TaxTMI 
TaxTMI 
2021 (12) TMI 113
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....d its port and terminal handling facilities, by incurring substantial capital cost for setting up additional facilities such as three SPMs, sub-sea pipelines, crude and product pipelines, marine tank farms, sea water outfall system and support vessels comprising of marine support vessels, diving support vessel, three tugs and two pilot boats, all with a view to handle the increase in the quantity of the crude and products that was likely to transit through the port for the new refinery. For this purpose, the Applicant (then known as Reliance Ports and Terminals Ltd. - 'RPTL' for short) entered into a long term contract with RIL on 26-3-2007 titled "Agreement for the Receipt Handling Storage and Evacuation of Crude, Petroleum and Petrochemical Products'', vide which the Applicant was obliged to set up new facilities as described in Schedule 1 thereto, for enabling it to provide services described in Schedule 2 of the said long term contract. Part A of Schedule 1 to the said long term contract gives a brief description of facilities that the Applicant was required to set up on ownership basis. The relevant portion of the same is extracted as follows: A. Brief description of ....
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....4. Schedule 2 of the long-term contract described the services that the Applicant was required to provide to RIL and relevant Para 3.2 of the contract required the Applicant to (i) ensure availability of adequate facilities of the desired specifications, and (ii) perform all services and obligations inter-alia in accordance with good industry practices. 5. Under the long-term contract, the Applicant represented and warranted to RIL that the facilities will be fit for provision of services in all material respects and further warranted that it can comply with all applicable material environmental laws and regulations (clause 6.2 and 6.3 of the long-term contract). 6. Since the Applicant provides port and terminal handling services which includes loading and unloading of cargo, transportation of cargo from the vessels berthed in the sea to the port, providing berthing facilities to the vessel, providing storage facilities etc., the same are treated as a composite supply of 'Port and waterway operation services (excl. cargo handling) such as operation services of ports, docks, light houses, light ships etc.' and classified under heading 996751. The Applicant recover throughput c....
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....e employed to connect the discharge pipes of the vessel to the sub-sea pipelines. These divers and their diving equipment are stationed on the Diving Support Vessel ('DSV') which are required to be manned, operated and maintained by third party contractors who are specialists in this field. 10. With a view to guard the port facilities, particularly the SPMs, MTFs and subsea pipelines which are all located mid-sea, the Applicant is also required to have a robust security and patrolling mechanism for which purpose it employs Security Patrol Vessels ('SPVs') which not only perform the function of providing security but also enables the Applicant company to comply with its obligations under the environmental laws by checking for any oil spillage/leak. The SPVs that are so employed by the Applicant are also required to be manned, operated and maintained by experts for which separate contractors are engaged. 11. The applicant submitted that the input services in question related to hiring and/or operations of two different kinds of vessels used by them for providing its output supply of taxable services, it is necessary to set out the detailed specifications and features of the two....
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....pplicant has also appointed various contractors for operation and maintenance of the SPVs (both owned and hired). These contractors provide specialized and technically trained crew to operate and maintain the SPVs in accordance with sound ship management practices. The detailed scope of work undertaken by contractors in respect of operation and maintenance of SPVs and sample invoices raised by such contractors was submitted. In respect of SPVs which are hired by the Applicant, sample copies of related work orders for such hiring are submitted. 12. Further the Applicant submits as follows : It receives services of hiring of the SPVs as well as for operating and maintaining DSVs and SPVs and that these services are eligible input services for availment of ITC, especially for the following reasons: (a) they are essential for providing output services of supplying port and terminal handling services and are used in the course or furtherance of the applicant's business; and (b) they are not specifically blocked under any other provision of Section 17 of the CGST Act. 13. The Applicant submitted that the provisions of Section 17(5) of the CGST Act, partic....
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....en the scope of ITC, and that it would now be made available in respect of Motor vehicles for transportation of persons having seating capacity of more than thirteen (including driver), vessels and aircrafts. Further, the context and rationale behind the amendment to Section 17(5)(a) and (aa) has been outlined in Serial No. 17 of Annexure 1 to the Agenda Item 6(i): 'Proposals for amendments in the CGST Act, 2017, IGST Act, 2017, UTGST Act, 2017 and GST (Compensation to States) Act, 2017'' under Agenda Item 6: Issues recommended by the Law Committee for consideration of the GST Council to the 28th GST Council Meeting. The relevant extract is reproduced for ready reference: "The amendment is sought to make it clear that input tax credit would now be available in respect of dumpers, work-trucks, fork-lift trucks and other special purpose motor vehicles. After the amendment is carried out, input tax credit would be denied only in respect of motor vehicles for transport of persons having approved seating capacity of not more than 13 persons (including the driver), vessels and aircraft when these are used for personal purposes.'' 17. The Applicant submits that a combined read....
