Prior disclosure and statutory levy treatment defeated service tax demand on user development fee collected from ship breakers.

Prior disclosure of user development fee receipts to the department defeated invocation of the extended limitation period, because there was no suppression of facts or intent to evade duty. The fee was also not taxable as port service, since no specific service to vessels or goods was established and the receipts were treated as a statutory levy under the Gujarat Maritime Board Act, 1981 rather than consideration for service. On that basis, the demand was unsustainable both on limitation and on merits.

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Issues: (i) whether the demand of service tax on user development fee collected from ship breakers was barred by limitation in view of the prior disclosure made to the department; (ii) whether the amount collected as user development fee was liable to service tax as port service or was only a statutory levy.

Issue (i): whether the demand of service tax on user development fee collected from ship breakers was barred by limitation in view of the prior disclosure made to the department.

Analysis: The appellant had disclosed, by letter dated 29.12.2009, that plot development fee was being collected and that no service tax was payable on such collection. The department was therefore aware of the nature of the receipts well before issuance of the later notice dated 10.04.2013. In these circumstances, there was no suppression of facts or intention to evade duty, and invocation of the extended period was not justified.

Conclusion: The demand was barred by limitation and could not be sustained.

Issue (ii): whether the amount collected as user development fee was liable to service tax as port service or was only a statutory levy.

Analysis: No specific service rendered by the appellant in relation to vessel or goods was established. The receipts were treated as a levy under the Gujarat Maritime Board Act, 1981, and the earlier view in the appellant's own case had held that amounts collected after insertion of Section 22A were in the nature of a statutory levy credited to the State treasury. On that basis, the receipts could not be treated as consideration for port service.

Conclusion: The amount collected as user development fee was not exigible to service tax as port service.

Final Conclusion: The impugned demand was unsustainable both on limitation and on merits, and the order confirming service tax was set aside.

Ratio Decidendi: Where the assessee has made prior disclosure of the receipts and their tax treatment, the extended period cannot be invoked in the absence of suppression, and a statutory levy not representing consideration for a taxable service is outside service tax.

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