AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 393
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....r the collection of statutory charges and taxes due to Respondent No.1. Respondent No.1 and Respondent No.2 are collectively referred to as Respondents. Respondent No.3 is the Union of India. 3. This Petition is filed to challenge a demand of Respondents in levying Service Tax on the gross amount billed towards Special Way Leave Charges/Storage Charges with effect from 1st July, 2001. 4. By way of an indenture of lease dated 28th August, 1951 Respondents granted permission to Petitioners to use a portion of a land at Wadala Estate for the purpose of bulk oil installation along with appurtenant offices, godowns and quarters subject to payment of rent/licence or other fees. A Total of 8 indentures of lease were entered into between Petitioners and Respondents over a period for various parcels or pieces of lands at Wadi Bundar, Wadala Estate and Elphinstone Estate by which, parcels and pieces of lands were leased to be used as a petroleum service station, a bulk oil installation and for storage, blending, filling and sale of petroleum. 5. Petitioners and Respondents thereafter executed a Way Leave Agreement dated 29th August, 1959 under which Respondents have given permission....
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....ents have also relied upon various Way Leave Agreements entered into with different parties but those are not part of the record in this matter. 11. An Affidavit-in-Reply has been filed on behalf of Respondent No.3 (incorrectly mentioned as Respondent No.2) affirmed on 24th March, 2005 in effect supporting Respondents' case. 12. With the assistance of Mr. Naushad Engineer, learned amicus curiae, Ms. John for Petitioners and Mr. Bhalwal for Respondents, we have considered the Petition and the documents annexed thereto as also the Affidavits in reply. We must express our appreciation for the distinguished assistance by Mr. Engineer, the learned amicus curiae. The endeavour put forth by Mr. Engineer has been of immense value in rendering the judgment. 13. In our view, the issue that falls for consideration in this Petition is, whether Respondents, viz., Mumbai Port Trust, can levy or charge any service tax on the amount collected under the Way Leave Agreements entered with Petitioners? 14. To answer this issue the following questions arise for consideration :- (a) What is the nature of the Way Leave Agreements? (b) Whether the permissions of Respondents t....
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....itioners. 17. Ms. John for Petitioners adopted the submissions of Mr. Engineer. Ms. John further stated that after the Finance Act, 2010 came into force and as it provided for renting of any immovable property would also be a taxable service, and the Act provided for retrospective effect from 1st June, 2007, Petitioners have been, without prejudice to their rights and contentions, paying service tax from 1st June, 2007. Ms. John states that even that has been challenged in another Petition which is not before us. 18. Mr. Bhalwal appearing for Respondents submitted that : (a) The demand for service tax is in respect of the levy/storage charges payable by Petitioners in respect of the facility of storage and transportation of petroleum/oil products extended by Respondents and the said facility amounts to a taxable service as contemplated under Section 65(72) of the Finance Act, 1994 as amended by the Finance Act, 2001 and read with sub Section 42 of the Major Port Trusts Act, 1963; (b) As per Section 65(51) of the Finance Act, 1994 as amended by Finance Act, 2001, port services means any service rendered by a port or any person authorized by the port, in manne....
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....oved on behalf of the Trustees and in the positions as shown on the said plan....... 1. The Company shall and will as from the first day of September One Thousand Nine Hundred and Fifty Five and during the continuance of this Agreement pay in advance to the Trustees at the office of the Estate Manager the Licence fee of Rupees One Thousand Four Hundred and Four only per annum clear of all deductions on the first day of September of every year the first of such payments having become payable on the First day of September One Thousand Nine Hundred and Fifty Five in respect of the the year ending on the 31st day of August One Thousand Nine Hundred and Fifty Six provided that during the continuance of this Agreement the Trustees shall have the right on the expiry of every five years to revise the way leave fee in their absolute discretion. 2. The Company shall and will pay all rates, taxes, charges, assessments and outgoings now payable or hereafter to become payable in respect of the pipe lines or any part of the pipe lines. 3...... 4.The Company shall and will at its own expenses maintain and keep the pipe lines or any trench in which the pipe line....
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....y to the Trustees all costs expenses and charges incurred thereby or in relation thereto. The Company shall not be entitled to any compensation or damage in the event of the Trustees requiring it to remove the pipe lines or any of them and any trench as hereinbefore provided. 9. The user of the pipe lines shall be at the sole risk and at the sole responsibility of the Company and if at any time owing directly or indirectly to the existence of the pipe lines or the user thereof or of any negligence on the part of the Company any claim for damage or loss or otherwise shall be substantiated by any persons against the Trustees the Company (anything herein contained or done under the terms of these presents notwithstanding) shall forthwith upon demand pay and make good the same and will also make good to the Trustees all and singular the costs charges and expenses which they may have incurred in regard or with reference to or in connection with any such damage or any such claim as aforesaid. (Emphasis supplied) 20. Therefore the agreement is clear that :- (a) It was for leasing of plots of land at Elphinstone Estate of the Mumbai Port Trust where Petitioners were....
