Berth royalty treated as licence fee, not port service consideration, so interim service tax demand was stayed.

Royalty received by a port trust for use of a berth under a licence agreement was analysed as consideration for the right to use the berth, not as consideration for the port trust itself rendering Port Service. The licence authorised the licensee to render port services to cargo owners, and that separate activity was treated as the taxable service under the statutory framework. On that prima facie view, the demand to levy service tax on the royalty was not sustainable at the interim stage, and waiver of pre-deposit with stay of recovery of tax, interest and penalties was granted.

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Issues: Whether royalty received by a port trust from a licensee for use of a berth and authorisation to render port services was, prima facie, taxable as consideration for 'Port Service', and whether waiver of pre-deposit and stay of recovery should be granted.

Analysis: The arrangement under the licence agreement authorised the licensee to render port services to cargo owners at the berth, which fell within the statutory framework of Section 42(3) of the Major Port Trusts Act and the definition of 'Port Service' under Section 65(82) of the Finance Act, 1994. The authorised person was separately rendering taxable services to cargo owners and paying service tax thereon. The royalty paid to the port trust was treated as payment for the right to use the berth, and not as consideration for the port trust itself rendering any port service. On that prima facie view, the revenue's attempt to bring the royalty within the service tax levy was not sustainable at the interim stage.

Conclusion: Waiver of pre-deposit and stay of recovery of service tax, interest, and penalties were granted in favour of the assessee.

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