TMI Blog2023 (11) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... arise. Invocation of Extended period of limitation - period of demand in this case pertains to 2006-07 to Feb 2009 and the show cause notice in this case has been issued on 21/10/2011 - Section 73 of the Finance Act, 1994 - HELD THAT:- The fact is noted that a final audit order report No. 10/ST/2008-09, for covering the audit period October 2005 to March 2008, wherein all the financial records have been there report the auditing officers. Similarly another audit final order report No. 75/ST-2009-10 dated 03.05.2010, covering period from 2008 to September 2009 has also been placed on record. The above audited report indicate that all the financial statements of the appellants were before the auditing officers much before the issuing of the SCN. In these circumstances, we feel that element of the suppression of facts or mis- representation etc., within intent to evade Service Tax are not present in this case. As the SCN has been issued on 21 October 2011 much beyond the normal period of demand, the SCN is barred by period of limitation. The impugned order-in-original is without any merit and therefore set aside - appeal allowed. - HON'BLE MEMBER (JUDICIAL), MR. RAME ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said sovereign function as a performance of taxable service. 3.1 Learned Advocate has also pointed out that the appellant start paying the Service Tax on this charges from 01.07.2010, as the definition of the port services provided in the Finance Act, 1994, underwent amendment from 01.07.2010, the legal provisions with regard to the port service definition prior to 01.07.2010, and thereafter has been as follows: They claimed that before the amendment of definition of port service they were not falling in the category of port service . Before the amendment, the port service was defined as any service rendered by a port or any person authorized by the port, in any manner, in relation to a vessel or goods . After the amendments, port service has been defined as any service rendered within a port or other port, in any manner . From the above definition of port service , it can be seen that words vessel or goods . After the amendments, port service has been defined as any service rendered within a port or other port, in any manner . From the above defined of port service , it can be seen that words vessel or goods have been deleted in the amended definition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Maritime Board Vs CCE-2015 (39) STR 529 (SC) CGST Vs Delhi International Airport Ltd 2023 (6) Centax 199 (SC) Mormogao Port Trust Vs CE 2017 (48) STR 69 (T) Affirmed by the Supreme Court of India- 2018 (19) GSTL J118 (SC) CCE Vs. Pragathi concrete Products (P) Ltd- 2017 (50) STR 92 (SC) 3.4 The learned Advocate has drawn our attention to decision of this Tribunal in case of M/s. Gujarat Maritime Board Vs. CCE- Bhavnagar reported in 2015 (38) STR 776 (Tri.-Ahmd), wherein the issue has been decided by this Tribunal in favour of the party holding that water front royalty charge recovered from licensee are in the nature of statutory levy and proceeds such levy are credited to the consolidated fund of State of Gujarat and same cannot be subjected to Service Tax liability. It has further been mentioned that the decision of the Tribunal in above matter was appealed before Supreme Court by the department and the Hon ble Supreme Court has held that charges for use of water front royalty charge does not include any service in relation to vessel or goods and therefore same cannot be described as a port service. 4. Learned AR reiterated the findings as given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity-local authority-constituted under the Gujarat Maritime Board Act, 1981. The said control is granted to State Governement by virtue of CONSTITUTION OF INDIA.(Item 31, List III Seventh Schedule) 14.3 FURTHER, FOUR SUB PORTS VICTOR, MAHUVA, RAJPARA AND KOVAYA operate under administration, control and management of PORT OFFICER JAFARABAD. All, Five, i.e. Port 1 Jafarabad and its Four Sub-ports are individually / separately registered with Service Tax Department since 01.07.2003. 14.4 The State Government of Gujarat has and exercises sovereign right over the water front in Gujarat. In view of such sovereign right of the State Government, inter alia certain private ports have been allowed to be developed in its jurisdiction. 14.5 GUJARAT PIPAVAV PORT LIMITED, PIPAVAV [GPPL] is one such private port which has been allowed to operate as such and is authorised to operate independently and provide Port Services etc. within its jurisdiction as per the relevant agreement(s) with Government of Gujarat in compliance of the BOOT Policy Government of Gujarat Resolution dated 29.07.1997 (ANNEXURE 1: 10 PAGES]; 14.6 On perusal of BOOT Policy, your goodself will be able to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve Agreement in accordance with applicable law, duly complying with the provisions of the Indian Ports Act relating to tariff. 14.11 Further, in terms of clause 11.2.1(c) of the same agreement GPPL is also permitted by law to structure the tariff at its discretion and the currency of denomination of tariff. 