2016 (2) TMI 222 - AT - Service Tax

Tribunal rules in favor of service tax on port services post 01.07.2010, penalties waived

M/s Essar Logistics Ltd. Versus Commissioner of Central Excise & Service Tax, Rajkot

The Tribunal upheld the demand for Service Tax on Stevedoring and Lighterage services from 01.07.2010 onwards under 'Port Services' but set aside the ... Cargo Handling Services - handling of export cargo as part of Stevedoring services - transportation of goods through barges (sea) - whether the Appellant is liable to pay the Service Tax on Lighterage & Stevedoring services rendered by them in relation to vessel or goods at the Magdalla/Hazira port under Port Services as defined under Section 65(82) of the Finance Act, 1994. Held that:- The Appellant contended that the charges were fixed in the contract entered by way of negotiations. It is clear from the contract between the Appellant and M/s Essar Steel that it is an independent contract. In any event, the intimation given by the Appellant to GMB of the contract between them and M/s Essar Steels, cannot be treated as authorization by the port. - After considering the above decisions and the provisions of Finance Act, 1994, in our considered view, the facts in the case of Kandla Shipchandlers and Ship Repairers Association [2012 (9) TMI 850 - Gujarat High Court] would not be applicable in the present case, as there was no authorization issued by the GMB to the appellant and the demand of service tax on Stevedoring and Lighterage charges, under port service, on the appellant, prior to 01.7.2010, cannot be sustained. The question of demand of Service Tax on barge charges and the handling charges connected therewith would not arise at all with effect from 10-10-2007 as they form an integral part of the transaction value for levy of customs duty. Even for the period prior 10-10-2007, the same position would apply for the reason that the import transaction is complete only when the goods reach the customs barriers and the bill of entry for home consumption is filed. The demand of Service Tax alongwith interest on Lighterage and Stevedoring services rendered by the Appellant in relation to vessel or goods at the Magdalla/Hazira Port under 'Port services' would be upheld from 01.07.2010 and the extended period of limitation cannot be invoked. The demand of tax alongwith interest prior to 01.07.2010 and penalties are set aside. - Decided partly in favor of assessee. Issues Involved:1. Classification of Stevedoring and Lighterage services under 'Port Services' prior to 01.07.2010.2. Authorization requirement for services under 'Port Services.'3. Taxability of Lighterage services before 01.09.2009.4. Applicability of Service Tax on services provided to SEZ units.5. Invocation of the extended period of limitation for demand.Detailed Analysis:1. Classification of Stevedoring and Lighterage Services under 'Port Services' prior to 01.07.2010:The main issue was whether Stevedoring and Lighterage services provided by the appellant at Magdalla/Hazira Port fell under the category of 'Port Services' as defined under Section 65(82) of the Finance Act, 1994, before its amendment on 01.07.2010. The Tribunal noted that the definition of 'Port Services' prior to the amendment required authorization by the port for any service rendered in relation to a vessel or goods. The appellant argued that they were not authorized by the port, and thus their services should not be classified under 'Port Services' before 01.07.2010. The Tribunal agreed with the appellant, referencing several previous decisions, including M/s Shreeji Shipping Vs CCE & ST, which held that without specific authorization from the port, services could not be classified under 'Port Services.'2. Authorization Requirement for Services under 'Port Services':The Tribunal examined the requirement of authorization under Section 32(3) of the Gujarat Maritime Board Act, 1981, which allows the Board to authorize any person to perform services in the port. The Tribunal found that the appellant did not have such authorization from the Gujarat Maritime Board (GMB). The Tribunal distinguished the present case from the Kandla Shipchandlers & Ship Repairers Association case, where the petitioners were authorized by the port. In the present case, the Tribunal found no evidence of authorization and concluded that the appellant's services could not be classified under 'Port Services' without such authorization.3. Taxability of Lighterage Services before 01.09.2009:The Tribunal addressed whether Lighterage services were taxable before the introduction of the 'Transport of Coastal Goods and Goods Transport Through National Waterways and Inland Water Services' category on 01.09.2009. The Tribunal referenced the Finance Minister's speech and the decision in Ispat Industries Ltd Vs Commissioner of Customs, which held that barge charges for moving goods from the mother vessel to the jetty were considered transportation costs and not taxable under 'Port Services.' The Tribunal concluded that Lighterage services were not taxable before 01.09.2009.4. Applicability of Service Tax on Services Provided to SEZ Units:The appellant argued that services provided to SEZ units were exempt from Service Tax under Section 26(1)(e) of the SEZ Act, 2005, read with Rule 31 of the SEZ Rules. The Tribunal noted that since the demand for Service Tax on Stevedoring and Lighterage services under 'Port Services' prior to 01.07.2010 was not sustainable, this issue became academic and did not need further examination.5. Invocation of the Extended Period of Limitation for Demand:The Tribunal examined whether the extended period of limitation could be invoked for the demand of Service Tax. The appellant contended that there was no suppression of facts, as they were paying Service Tax under the category of 'Cargo Handling Services' and had informed the department of their activities. The Tribunal found that the case involved classification and interpretation issues, and there was no deliberate intention to evade tax. The Tribunal referenced the Supreme Court's decision in Uniworth Textile Ltd Vs CCE Raipur, which held that mere non-payment of tax without deliberate default does not justify invoking the extended period of limitation. The Tribunal concluded that the extended period could not be invoked, and the demand for Service Tax along with interest and penalties for the extended period was set aside.Conclusion:The Tribunal modified the impugned order, upholding the demand of Service Tax on Stevedoring and Lighterage services from 01.07.2010 onwards under 'Port Services' but set aside the demand for the period prior to 01.07.2010. The extended period of limitation was not applicable, and penalties were deemed unwarranted. The appeal was disposed of in these terms.