TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 393
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....es 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 to Petitioners to lay down/construct and maintain ....
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....ed 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 to laydown/construct and maintain four oil pipe lines and a steam pipe line at Wadal....
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....nance 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 manner, in relation to a vessel or goods. Port Services as contemplated under Section 42 of the Major Port Trusts Act consists of port and port s....
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.... 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 lines may be laid for the time being and all works in relation thereto in good and substantial repair and conditions and in sound working order so that the pipe lines and trench shall be capable of carrying the heaviest wheel tr....
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....s 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 desirous of laying and maintaining four oil pipe lines under and across other land and railway tracks belonging to port and an overhead steam pipe line over and across the port's Railway; (b) Respondents permitted Petitioners to construct and maintain the oil and ste....
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.... 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 sets out the services that Respondents can provide. Sub-section 1 of Section 42 of the Major Port Trusts Act, 1963 reads as under:- (1) A Board shall have power to undertake the following services (a) landing, shipping or transhipping passengers and goods between vessels in the port and the wharves, piers, quays or docks belonging to or in the possession of the Board; (b) rece....
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....ex 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 "port services" means any service rendered by a port or any person authorized by the port, in any manner, in relation to a vessel or goods. As per section 65(72)(zn), taxable service is any service provided to any person by a port or any person authorized by the port, in relation to port services, in any manner. (2) Port services generally consist of port and dock services (these are for services rendered in relation to vessels), cargo h....
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....endered 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 being maintained by Respondents. In the case at hand, it is Petitioners who have laid the pipe lines and have been maintaining the pipe lines. The pipe lines also do not belong to Respondents because the agreement itself provides that on termination of the Way Leave Agreements Petitioners are bound to remove the pipe lines and restore the land at its own cost. Therefore, it cannot be stated that Respondents are providing port services under the Way Leave Agreement. Respondents are also not doing any....
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....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 accepted by the Court. Under Sections 32(3) and (4) of the Gujarat Maritime Board Act which is pari materia with the Major Port Trusts Act, 1963, it was observed that as the Gujarat Maritime Board itself charges or recovers wharfage charges from the licensee and does not authorise the licensee to recover such charges from other persons, it was clear that no service was rendered by a port or by any person authorised by such port and, therefore, the very first condition for levy of service tax was absent. Parag....
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....ensee 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 for captive purposes subject to full payment of wharfage charges so long as the project of the licensee - i.e. the cement plant of the licensee continues to function. 11. The question which arises on a reading of the said agreement is, therefore, whether any service is rendered by GMB or by any person authorized by GMB in relation to a vessel or goods. The agreement makes it clear that it is the duty of the licensee, i.e., UCL to maintain the jetty in good order and condition during the tenure of the agreement. (See: clauses 15 and 16 set out above). Further, it is UCL that is to pro....