TMI Blog2023 (12) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... her, both KSPL and SCCPL are obligated to market the said facility for attracting fertilizer cargo and also to jointly coordinate on matters pertaining to railway movement and allotment of the railway rakes in co-ordination with the Indian Railways - the revenue generated from the facility so created is also shareable by the port authority of the State government under the concessionaire agreement. Admittedly, the Appellants were awarded work by SCCPL for civil work concerning Mechanized fertilizer handling bagging facility. Extended period of Limitation - HELD THAT:- The extended period of limitation is not invokable by the Revenue as no sufficient evidence and grounds have been brought on record for invoking extended period. Admittedly, SCN dated 25.08.2018 has been issued after the end of 40 months, as calculated from April 2015. The normal limitation during the period was 30 months, as substituted for 18 months vide Finance Act, 2016. Accordingly, SCN is hit by limitation, as extended period is not available to the Revenue in the admitted facts and circumstances. Since, on the grounds of limitation itself, the SCN is not sustainable, the case on merit as to whether o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts for the purpose of this appeal are that the Kakinada Deepwater Port (KDWP) is a Andhra Pradesh state government-owned port at Kakinada. The said port was transferred to International Seaports PTE Ltd (ISPL), Singapore by the State government under concessionaire agreement dated 19th March 1999, by giving exclusive rights and authority for operation, maintenance and management of terminal with foreshore connected berths at the port. The concessionaire agreement was for 30 years and was extendable by 10+10 years. Further, more berths were to be built contiguous to the existing 3 berths in the port and all the structures and facilities constructed namely, infrastructure and buildings, land reclaimed by the concessionaire during pendency of agreement, tugs, pilot launches, as well as other flotilla for providing services to ships, open stockyards, storage sheds, railway yards, handling systems etc., were handed over to International Seaports Private Ltd for operating the said port. ISPL incorporated a SPV in the name and style of Cocanada Port Co Ltd , which was later on renamed as Kakinada seaports Limited (KSPL). Since 1999, KDWP is being operated by KSPL. Under the said ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to cargo handling operations. e. To comply with all the applicable laws including workmen compensation, provident fund, gratuity, etc., as applicable. 7. As per the agreement dated 27th June 2013, entered into between SCCPL and KSPL, the specified land was leased to SCCPL for a period up to March 2019 (extendable by 20 years) subject to payment of Land lease rental charge. Apart from that for the first 10 years, SCCPL was also obligated to pay license fee/royalty together with applicable taxes to KSPL, at a specified rate per metric ton of cargo handled and the said fee will be revised after 10 years on mutual consent. As such the measure of payment of lease rental was both fixed and variable. 8. As per clause 11 of the agreement, all assets created by SCCPL pursuant to the said agreement shall remain under ownership of SCCPL at all times, subject to any lien on such equipment towards securing any outstanding dues to KSPL by SCCPL. Further, in the event of termination of concession agreement, before the expiry of the concession period, including all extensions or the termination on any of the grounds mentioned, KSPL may at its option either allow SCCPL to unin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g system from vessel discharge to storage inside godown, mechanized bagging and other facilities constructed and owned by SCCPL, are part of infrastructure facilities of the Kakinada deepwater port. The statement of Captain K. Sridharma Sastha, Port Officer, Kakinada, was recorded on 18/07/2017, who inter alia, stated that he is working as the port officer at the said port since July 2016 and is the operational in-charge of the Kakinada Anchorage Port. The entire Kakinada port which includes Kakinada Deepwater Port and Kakinada Anchorage Port is owned by the government of Andhra Pradesh. Apart from the lease amount for the port infrastructure/land, the annual revenue is shared between KSPL and the State government in the ratio of 78:22. Thus, the State government gets 22% of the annual revenue. KSPL cannot use the facility/land for purposes other than port activity or for marine related activities only. Further KSPL can sublease the infrastructure/land given to them as far as it is related to operation, maintenance and management of the port. Further, the said port officer sent a letter dated 20/11/2017, inter alia, stating that as per the customs notification, the area where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructure development within the port. 13. Statement of Shri V.A. Kumar, Managing Director of the Appellant was recorded by Revenue on 14/08/18 who, inter alia, stated that the construction of the fertilizer handling and bagging facility commenced in September 2012 and concluded in March 2015. He also furnished the details of date-wise advances received and RA bills raised. Further, stated that they have not charged service tax on the said work on the understanding that it was part of port construction and is exempted under Notification No. 25/2012 ST. They had consulted SCCPL who informed them orally that the