14.12 Further, in terms of clause 11.2.2(b), notification of comprehensive tariff schedule to public was to be responsibility of GPPL along with power to customise separate service and tariff package for specific users form time to time. 14.13 In view of above factual / legal reality, it can be observed that the total port operations including complete responsibility of GPPL. port operations were total 14.14 Please note that State Government and/ or GMB had/has no role to play in the administration, finances and/or operations of GPPL and all operations/logistics/ provisions of services etc. are entirely at risk, cost control of GPPL. 14.15 In terms of its agreement with State Government / GMB, GPPL had/has to pay WATER FRONT ROYALTY [WFR] to GMB till 28.02.2009 and thereafter w.e.f. 01.03.2009 DIRECTLY to STATE GOVERNMENT at a prespecified and agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts. 14.21 Further, right from creation of port infrastructure for port user(s) to actual provision of various port services in the port premises of PIPAVAV PORT of GPPL, GMB/State Government has had no role to play and only collection of proceeds thereof would be routed through PLD account which was/is basically to ensure foolproof computation of WFR to ensure that no loss occurred to Government exchequer. 14.22 All the relevant facts as narrated above are/were on record and apparent on prima facie perusal and in vogue since October,1998. 14.23 Apart from the fact that Port Office Jafarabad of GMB and its four subports had got itself registered under Service Tax w.e.f. 01.07.2003, GPPL was also registered as such in view of the fact that they were providing port services [AAACG6975BST001). 14.24 Since 01.07.2003, various audits / inspections, of the records of GMB and GPPL, have been conducted by Service Tax Division of Excise department and nowhere in past, any objection / para was ever raised in this context about non levy/collection of Service Tax on the WFR received by GMB/State Government. 14.25 In para 2 of SCN it is stated that During the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit of GPPL came across the said letter of PO Jafarabad dated 20.04.2011 and wrote a letter dated 29.06.2011 [ANNEXURE 11:01 PAGE] addressing it to PO Jafarabad with a copy to GPPL. The said letter in its para 2 stated that 2 .....the Service Tax on warfage charges is from April 2010 is incorrect. In this connection, your attention is invited to the fact that Water front Royalty Charges are nothing but Wharfage Charges and M/s. GPPL, Pipavav collect the Service tax right from the beginning. The applicability of Service Tax on said warfage charges is very well in the knowledge of M/s. GPPL. 3. It is therefore informed that the Service Tax is applicable on the said charges collected by you from M/s. GPPL The Service Tax on it is not paid prior to April, 2010. It is required to be paid for the prior period to April 2010 14.30 The natural question arising at this juncture would be that; If, as per statement in para 2 of Supdt.'s letter dated 29.06.2011, GPPL had been collecting Service Tax right from the beginning, then WHERE IS/WAS THE QUESTION OF LEVYING SERVICE TAX AGAIN ON SAME AMOUNT, WHEN ONLY A PART OF IT WAS BEING PAID BY GPPL TO GMB/STATE GOVERNMENT AS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpreting the stipulation as also for buying peace by avoiding litigation, GMB started collecting and paying the same since April, 2010. At this juncture, We also wish to draw your kind attention to the fact that unlike the contention taken by you in para 2 of your above letter that Water Front Royalty Charges are nothing but Wharfage Charge factually and legally both cannot be and are not synonymous, as sought to be conveyed by you. As regards, your query raised in para 4 in your letter dated 29.06.2011. We seek to inform that GMB has neither collected nor paid Service Tax on Water Front Royalty prior to 01.04.2010 for reasons stated above. 14.34 On 27.09.2011, Supt., (Audit) visited PO Jafarabad and issued letter F.No. VI/8(a)-196/EA-2000/10- 11/AP-VI (ANNEXURE 14: 01 PAGE) based on the records produced for audit and asked for confirmation of the data contained therein (ANNEXURE 15: 01 PAGE) which now forms part of present SCN as Annexure A. 5.4 It can be seen from the perusal of the above agreement that lumpsum royalty per matric tones on monthly basis a water front royalty is to be paid. We find that the Water Front Royalty payment which is been char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for any consideration. Therefore, such an activity performed by a sovereign/public authority under the provisions of law does not constitute provision of taxable service to a person and, therefore, no Service Tax is leviable on such activities. Similarly the CBEC has further clarified this matter vide Circular dated 23.08.2007, The relevant portion of the same is reproduced below : 999.01/ 23-8-2007 Sovereign/public authorities perform functions assigned to them under the law in force, known as statutory functions . For example, Sovereign/public authorities perform functions assigned to them under the law in force, known as statutory functions . For example, Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments; Regional Transport Officers (RTO) issue fitness certificate to motor vehicles; Directorate of Boilers inspects and issues certificates for boiler; or Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant laws. Authorities providing such func ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... boot scheme. thus, no service of whatsoever nature has been rendered by gmb, which may fall under the category of port service. no service has been rendered by them in relation to a vessel or goods. just because rs. 20 has been charged by gmb from m/s. ucl ltd. under the head wharfage charges and gmb has paid service tax on the same