TMI Blog2023 (6) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities relating to business would be eligible for credit. Therefore, the appellants would be eligible to take credit on the input services where they are able to satisfy the above criteria. In case of Essar Bulk Terminal Ltd. [ 2021 (9) TMI 816 - CESTAT AHMEDABAD ], it was held that in the present case also as regard the service provision of dredging service there is a direct contract between the service provider viz M/s. Van Oard Dredging and Marine Contractor and M/s. Van Oard India Pvt. Ltd. and the appellant. The said service providers rendered the service to the appellant only and not to the Gujarat Maritime Board. Therefore, the appellant being the sole recipient of the service entitled for the Cenvat credit. It also not disputed that the entire service charges along with service tax there on for dredging of navigation channel was paid by the appellant to the aforesaid contractors who carried out the dredging services. In this undisputed fact the appellant is the service recipient for dredging service which is undisputedly used for providing Port Services and cargo handling services, hence, the appellant is entitled for taking Cenvat credit on dredging services. Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 15(3) of the Cenvat Credit Rules, 2004. 1 further give option to JSW Jaigarh Port Limited, to pay the amount of wrongly availed Cenvat Credit along with interest plus 25% penalty within the period of thirty days from the receipt of this order, then penalty liable to be paid them shall be twenty five percent. 27. With this, the show cause notice issued under F. No. V(JSW)15-68/A-II/ Pune/Tech/2017 dated 14.02.2017 stands disposed off. 28. This order is passed without prejudice to any other action that may be initiated against M/s JSW Jaigarh Port Limited under the Finance Act, 1994 or Rules made there under or any other law for the time being in force within the Republic of India. 29. This order passed is protected vide Section 174 of the Central Goods and Services Act, 2017. 2.1 The Appellant is engaged in the business of rendering port services from the Jaigarh port at Dhamankhol Bay, Maharashtra. For this purpose, the Appellant had entered into a concession agreement dated 24.06.2008 in terms of which, the Appellant was granted a license by the Maharashtra Maritime Board ( MMB ) for designing, financing, constructing, operating, maintaining and manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel submits: Issue is no longer res integra having been decided in the Appellant's favour in several decisions of this Hon'ble Tribunal Essar Bulk Terminal Ltd. [2022 (57) GSTL 53 (Tri. - Ahmd.)]; Essar Bulk Terminal Ltd. [E/12243/2019 (Ahmedabad Bench)]; Adani Ports SEZ Ltd. [2016 (42) STR 1010 (Tri.- Ahmd.)]; Sanghi Industries [2020-TIOL-328-CESTAT-AHM]; Ultratech Cement [2021-TIOL-161-CESTAT-AHM]; Saurashtra Cement Ltd. [2018-TIOL-2749-CESTATAHM]. Services were not towards construction or development of port, but were in respect of a contractual obligation towards a service recipient, JSW Steel Ltd. Credit on goods and services procured prior to rendering of output service is also allowed Impugned Order traverses beyond the scope of the SCN , the finding that the services of construction or development of port was exempt, besides being absurd and inconsequential, was beyond the scope of the SCN and accordingly is completely untenable. The Appellant refers to the settled position in law that the Impugned Order cannot travel beyond the scope of the SCN [Ref: Toyo Engineering India Ltd. reported at 2006 (201) ELT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in normal parlance and in accounting terms. In the instant case, they had procured the service of Capital Dredging from M/s. Boskalis Smit India LLP to deepen the navigation channel, berth pocket and turning circle for movement of arriving vessel to dock at the port (jetty/berth). It is submitted that as per the definition of 'input service' any service which is used by service provider for providing an Output service is an input service and eligible for cenvat credit. In the instant case, the service of capital dredging procured by them was very much required for the purpose of providing its taxable output service i.e. port service and therefore the service of capital dredging procured by them not only has a direct nexus with the output service but a sine It is qua non for providing the output services of port and hence is eligible for cenvat credit. also argued that there is a direct nexus between the dredging services received and the port services provided by them. M/s JSWJPL submitted that capital dredging is a prime activity which is needed to be carried out for deepening the navigation channel, berth pocket and turning circle. 