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.... said that the activity is, 'appropriate or adopted to such profit'. ii. In case of ACIT vs. Surat Art Silk Cloth Manufacturers Association [(1979) 2 TAXMAN 501 (SC)], the Hon'ble Apex court also interpreted the word 'for' as 'for the purpose of'. The relevant portion of the judgement is reproduced as follows: "The activity must, however, be for profit in order to attract the exclusionary clause and the question therefore is when can an activity be said to be one for profit? The answer to the question obviously depends on the correct connotation of the preposition 'for'. This preposition has many shades of meaning but when used with the active participle of a verb it means for the purpose of and connotes the end with reference to which something is done." iii. The Hon'ble Tribunal in Kedar Constructions vs. CCE [2014-TIOL-2138-CESTAT-MUM] has also followed the ratio laid down by the Hon'ble Supreme Court in case of Indian Chambers of Commerce (supra). 19. The Applicant submits that the DSVs as also the SPVs are essential to enable efficient transportation of goods from SPM to storage tanks located at the jetty. These services are integral t....
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....are further used for making taxable supplies of same category or as an element of a taxable composite or mixed supply. Thus, insofar as input service of hiring of SPV is concerned, the Applicant is even otherwise eligible to avail ITC as SPV is clearly used by the Applicant to provide its output services. The port and terminal handling services provided by the Applicant to its customer RIL is nothing but a composite supply comprising of various services such as loading and unloading of cargo, transportation of cargo from the vessels berthed in the sea to the port, providing berthing facilities to the vessel, providing storage facilities etc. The service of hiring of SPV is used by the Applicant for providing such composite supply. 19.4 In view of the foregoing, the Applicant thus submits and prays that We answer the questions raised by the Applicant in the affirmative by holding that the Applicant is eligible to avail ITC in respect of the services received by it, viz. operation and maintenance services in respect of DSV and hiring, operation and maintenance services in respect of SPV. 20. The applicant has submitted copies of revised work order of Diving Support Vessel (DSV)....
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....on flying such aircraft; (ii) for transportation of goods; Sub-Section (b): the following supply of goods or services or both i. food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or renting of motor vehicles, vessels or aircraft referred to in clause (a) or clause(aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; From the above, it is clear that the provisions of Section 17(5) (aa) of the Act are not only overriding provisions with respect to Section 16(1) of the Act, but are also exhaustive in nature and limits the scope of Input tax credit with respect to vessel. The use of the words "Notwithstanding anything contained in sub-section (1) of Section 16" emphasizes that the Input Tax Credit can be availed o....
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....hem and used by it for supplying port and terminal handling services? 2. Whether the Applicant is entitled to avail Input Tax Credit ('ITC') on services procured for hiring, and for operation and maintenance of Security Patrol Vessel used by it for supplying port and terminal handling services? Personal Hearing: 24.1 Shri Vipin Jain, Shri Aqueel Shiraji, Ms. Parnasi Singla appeared for the hearing (virtual mode) and reiterated the contents of the application. In the hearing, Shri Vipin Jain submitted to place before us the Correct Contracts entered between M/s Sikka and the Contractors for providing subject services within a weeks time. Further, Shri Jain requested for one more hearing. 24.2 The next hearing was attended by the said three representatives and the contents of additional submissions were reiterated. Discussion and Findings 25. At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act. 26. We ....
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....e by M/s Sikka. vii. The services by way of operation of DSV is used for underwater work such as the operations and maintenance of SPMs, under sea pipelines and their connections, well-heads and other off shore installations; used at the time of connecting the underwater pipelines at the time of evacuation of the liquid bulk cargo from/to tankers as well as vessels. M/s Samson supplies qualified crew for operation and maintenance of DSV. 2. Contract with Ocean Sparkle Ltd: i. The rationale we had employed from examining the Contract with M/s Samson, applies to this Contract also. This Contract is, inter alia, for the Operation and Maintenance of DSV Reldarshan, along with the operation and maintenance of SPM 3,4 & 5. ii. The SAC quoted in the invoice raised by Ocean Sparkle is SAC 996751 which pertains to 'Port & Waterway operation Services (excluding Cargo Handling) such as operation services of Ports, Docks, Light houses, Light ships etc. In light of the substance of the contract before us, We hold that the SAC quoted by M/s Ocean in its invoice shall not alter the factual scope of service supply to M/s Sikka. We hold that this supply of servic....
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....g/ Rental services of the Boat but the scope of work is for supply of Security and Patrolling services to M/s Sikka. As we read this Contract, we find that the Contractor is responsible for supplying this Boat with its crew along with their insurance. iii. We find the rationale employed for the Security and Patrolling services provided by Lilly Maritime is applicable in subject supply by I Marine Infratech too. 5. Contract with Ismail Ibrahim Hundada. i. This Contract begins with the wordings that it is for hiring of security boat 'ML Noorani' for patrolling of SPIL port waters of JMD. The SAC quoted in the invoice by the contractor is SAC 996609 which is the SAC for Rental Services of Transport Vehicles (nec) with or without operator. ii. However, on further reading the Contract, it specifies that the contractor shall provide competent crew as per certification of survey issued by MMB/GMB. We find that this contract's scope is not limited to the Hiring/ Rental services of the Boat but the scope of work is for supply of the Security and Patrolling services to M/s Sikka. iii. We find the rationale employed for the Security and Patrolling servic....