under the category of port service, it cannot be said that the service rendered, if at all, by gmb was a port service. there is no estoppel against the law. 8.4 as mentioned above, except for the ownership of waterfront, gmb does not own anything. the port and the infrastructure thereon vests in m/s. ucl ltd. and this is permissible under indian law as there can be two owners, one for the waterfront and another for port and infrastructure thereon. the law in india is that land can belong to one and building thereon can be of other person as compared to law in uk wherein building vests in the owner of the land. 8.5 thus, in the absence of any port service having been rendered by gmb, question of charging differential service tax under the category of port service does not arise at all. the show cause notice has not invoked any other head for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s amount charged is defined in section 67 in the following manner : gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment, and any amount credited or debited, as the case may be, to any account, whether called suspense account or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise. the gross amount charged is the value with reference to which tax is payable, provided the provision of service is for a consideration in money. the expression money is defined in section 67 to read as under : money includes any currency, cheque, promissory note, letter of credit, draft, pay order, traveler s cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value. 9.2 a reading of the above provisions makes it evident that the levy of service tax in the finance act, 1994 is with reference to the amount actually paid for the services. this is akin to the concept of transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it was squaring off account or adjustment or deduction. the gross amount charged is the assessable value only when the provision of service is for a consideration in money. in the present case, revenue s contention is that the service rendered by gmb was not entirely covered by a consideration in money and that there was an additional consideration which flowed to it in the form of benefits which it would derive from the capital expenditure incurred by the user industry for developing the seafront, which would become gmb s property. in this context, one needs to examine whether the expenditure incurred by the user industry can at all be considered as consideration flowing from the user industry to gmb . 9.4 the capital expenditure incurred by m/s. ucl cannot constitute consideration flowing from m/s. ucl to gmb for the reason that such expenditure was not incurred at the desire and request of gmb but was incurred by the end user for own benefit without there being a stipulation for such amount to be incurred. the privy council in the case of raja of venkatagiri v. sri krishnayya, - 1948 pc 150, interpreted the words at the desire of the promisor appearing in section 2(d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h contingent benefit, no addition can be made to the assessable value on account of such contingent benefit. since the provisions of the finance act, 1994 do not contain any machinery provision to determine the present value of such future or contingent benefit, any addition on this account would be an arbitrary one. the question of adding the value of full capital expenditure as additional consideration is in any case absurd as most of the benefits from such capital expenditure would have accrued to the user industry during the concession period and would not be to the account of gmb. in other words, the capital expenditure incurred by the user industry is an expenditure incurred by the user industry in its own benefit and it is clear on the intention of the two parties that gmb would have been entitled only to a contingent benefit at the end of the concession period and the value of that contingent benefit cannot be quantified particularly in the absence of a machinery provision to that effect in the finance act, 1994 or in the rules framed thereunder. in this regard, the judgement of the supreme court in the case of b.c. srinivas shetty is relevant, which provides that where a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed with consequential relief, if any. 5.6 The Hon ble Apex Court also in the same matter as held as follows: Commr. Of C.Ex., Bhavnagar Vs. Gujarat Maritime Board, Jafrabad: 14. As can be seen from Section 32 sub-sections (3) and (4), the Board may authorize any person to perform any of the services mentioned in sub-section (1) of the said section which includes landing of goods at wharves. We asked Shri Adhyaru to show us where such authority is given and his reply was only that it was given under the self-same agreement referred to hereinabove. We are afraid that we are unable to agree with Shri Adhyaru. The authority given to perform any of the services must first and foremost be under terms and conditions as may be agreed upon by the Board and the private person. Further, under sub-Section (4) of Section 32, it is the private person who is then authorized to charge or recover any sum in respect of such service rendered. This is conspicuously absent in the aforesaid agreement. There is no doubt on a reading of the agreement that it is the Board itself that charges or recovers wharfage charges from the licensee - UCL and does not authorize UCL to recover such c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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