18.2 In this case, I find that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as agreed to grant License to the Licensee to do so on the terms and conditions set forth below. I. LICENSING AND REGULATORY FRAMEWORK I. GRANT OF LICENSE 3.1 In consideration of the Licensee agreeing to pay one time license fee of Rs. 10 lakhs and in consideration of the Licensee agreeing to pay a monthly Charges and lease rent and other payments under this Agreement and subject to the provisions of this Agreement, the Licensor grants to the Licensee, an exclusive license for designing, financing, constructing. operating, maintaining and managing the port complex during the license period as specified in the agreement. 3.2 The Licensor grants the Licensee the right to design, collect and retain user charges during the License period. 3.3 At the end of licence period the Port complex well maintained good condition shall stand transferred to the Licensor free from any encumbrances and the Licensee shall have no right, title, interest etc. in the same other than as provided in Section 59. 3.5.7. The ownership of the land provided by the Licensor and/or the reclaimed area and the water area shall remain with the Licensor and shall vest in the Licens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions of the Agreement, it is noticed that by this agreement, MMB has granted License to M/s JSWJPL to build a Multipurpose, common-user port at Jaigad Dist- Ratnagiri on Build, Own, Operate, Share and Transfer (BOOST) basis. The agreement was signed on 24.06.2008 and as per clause 16.2, the scheduled Construction period shall be a period of 3 years starting from the effective date. 18.5 In the present case, by issuing the subject show cause notice, the Cenvat credit availed on the invoices issued by M/s Boskalis Smith India LLP as detailed below of the Capital dredging services mentioned therein is proposed to be denied. S No Invoice No. date Details of service provided as per invoice Total Cenvat credit 1 35610185- LLP/2014/ JSWJPL/003 dtd 23.12.14 Capital Dredging Phase-II at Jaigarh,Ratnagiri, India as per contract dated 14/11/14 between Boskalis Smt India LLP and JSW Jaigarh Port Ltd, India 9269039 2 35610185- LLP/2014/ JSWJPL/004 dtd 1.01.15 Capital Dredging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Because capital works usually involve hard material or highvolume works, the work is usually done using a cutter suction dredge or large trailing suction hopper dredge; but for rock works, drilling and blasting along with mechanical excavation may be used. Maintenance dredging: Maintenance dredging consists of the restoration of designed depths of waterways and harbours by removing silt, sand and other accumulated sediments. Due to natural sedimentation, active channels generally require periodic maintenance dredging if the navigability of the channels is to be maintained. Thus, the capital dredging is mainly carried out for development and construction of new ports and expansion projects. In the reply, M/s JSWJPL also stated that Capital Dredging is used for deepening of the channel for the first time. Thereafter to maintain depth of such channel, regular maintenance is required to carried out. On going through the above invoices, it is noticed that these were issued for the capital dredging services provided. As mentioned earlier, as per the agreement MMB- the Licensor grants to M/S JSWJPL-the Licensee, a licence for designing, financing, constructing, operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the services have been specifically excluded from definition of 'input service' and those would not be eligible to the credit even if these would be eligible as per inclusive part of the definition of input service'. Following services have been specifically excluded from definition of 'Input services . From 1.07.2012, the service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act, 1994have been excluded from definition of 'Input services. . Further, notification no. 25/12- S. T. dated 20.6.2012 (effective 1.7.2012) services provided to construction of Port are exempted. Serial no.14 of Notification no. 25/2012-ST dated 20.06.2012 which grants exemption to construction, erection, commissioning or installation of original work for specified structure. Serial no. 14 of Notification no. 25/2012-ST reads as follows. 81. Services by way of construction, erection, commissioning and installation of original works pertaining to, (a) An airport, port or railways inciuding mono rail or metro, (b) a single residential unit othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Ports Act, 1908 (15 of 1908), but does not include the port defined in clause 80. (Clause (4) of section 3 of the Indian Ports Act, 1908 provides that ports include any part of river or channel in which this Act is, for the time being in force. ) The CBEC, vide letter F. No. B-II/1/2000-TGRU dated 9.07.2001 issued clarification regarding the Port services. The relevant paras are reproduced below. 