said work is exempt from payment of service tax, being construction of port infrastructure. By way of abundant caution, they had mentioned in their RA bills - that if service tax is applicable, the same will be claimed in the subsequent bills. So far not paying or disclosing the amount of advance received, to service tax, he said that the same was an error on the part of their employee who was handling the accounts and tax work. The same is only attributable to oversight and/or ignorance and not with any malafide intention. They have maintained proper books of accounts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al port includes only piers, jetties, landing places, wharves, quays, docks etc., which is usually secured with a boundary wall for the sake of security and also for the sake of notifying as a customs area. In spite of the fact that the port department collects lease amount and also shares the revenue arising from the operation of the fertilizer handling and bagging plant, however, the same is not part of the port infrastructure. Further, observing that Department of Port, Government of AP, does not have any operational control over the infrastructure/land leased out to KSPL. The revenue calculated on the amount of receipts for the said work by the Appellant from the details furnished by the Appellant, RA bill/additional construction bills raised and it appeared that the total value of the services/works contract rendered is ₹ 92,75,23,227/- and accordingly, after allowing abatement of 60%, the service tax payable has been worked out at ₹ 4,58,56,748/-. 17. The SCN was adjudicated on contest and the proposed demand was confirmed denying the claim of exemption under notification No. 25/2012 ST, along with interest and further, an equal amount of penalty was also imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionaire agreement, and further on the revenue earned from the said facility constructed by the Appellant for SCCPL, the State government is also entitled to share in revenue. 19. Learned counsel also refers to the permission sought and granted by the Commissioner of Customs of Kakinada custom House, with respect to permission for operation of the mechanized fertilizer terminal inside the port at berth No. 6 and its backup area. Such permission was granted vide letter C.No. VIII/48/133/2015 Customs Tech dated 14/05/2015 addressed to the Deputy Commissioner of Customs KCH, by the Asst Commissioner. Copy of the said letter was marked to SCCPL. Further, from the definition of port and port limit in the Indian port act 1908, it clearly emerges that landing place is part of the port, which includes Bandar, wharf, Pier, Jetty, hard ground and anyplace used for the landing, shipping or storage of goods or for the embarking and disembarking of passengers, landing place in a structure providing a place where boats can land people or goods, docking facility, dockage and dock landing in a harbor next to pier where ships are loaded and unloaded or repaired. Thus the construction activity i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record, we find that admittedly, the Mechanized fertilizer handling and bagging facility have been constructed at berth No. 6 and its backup area of the Kakinada Deepwater Port. Admittedly, the construction of the said baggage handling facility have enhanced the capacity of the port, which shall further enhance the revenue from the operations in the port. We further find that the agreement between KSPL and SCCPL provides to establish fertilizer and FRM handling system for unloading, bagging and rail/Road dispatch in the said port, for enhancing the port capacity with respect to fertilizer cargo. Further, both KSPL and SCCPL are obligated to market the said facility for attracting fertilizer cargo and also to jointly coordinate on matters pertaining to railway movement and allotment of the railway rakes in co-ordination with the Indian Railways. We further find that the revenue generated from the facility so created is also shareable by the port authority of the State government under the concessionaire agreement. Admittedly, the Appellants were awarded work by SCCPL for civil work concerning Mechanized fertilizer handling bagging facility. 24. The SCN has invoked extended pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax, if applicable, shall be paid separately by the principal. The Appellants have also mentioned in their bills raised on the principal that - service tax, if payable, shall be charged in the supplementary/subsequent bills. Further, we find the statement of the Managing Director of the Appellant company Mr. V.A. Kumar was recorded and from the statement no mens rea is made out, for not depositing the tax. There is no positive act of suppression or any misstatement on the part of the Appellant. We find that the issue is wholly interpretational in nature. We also find that service tax, if any, paid by this Appellant would have been otherwise available as Cenvat credit to their principal, who was rendering taxable services under the head Port services . 26. In view of our aforementioned observations and findings, we hold that extended period of limitation is not invokable by the Revenue as no sufficient evidence and grounds have been brought on record for invoking extended period. Admittedly, SCN dated 25.08.2018 has been issued after the end of 40 months, as calculated from April 2015. The normal limitation during the period was 30 months, as substituted for 18 months vide Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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