TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 317
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....nse of GUJARAT MARITIME BOARD (GMB) to administer, develop, maintain and operate a captive jetty for the purpose of handling storage and transportation of cargo of M/S. ESSAR STEEL INDIA LTD. The license agreement between M/S. GMB and the respondent appear to reveal that Gujarat Maritime Board had agreed to give rebate of 80% of notified rates, on landing and shipping fees (known as wharfage charges) notified by the Ports and Transportation Department, Government of Gujarat under Schedule of Ports Charges with respect to such captive jetty of M/S. ESSAR STEEL INDIA LTD. in view of the cost of construction borne by the respondent as per the agreement dated 25.03.2010, it was noticed that the Gujarat Maritime Board is paying service tax on entire amount of wharfage charges as notified by the Government of Gujarat whereas, the respondent was paying service tax only on the 20% of notified wharfage charges. 1.1 On perusal of the invoices issued by the Gujarat Maritime Board, it was noticed that Gujarat Maritime Board is charging service tax on full notified rate as per Schedule of Ports Charges from the respondent and in turn the respondent was availing the Cenvat Credit of service tax....
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.... Maritime Board and M/s. EBTL that in consideration of M/s. EBTL constructing the deep draft captive jetty or handling captive cargo of EBTL at its own cost. Initially, the Gujarat Maritime Board has agreed to grant rebate adjusted against the cost of constructing subject to the conditions stipulated therein. It is clearly mentioned therein that set off as aforesaid against the capital investment for construction of deep water captive jetty only (i.e. Cost of construction) and that whether such captive investment is recovered through such rebate, M/s. EBTL shall have to pay thereafter, such charges at normal rate as per schedule of Ports Charges. It is clearly provided under the said agreement dated 25.03.2010 that whatever rebate in concession is granted by Gujarat Maritime Board against the cost of construction is equivalent amount at the relevant time shall be utilized by M/s. EBTL in repayment of loan so that at the end of the period of the agreement when M/s. EBTL may not have right of rebate then the construction is free of any liability in respect of such loan. It is clearly established the fact that such rebate of 80% of wharfage charges has been extended only to M/s. EBTL ....
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.... of the Act in other words, such gross amount charged in respect of taxable service of port services provided by M/s. EBTL to M/s. ESTL being not wholly consisting of money and the quantum of which is not ascertainable the same has to be arrived at in terms of Section 67(1) read with provision of Rule (3) of Service Tax (Determination of value) Rules, 2006. 2.4 In view of the above, the adjudicating authority has clearly erred in holding that there is no evidence of additional consideration or additional money flow from M/s. ESTL to M/s. EBTL. He submits that it is an admitted position that GMB normally charge charges as notified by the Government of Gujarat at specified rates, only had extended the benefit of rebate to the tune of 80% applicable wharfage charges they would normally charge to other port users only to M/s. EBTL in terms of their agreement with them and in consideration of the fact that M/s. EBTL had invested huge sum in constructing and developing of the said port and that too with the condition that such rebate shall be allowed only for a period of 25 years therefore, this benefit of rebate was specifically intended for M/s.EBTL only and not to others. Therefore, ....
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....nder Section 35 of the GMB Act to construct and use 550 Mtrs of deep water captive jetty for handling of captive cargo at the demarcated site. For this purpose, a license fee of Rs. 10,000/- per annum was payable by it to GMB. As the jetty was constructed at the Applicant's own cost initially, GMB agreed that the jetty so constructed shall be mainly and initially as per terms of the agreement allowed to be used for the vessels belonging to the Applicant or chartered by it on preferential basis without any ousting priority. The agreement very specifically emphasized that the ownership of deep water captive jetty will vest in GMB and the Applicant shall have no right, title, interest or other proprietary right in respect of the jetty so built and the land on which it was constructed as it was specifically understood that the water front is the sovereign right of the Government. 11.5 It is submitted that looking into all the clauses of the agreement, it was GMB which was the owner of the captive jetty and the wharfage and other like services were being provided by the Applicant on behalf of GMB. Reference is invited to clause 17 of the agreement which lays down that "in conside....
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....ore no service tax was payable on the same. In support thereof, reference invited to the CBEC Circular No. 89/7/2006-ST dated 18.12.2006, Master circular dated 23.8.2007, FAQ dated 4.12.2008 issued by DGST and FAQ 2010 dated 1.9.2010 wherein it has been clarified that if a Government department (sovereign) / public authorities perform any mandatory or statutory function under the provisions of any law and collect any fees, such activity shall be treated as activity purely in public interest and will not be taxable. Applicant submits that on this ground also the demand ought to have been dropped. 11.8 Applicant submits that matter was purely revenue neutral as ESTL, our own group company was entitled to the entire credit of service tax paid by us. In view of this, no demand for service tax could have been raised as held by the Hon'ble Supreme Court in the case of Commissioner Vs. Coca Cola reported in 2007 (213) ELT 490 (SC); Commissioner Vs. Textile Corporation, Marathwada 2008 (231) ELT 195 (SC); Nirlon Ltd. Vs. Commissioner -2015 (320) ELT (SC) besides several other decisions wherein it has been clearly held that when the whole exercise is revenue neutral then the extended ....