2. Port services generally consist of port and dock services (there are for services rendered in relation to vessels), cargo handling and storage services, railway haulage services, and container handling services (these are for services rendered in relation to goods). The Dock Labour Board of the Port provides service of labour for handling of goods. The port or the person authorised by the port rendering these services is the service provider. 2.1 Some of the specific charges for the services rendered in respect of port services are as fallows. (i) Port and dock charges consisting of berthing and mooring charges, port dues, pilotage and towage, water supply charges, salvage and diver charges, anchorage fee. (ii) Cargo handling and storage charges c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction of port are not eligible as input service tax credit for port services. 19.6 M/s JSWJPL placed reliance on the decision of the Hon'ble Tribunal in the case of Adani Port Special Economic Zone Ltd V/s CST Ahmedabad (2015-TIOL-288-CESTAT-AHM)/ (2016(42)STR(1010)(Tri-Ahmd). On going through the case law it is observed that in this case the service of dredging is held to be an input service, but the decision does not differentiate whether these are capital dredging or maintenance dredging. Therefore the ratio of this decision is not applicable to the present case. 19.7 In view of above discussion, I hold that M/s JSWJPL is not eligible to the Cenvat credit on capital dredging service and they had availed the credit wrongly with is recoverable from them under the provisions of Rule 14 of Cenvat Credit Rules, 2004 read with Section 73(1) of the Finance Act, 1944. Whether the dredging services were rendered to MMB as alleged in the notice? 20. The show cause notice also alleges that the dredging was undertaken in navigation channel belonging to Maharashtra Maritime Board therefore the services were actually rendered to MMB and not to M/s JSWJPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement. 3.2 . 3.3 . 3.5.7. Subject to the proviso to clause 3.4(d) of this Agreement the ownership of the land provided by the Licensor and/or the reclaimed area and the water area shall remain with the Licensor and shall vest in the Licensor at all times. From the above, I find that this is a Licence agreement under which M/s JSWJPL has been granted exclusive license for designing, financing, constructing, operating, maintaining and managing the port complex during the license period as specified in the agreement, but the ownership of the land provided by the Licensor and/or the reclaimed area and the water area shall remain with the Licensor and shall vest in the Licensor at all times. As per clause 1.6, the Licensor (MMB) has agreed to grant license for 50 years to Licensee which means they had given mere permission for construction and development of port on their property without any transfer of interest. This is not a lease agreement under which for the agreed period property remains in the possession of the Lessee. Therefore, it is necessary to understand the difference between a Lease and License agreement The terms 'lease' and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortion (hereinafter called Monthly charges ) of an amount collected by him for the cargo handled at port as per the scale of rules for providing services, starting from the Date of commencement of Commercial Operations. The rate at which the portion of such payments to be made from the charges collected by the Licensee shall be as follows. i) a sum of Rs. 3/- (Rupees Three only) per Tonne of cargo (or) 1) Rs. 36/-(Rupees Thirty six only) per loaded TEU (Twenty Foot Equivalent Unit) in the case of containers The Monthly charges will be subject to revision by Licensor at the compounded rate of 20% p.a. for the first fifteen years from the date of Commencement of Commercial Operations Subsequent revisions till expiry of the Term shall be decided in consultation with Licensee by the Licensor Government taking into account the situation prevailing at that time, Provided .. Provided further ... 