TMI Blog2008 (8) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Respondent. [Order per: P.G. Chacko, Member (J)]. - Of the 13 appeals before us, 11 are by assessees, the rest having 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 connection, reference was made to the CBEC's Circular No. B11/l/2001-TRU dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 respect of the services rendered to the Karnataka Power Corporation Ltd. at Talcher, M/s. SICAL had not discharged service tax liability correctly, (d) that, within the Chennai port area, intercarting of cargo from the wharf to the storage point was an activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice. 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 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: ""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 in dispute that M/s. SICAL's activities, which are claimed to be "port services" by the department, were performed within Madras (Chennai) port limits defined by the Central Government for the purposes of the Major Port Trusts Act. Like or similar activities of the other ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices. 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 subsection (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 Notification in the Official Gazette. No rates were fixed by TAMP for the services, either. Thus it has been argued that any person holding stevedoring licence issued by the Port Trust without previous sanction of the Central Government cannot be considered to be a person 'authorized' under sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 operations on the vessels. On the other hand, the party's counsel argued that the expression should be read ejusdem generis with the specific terms like piloting, hauling, mooring etc. It was pointed out that piloting, hauling, mooring etc. were activities directly connected with the entry or exit of the vessel and, therefore, the expression "any other service" should also be understood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oses 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 case was followed in subsequent cases of New Mangalore Port Trust v. Commissioner, 2006 (4) S.T.R. 448 (Tri.-Bang.), Western (I) Shipyard Ltd. v. Commissioner, 2006 (3) S.T.R. 639 (Tri.-Mum.), BBR (India) Ltd. v. Commissioner, 2006 (4) S.T.R. 269 (Tri.-Bang.), Konkan Marine Agencies v. Commissioner, [2007 (8) S.T.R. 472 (Tribunal) = 2007-TIOL-1853-CESTAT-BANG], Kin-ship Services (India) Pvt. Ltd. v. Commissioner, [2008 (10) S.T.R. 331 (Tribunal) = 2008-TIOL-584-CESTAT-BANG], Mazgaon Dock Ltd. v. Commissioner, 2008 (11) S.T.R. 271 (Tri.-Mumbai) and Western India Shipyard Ltd. v. Commissioner , [2008] 15 STT 371 (Mum.-CESTAT). 10. Against the Tribunal's decision in Velji case, the department's appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessees were undertaking stevedoring and allied operations within the respective port areas on the strength of licences issued by the Port authorities, and they have no case that they had been undertaking the said operations unauthorizedly. They can only be held to have been authorized by the Port authorities to undertake such operations/services. In Velji case, the party did not plead that their operations in the port area were unauthorized, nor was anything found to this effect by the Bench. For all these reasons, we do not think that the decision in Velji case or any of the subsequent decisions, which followed the ratio decidendi of Velji, is a good precedent for the present batch of appeals. 12. The ld. counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 (as per the records of the Ministry of Shipping, Govt. of India) as against only 12 major ports - in this country, no activity/Operation (including stevedoring) is liable to be exigible to service tax under the head "port services" defined under Section 65(82) ibid ? Certainly, the law of service tax cannot be expected to have envisaged such an anomalous situation. It is a cardinal principle of statutory interpretation that, when the language of a statute is capable of two interpretations, one of which is reasonable and the other unreasonable, the court should hold that the former must prevail. The definition of "port service" given under Section 65(82) of the Finance Act, 1994 is referable to both major and minor ports, not by reason of identity of service but by reason of identity of port. While the Major Port Trusts Act specifies certain services to be provided by the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, in so far 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 classified under the sub-clause which occurs first among the sub-clauses which equally merit consideration. Loading and unloading of cargo (other than export cargo) are taxable services classified as "cargo handling service" under clause (23) of Section 65. When these operations are done in a 'port' or 'other port', they become "port services" classified under clause (82) of Section 65. Applying Section 65A(2)(a) to this case, cargo handling service provided by any person within the limits of a major or minor port shall have to be classified as "port service", being more specific in relation to port. Thus, by strict construction of the provisions of the Finance Act, 1994 as advocated by the ld. counsel, we think, we are able to decipher the scope of "port service" defined under Section 65(82) ibid and accordingly to fix the tax liability. "Port service" means any service rendered by a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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