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.... very much in knowledge of the Department as similar short levy in respect of GMB was pointed out earlier. In view of this, the very basis on which suppression has been alleged on the Applicant does not survive and the extended period cannot therefore be invoked. In view of this, it was submitted that the entire demand is time barred and the proceedings are liable to be dropped. Reliance was also placed on the Supreme Court decision in the case of CCE Vs. Pragati Concrete Products reported in 2015-TIOL-223-SC-CX wherein it has been held that no suppression can be alleged when the unit has been audited several times. The impugned order however does not contain any finding in this respect. 11.11 Applicant submits that even otherwise it could not have any intention to evade service tax as ESTL, to whom the service was rendered, was eligible to avail credit of the entire service tax paid by us, and being a group company the entire exercise was completely revenue neutral. There was therefore no incentive to the Applicant to evade payment of tax. In view of this, the extended period cannot be invoked and the demand is liable to be dropped. 04. We have carefully considered the submissi....
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....s under Port Service at the rate of 20% of the notified rate as per GMB, however, other than this there is no other amount flowing in the form of money or in any form from ESTL to EBTL therefore, the case of the respondent does not fall under clause (II) of Section 67(1) of the Finance Act, 1994. It is pertinent to note that the entire case of the revenue is that there is a capital expenditure incurred by EBTL and on that account 80% rebate was given by GMB. The transaction which is under question in the present case is not between GMB and EBTL but it is between EBTL and ESTL, in this transaction the capital expenditure incurred by the EBTL is not relevant for the purpose of charging wharfage charges by EBTL to ESTL. Therefore, in our view the entire foundation of the case that 80% rebate given by GMB to EBTL on account of the capital expenditure incurred by the EBTL is not relevant for the transaction which is between EBTL and ESTL. The manner of determination of value is provided under Rule 3 of the Service Tax (Determination of Value) Rules, 2006 which is reproduced below:- Subject to the provisions of section 67, the value of taxable service, where such value is not ascertain....
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....ndent transaction between two parties, the one transaction may vary from the other transaction. There is no provision in the service tax law particularly when the gross value in the present case is ascertained to apply a comparable value of a similar service but of a different transaction therefore, even though there is a different charges by GMB to two different parties that cannot be a reason to apply normal notified rate in the present case. For this reasons also revenue's contention to enhance the value from 20% to 100% is not sustainable. We find that the adjudicating authority has relied upon the judgment of Hon'ble CESTAT in the case of GUJARAT MARITIME BOARD V/s. CCE- BHAVNAGAR- 2015 (38) STR 776 (Tri.-Ahmd.) the same is reproduced below:- 6. We have considered the submissions made at length by both sides and also have taken on record the written submissions made by both sides. Essentially, the entire issue revolves around whether the appellant herein is required to pay the differential Service Tax liability on the amount of Rs. 80/- which was considered by M/s. GMB and M/s. Unitech Ltd. as rebate and the Revenue authorities considered as additional consideration recei....
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.... the outset, we would like to record that both sides have relied upon the various case laws and we have given due consideration to them. 8.1 The term Port service is defined during the relevant time as under in terms of Section 65(82) of Finance Act, 1994. "Port service" means any service rendered by a port or other port or any person authorized by such port or other port, in any manner, in relation to a vessel or goods." 8.2 From the perusal of the definition of port service which was in existence prior to 1-7-2010, it can be seen that a service could be considered as a port service if it satisfied following two conditions :- (i) Service should have been rendered in relation to a vessel or goods. (ii) Service should have been provided by port, other port, or person authorized by port. 8.3 In the present case, neither of the above two conditions is being fulfilled. Except for the ownership of the waterfront, GMB had no role to play. The entire port with infrastructure was built by M/s. UCL Ltd. and would be owned and operated also by M/s. UCL Ltd. under BOOT scheme. Thus, no service of whatsoever nature has been rendered by GMB, which may fall under the category o....