40. PAYMENT AND PAYMENT TERMS 40.1 One time Licensee Fee In consideration of the grant of this License, the Licensee shall pay to the licensor one time license fee for an amount of Rs. 10 lakhs simultaneously on the Date of signing of this Agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letion of licence period. Thus, the capital dredging undertaken is ultimately will be for MMB only. 20.6 It is noticed that the capital dredging services have been availed for developing and construction of the navigational channel which does not belong to M/s JSWJPL. As per clause 3.5.7 referred above, the ownership of the land, reclaimed area and the water area remains with the Licensor (MMB). In this case, M/s JSWJPL had made contracts with M/s Boskalis Smit India LLP, Mumbai for providing capital dredging services and they had provided services for development and construction of port, which does not belong to M/S JSWJPL, but for which they have received license. Though the expenditure on capital dredging has been made by M/s JSWJPL and the invoices were raised on M/s JSWJPL, the ultimate ownership of channel remains with MMB. Even though the services are received by M/s JSWJPL, these are in relation to development and construction of port which is an exempted service and therefore cannot be held to be received as input services for port services. 20.7 M/s JSWJPL placed reliance on the decision of the Hon'ble Tribunal in the case of Adani Port Special Economic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices under the category of port services; Dredding services are in relation to development and construction of port, which is an exempt service. Dredging work is for the benefit of MMB 4.3 In case of Adani Port SEZ Ltd. [2016 (42) STYR (TAhmd)] following has been held: 19. The third issue is denial of Cenvat credit on input services. It has been alleged that the input services have no nexus with output service. It may be referred to show cause notice dated 23-4-2012 issued by the Commissioner of Service Tax, Ahmedabad to the appellant M/s. Adani Port Special Economic Zone Ltd. In that show cause notice, it has been alleged that M/s. APSEZ has availed Cenvat credit on services Goods Transport Agency, Cargo Handling Services, Clearing Forwarding Agent Services, Manpower Recruitment Supply Agency Service, Steamer Agent Services, etc. These services have no relationship/nexus with the provisions of output service of Port service inasmuch as the said services had been directly provided to the cargo imported by others. Hence, it does not appear to be an input service within the meaning of Rule (l) of Cenvat Credit Rules, 2004. 20. The adjudicating aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ship Repairers Association v. UOI - 2013 (29) S.T.R. 233 (Guj.), the Hon ble Gujarat High Court observed that the term Port has been defined in an extensive manner. It includes within its sweep any service rendered in any manner in relation to a vessel or goods. The expressions in any manner and in relation to both tend to expand the scope of such service. The words in any manner would further go to show that the legislature intended to make the definition wide and inclusive and to include range of services which may be provided in relation to a vessel or goods. 22. The Hon ble Supreme Court in the case of State of Punjab v. Paper Mills Limited (supra), while dealing with the words used for the purpose of factory in Rule 18 of the Punjab Urban Immovable Property Tax Rules, 1941, observed that the use of buildings for providing such facilities and amenities which are necessary for maintaining a proper standard of efficiency of factory workers must also to be used for the purpose of factory. The allotment of the buildings for the use of the workers was made for the purpose, which was necessary for the efficiency of workmen. All such quarters is clearly necessary to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n also includes services used in relation to activities relating to business . These further enlarge the scope of the input services. The net result of such a wide definition as rightly held by the High Courts and Tribunal, is that any input service which has any nexus or is in relation to the output services in any manner whatsoever, or is in relation to the activities relating to business would be eligible for credit. Therefore, the appellants would be eligible to take credit on the input services where they are able to satisfy the above criteria. 4.4 In case of Essar Bulk Terminal Ltd. [2022 (57) GSTL 53 (TAhmd)] following has been held: 4.3 As regard the ground for denial of Cenvat that the Navigation channel for which dredging was availed is not a private property of the appellant but it was done on behalf of GMB, We find that the entire coastline is a sovereign property of Government of India through various Port Trust, Maritime Board etc. In none of the case of constructing the port the ownership belongs to the operator of the port. The sea coast parcel on which construction of the port is allowed is always on lease basis and not on the ownership basis however, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital goods and even if it is leased for a particular period, the assessee is eligible to take Cenvat credit. In the present case, merely