1994. The ld. counsel have argued that only those services specified under section 42(1) of the Major Port Trusts Act can, if provided by the Port or by a person authorized by the Port, be charged to service tax as port services . We have not found any corresponding provision in the Indian Ports Act specifying services to be provided by a minor port or a person authorized by such Port. (Section 35 of the Indian Ports Act, which provides for charging of fees by a minor port for pilotage, hauling; mooring, remooring, hooking, measuring and other services rendered to vessels, however, seems to indicate that a minor port can get these operations undertaken by a licensee or authorized person). Would it mean that, in respect of minor ports- our country has as many as 187 minor ports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h lays down that service tax shall be levied at the rate of 12 per cent of the value of the taxable service. The value of a taxable service shall be determined in terms of section 67 of the Act. Taxable services are classified under section 65 of the Act. Where, in a given case, the question arises as to under which head (under section 65) the service under consideration has to be classified, aid shall be taken of the provisions of section 65A of the Act. Sub-section (2) of section 65A provides that, when for any reason a taxable service is prima facie classifiable under two or more clauses of section 65, classification shall be effected as follows : (a) the sub-clause which provides the most specific description shall be preferred to sub-clauses providing a more general description; (b) composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, insofar as this criterion is applicable; (c) when a service cannot be classified in the manner specified in clause (a) or clause (b), it shall be classifie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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