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.... cargo. 22. The above makes it clear that Respondents were only charging a licence fee for giving permissions to Petitioners to carry out construction/laying down of pipe line work on the port land and nothing else. 23. The concept of imposition of tax on services was introduced by Finance Act, 1994. By the Finance Act, 2001 that came into force on 11th May, 2001, service tax was introduced on 15 new services. Section 65(72) of Finance Act, 2001 defines taxable service. Clause (zn) of Section 65(72) provides for port services. Section 65(72)(zn) of the Finance Act, 2001 reads as under:- (72) "taxable service" means any service provided:- ......... (zn) to any person, by a port or any person authorised by the port, in relation to port services, in any manner; What is port services is defined under Section 65(51) and it provides as under:- 65. Definitions- In this Chapter, unless the context otherwise requires:- ........ (51) "port services" means any service rendered by a port or any person authorised by the port, in any manner, in relation to a vessel or goods; 24. Section 42 of the Major Port Trusts Act, 1963 ....
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....r the Port Scale of Rates. Therefore, the nature of the Way Leave Agreements cannot be stated to be for Port Services under Section 42 of the Major Port Trusts Act, 1963. 25. Now let us examine whether the fee payable to Respondents under the Way Leave Agreements for granting permission to Petitioners to lay/construct and maintain its own pipe lines was for a port service defined under the Finance Act, 2001. The Hon'ble Apex Court in All India Federation of Tax Practitioners Vs. Union of India (2007) 7 SCC 527 held service tax is a value added tax. For Respondents to be entitled to levy service tax or become liable to pay any service tax to the Government of India, Respondents must render a service and to render a service it must do some activity which amounts to value addition. In our view, merely granting a licence/permission to a person to carry out construction of pipe lines or maintain its own pipe lines on land belonging to Respondents would not amount to a service or port service. In fact the Government of India in its circular dated 9th July, 2001 bearing No.F.No.B.11/1/2001-TRU has clarified as under:- Port services: (1) As per the section 65(51), the ....
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....mentioned above, the Commissioner may decide the inclusion/exclusion in the value of taxable service on merits. (Emphasis supplied) 26. The Government of India has itself clarified that estate rentals of the port which is charged for renting of accommodation provided to outsiders and port users, lease rental for land, etc. will not be liable to service tax as these are not services rendered in relation to goods or vessels. From the definition of port services it is clear that only a service rendered in relation to a vessel or goods can fall under the category of taxable service. By this notification, the Government of India itself has clarified that lease rental for land will not be liable to service tax because those are not services rendered in relation to goods or vessels. As stated earlier the amounts being collected under the Way Leave Agreement are nothing but licence fee for the permission given to Petitioners to lay their pipe lines. In order to charge service tax for such amounts Respondents must provide a service and for that it must do some activity which amounts to value addition. It is not Respondents' case that pipe lines were either laid by Respondents or are b....
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....ssary for Gujarat Maritime Board itself to keep the said jetty in good order. Wharfage charges were collectible because they were in the nature of fees for services rendered. The expenses that were defrayed by the Board for the maintenance of the jetty was sought to be collected as wharfage charges. This amount would necessarily include all amounts that are spent for keeping the said jetty in good condition including dredging so that vessels can berth alongside the jetty. As far as jetties operated by the Board were concerned, the Board itself defrays such expenses. It was only in cases where the jetty was primarily meant for loading and unloading goods belonging to a particular private party that repair and maintenance expenses were to be borne by the private party and not by the Board. In this circumstance, the Court observed that there was no service being rendered by Gujarat Maritime Board to UCL. 29. With respect to the argument that in any case UCL was a person authorised by Gujarat Maritime Board within the definition of "port service" and the section would be attracted as wharfage charges are a payment for services rendered in relation to a vessel or goods, was not accep....
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....e licensee will have to pay thereafter wharfage charges at the full rate prescribed in the schedule of port charges for captive jetties. H. For direct berthing facilities provided for captive cargo in ships which call at the jetty of 10,000 DWT and above, an amount of Rs.25,00,000/- will be charged as lease rent for waterfront use. I. It is the licensee UCL that will provide all services at or around the jetty including dredging, navigation, etc. and if this is not done then the Board may on its own provide such facilities at the risk and cost of the licensee UCL. J. The licence is terminable on breach of the terms and conditions of the agreement or of any infraction of law. Upon such termination, the Board shall be entitled to take control or otherwise dispose of all or any part of the jetty that may have been constructed. K. The period of the agreement is to be 25 years from the date of commissioning of the jetty or such time as the rebate availed of by the party equals the construction cost of the jetty whichever date is earlier. However, even after the rebate and the construction cost square off, the licensee will be allowed to use the jetty ....
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....wharf' and 'wharfage' from Black's Law Dictionary as under:- Wharf. A structure on the shores of navigable waters, to which a vessel can be brought for loading or unloading. Private wharf. One that can be used only by its owner or lessee. Public wharf. One that can be used by the public. Wharfage. 1 The fee paid for landing, loading, or unloading goods on a wharf. 2 The accommodation for loading or unloading goods on a wharf. We are afraid that we are unable to agree with Shri Adhyaru for the reason that though GMB is the owner of the jetty under the said agreement, yet for providing the service of allowing a vessel to berth at the said jetty, it is necessary for GMB itself to keep the said jetty in good order. Wharfage charges are collectible because they are in the nature of fees for services rendered. The expenses that are defrayed by the Board for the maintenance of the jetty is sought to be collected as wharfage charges. This amount would necessarily include all amounts that are spent for keeping the said jetty in good condition including dredging so that vessels can berth alongside the jetty. It is clear that so far as jet....