because M/s. Inox Air Products Ltd. has leased out the plant to the appellant, that does not disentitle the appellant from availing Cenvat credit of the excise duty paid on capital goods. Similarly, in the case of Gujarat Ambuja Cement Ltd. (supra), Rajarambapu Patil SSK Ltd. (supra) and KCP Ltd. (supra), this Tribunal and the Hon ble High Court of Himachal Pradesh held that Cenvat credit of excise duty paid on parts, components and accessories would be admissible under the Capital Goods Credit scheme even if they are assembled into goods which are immovable or exempted. Similarly, in the ICL Sugars Ltd. (supra), it was held that immovability has no bearing on eligibility for availment of Cenvat credit on capital goods. In the light of these decisions, the interpretation of law undertaken in the impugned order does not appeal to any common sense or logic. So long as the individual machinery, equipment or appliance or parts and components thereof fall within the definition of capital goods under Rule 2(A) of the Cenvat Credit Rules, 2004 and so lon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective of services received related to such premises or not but the credit cannot be denied on the service received by the service provider in respect of the leased premises for a simple reason such that such leased premises is used by the service provider for providing the output service. The only condition is that in respect of input service the relationship between the service provider and input service recipient is that of service provider and the service recipient. The payment of any service including the service tax is charged by the service provider and the same is borne by the input service recipient. In the present case also as regard the service provision of dredging service there is a direct contract between the service provider viz M/s. Van Oard Dredging and Marine Contractor and M/s. Van Oard India Pvt. Ltd. and the appellant. The said service providers rendered the service to the appellant only and not to the Gujarat Maritime Board. Therefore, the appellant being the sole recipient of the service entitled for the Cenvat credit. It also not disputed that the entire service charges along with service tax there on for dredging of navigation channel was paid by the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal after considering various judgments given the following order : On careful consideration of the submissions made by both the sides and perusal of the records, I find that the Jetty is a captive active jetty of the appellant, which is exclusively used by the appellant only. At time, the appellant have to get the dredging done at the jetty for proper function of jetty to improve the draft. Since jetty is used primarily for import of coal which is used in the manufacture of final product, Dredging Service is qualified as input service. It is also a fact that dredging service is nothing to do with the customer to whom final product is sold. The service charge of dredging service is borne by the appellant only which stands absorbed in the overall cost of manufacturing of cement. Therefore, it cannot be said that the Dredging service is used for the removal of final product from place of removal. Also as per Hon ble Bombay High Court judgment in the case of CC Ex., Nagpur v. Ultratech Cement Ltd. 2010 (20) S.T.R. 577 (Bom.) = 2010-TIOL-745-HC-MUM-ST it was held that if the cost of input service borne by the assessee and the same stand absorbed in the cost of final product, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant s license agreement dated 25-3-2010 with GMB and has pointed out short payment of service tax on wharfage charges as the service tax was paid on the concessional rate granted to the appellant and not on the full rate. This makes it clear that copy of agreement dated 25-3-2010 entered into by the appellant with GMB along with its all enclosures including NOC dated 14-5-2007 was submitted to the department and it is on the basis of this agreement only the entire present case of Cenvat credit was made out therefore the details of the agreement was in the knowledge of the department. 4.10 In this fact all the information regarding dredging service availed by the appellant, Cenvat credit availed there on etc. were in the knowledge of the department therefore there is no suppression of fact or mis-declaration with intent to evade duty on the part of the appellant. From the Show cause Notice it was observed that the appellant had availed Cenvat credit on dredging services from 19-4-2010 to 1-12-2012 whereas the Show Cause Notice denying the said Cenvat credit was issued on 13-4-2015. Therefore, the entire demand is under the extended period, hence in view of the above facts ..... 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