2026 (3) TMI 506 - AT - Service Tax

Taxability of Retention: a contractual 15% ledger retention from statutory port dues is not taxable as commission and cannot be double taxed.

The note addresses whether a concessionaire's contractual 15% retention from statutory port dues constitutes taxable consideration under business ... Port Services - Service tax under the category of ‘Business Auxiliary Service’ (BAS) and along with penalty under section 78 - Concessionaire agreement and the nature of port dues collection and application - double taxation - agency/commission-agent characterization - Whether the appellants are acting as commission agent on behalf of the Government of Andhra Pradesh (GOAP) and are getting payment by way of retention of 15% of port due charges and therefore, their activity is required to be classified under BAS and subject to service tax both pre and post July, 2012. Same service cannot be taxed twice - Whether retention of 15% out of port dues by the concessionaire amounts to consideration for taxable services under Business Auxiliary Service/Port Services. - HELD THAT:- The Tribunal found that the 15% retained by the appellant was part of port dues, a statutory levy collected from port users and credited to a dedicated fund to meet agreed maintenance and improvement obligations under the concession agreement. The concessionaire was granted exclusive rights and the agreement itself provided for the appellant to undertake and fund maintenance from the port dues fund; no additional amount was paid by the Government of Andhra Pradesh to the appellant as consideration. The CA certificate and admitted position showed that port dues had already borne service tax. In this factual matrix there was no basis to treat the retention as a commission or separate consideration for services rendered on behalf of the GOAP, and taxing the retained amount would amount to double taxation of the same service. Having decided the issue on merits, the Tribunal did not examine limitation. [Paras 8, 9] The retention of 15% of port dues is not consideration for BAS/Port Services and the service tax demand on that amount is unsustainable. Final Conclusion: The service-tax demands in the impugned orders insofar as they relate to the 15% retention out of port dues are set aside on merits and the appeals are allowed. Issues: Whether the 15% retention from port dues by the concessionaire constitutes taxable consideration under business auxiliary service/port services (pre and post July 2012) as commission received on behalf of the Government of Andhra Pradesh.Analysis: The Tribunal examined the concessionaire agreement and the nature of port dues collection and application. It is an admitted fact that port dues are statutory levies under Section 33 of the Indian Ports Act, 1908 and that the port dues collected were credited to a dedicated fund used exclusively for agreed port maintenance and development works; the collected port dues had already suffered service tax. The agreement granted the appellant the exclusive right to operate the port and to meet maintenance expenses from the port dues fund, including an entitlement to retain 15% of actual expenditure to cover overheads and taxes. There is no record that the appellant performed services as an agent on behalf of the Government of Andhra Pradesh or that additional amounts were paid by the Government; the 15% retention is a ledger allocation from amounts collected from port users and applied to agreed obligations. The Tribunal applied the principle that the same service cannot be taxed twice under the same head and found the departmental characterization of the 15% retention as consideration/commission to be unsupported on the factual matrix and by the agreement.Conclusion: The 15% retention from port dues is not taxable as consideration under business auxiliary service or port services for the periods in dispute; the demands and penalties confirmed by the adjudicating authority are unsustainable and are set aside. Appeals allowed in favour of the assessee.