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....upreme Court that the right to catch and carry away of fish in specific sections of lake for a specified future period amounted to a licence to enter on the land coupled with the grant to catch and carry away the fish and was regarded as a benefit that arose out of the land as "immovable property". In Lakshman Gowroji Nakhawa v. Ramji Antone Takhwa - AIR 1921 BOM 93, it was held that right of fishing was "immovable property". Several fishery was held to be "immovable property" in Ram Bysack v. Nurumuddin - 1893 ILR 20 CAL 446. In Shibu Haldar v. Gupi Sundari Dasya - ILR 24 CAL 449, it was held that suit for the rent of the fishery was a suit for immovable property. In Sitaram v. Petia - AIR 1917 Nag 37, it was held that right of fishing is recognized as an interest in immovable property. 8.11 In the light of the above judgments, it can reasonably be concluded that allowing the user of the water front by M/s. GMB to M/s. UCL Ltd. was allowing the use of immovable property by GMB to M/s. UCL Ltd, and hence, Rs. 20 charged by GMB to M/s. UCL Ltd. at the most was on account of renting of immovable property. Just because the said charges were linked to the number of ships, it will no....
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....vision of service is for a consideration in money. The expression 'money' is defined in Section 67 to read as under : " 'money' includes any currency, cheque, promissory note, letter of credit, draft, pay order, traveler's cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value." 9.2 A reading of the above provisions makes it evident that the levy of Service Tax in the Finance Act, 1994 is with reference to the amount actually paid for the services. This is akin to the concept of transaction value which is now the method of valuation followed both in the Central Excise as well as Customs Acts. The definitions extracted above make it clear that tax is required to be paid on the amount that is actually paid by one party to another. Such actual payments can be made by any acceptable modes of payment such as cheque, currency, promissory note, letter of credit, draft, pay order, traveler's cheque, money order, postal remittance or other similar instruments. Also, payments made by way of deduction from accounts or by issue of credit notes, debit notes or book adjustments are also regarded as forms of p....
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.... industry can at all be considered as 'consideration flowing from the user industry to GMB'. 9.4 The capital expenditure incurred by M/s. UCL cannot constitute 'consideration' flowing from M/s. UCL to GMB for the reason that such expenditure was not incurred at the desire and request of GMB but was incurred by the end user for own benefit without there being a stipulation for such amount to be incurred. The Privy Council in the case of Raja of Venkatagiri v. Sri Krishnayya, - 1948 PC 150, interpreted the words 'at the desire of the promisor appearing in Section 2(d) of the Contract Act, 1872 held that where the monies were advanced not as a result of the desire of the promisor who executed the promissory note, the same cannot constitute consideration for the promissory note. As such, applying the ratio of this decision, it will flow that since the construction of the jetties by the user industry was not at the request or desire of GMB but by the company's own volition, such expenditure would not constitute consideration. This is clear from the definition of 'consideration' in Section 2(d) of the Contract Act, which reads thus : "When at the desire of the promisor, the promise....
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....ure incurred by the user industry is an expenditure incurred by the user industry in its own benefit and it is clear on the intention of the two parties that GMB would have been entitled only to a contingent benefit at the end of the concession period and the value of that contingent benefit cannot be quantified particularly in the absence of a machinery provision to that effect in the Finance Act, 1994 or in the rules framed thereunder. In this regard, the judgement of the Supreme court in the case of B.C. Srinivas Shetty is relevant, which provides that where a taxing statute does not provide or prescribe a machinery provision, in the absence of such machinery provision to cover a particular type of transaction, it is the absence of such a machinery provision itself sufficient indication that the legislature did not intend to tax that transaction. Though the judgment was rendered in the context of the Income Tax Act, 1961, the principle arising therefrom is equally applicable in the present situation where there is no method available to determine the present value of a contingent benefit which may or may not accrue to GMB at a future date. 9.7 The Revenue's case is even other....
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....n GMB and EBTL, exists in the transaction between EBTL & ESTL, the case of the respondent is on a better footing as compared to the judgment given in GUJARAT MARITME BOARD case (supra). In the said judgment the similar issue was involved that whether service tax should be chargeable on 100% of notified rate or on 20% (after giving rebate of 80%) therefore, the judgment of GUJARAT MARITIME BOARD (supra) is squarely applicable in the present case. 4.4 In view of the above and concurring with the findings of the learned Commissioner, we are of the view that the appellant has discharged service tax correctly on the 20% of the wharfage charges charged to the M/s. ESTL. 4.5 Without prejudice to the above, we find that the appellant also raised additional grounds in their cross- objection. As regard the ground that the adjudicating authority has not appreciated and ignored the agreement, as regards consideration receivable for provision of services in terms of agreement dated 21.2.2011, we find that EBTL is also providing facilities for loading unloading and export import of cargo and services incidental thereto referred to as cargo and handling facility for which separate charges are m....