Port Services - As amended by the Finance Act ,2010

[CASeetharaman KC]

The recent amendment in the scope of 'Port Services' virtually means that any service rendered inside the port premises would be chargeable under 'Port Services'. Would this mean that a Clearing and Forwarding Agent operating inside the port would have to pay service tax under ' Port services' ?

[CA. Shivani Shah]

In such scenarios, you need to apply the test under section 65A of the Finance Act, 1994. There are lot many judicial pronouncements that state that if a particular activity is covered under a new taxable service category, it implies that it was not sought to be taxed under the existing categories. Hence if the change in the definition of a particular category makes a service fit within its ambit, it means it was not sought to be taxed earlier. Thus, if the activities in the instant case fall within the service category of 'clearing & forwarding', a change in the definition of 'port services' will not make it fall under the latter.

[Guest]

It appears so as per the clarification issued by CBEC (TRU)in D.O.F. No.334/1/2010-TRU, dated 26th February 2010 available at website, "cbec.gov.in".

[CASeetharaman KC]

The point made by Shivani Shah is correct but the Finance Act 2010 has specifically excluded the applicability of Section 65A in this case. What would be the position then? It says that the provisions of Section 65A shall not apply to services rendered in the other port.

[CA. Shivani Shah]

As per clarification 334/1/2010-ST dated 26/02/2010, reference was made as follows: "Elsewhere, individual services are classified according to their individual description on the grounds that the provisions Section 65A of Finance Act, 1994 prescribes adoption of a specific description over a general one." I feel that sec 65A can be resorted to.

AI Summary

Port services scope broadened may capture in port clearing agents unless specific service classification governs. Amendment expands the scope of Port Services to include services rendered within port premises, creating a classification issue whether in port clearing and forwarding must be taxed as port services. Judicial practice favors taxing under a specific service description when applicable, yet the Finance Act amendment excludes the application of Section 65A to port services, generating tension with CBEC guidance endorsing preference for specific descriptions and resulting regulatory ambiguity for in port service providers.