TaxTMI 
TaxTMI 
2023 (6) TMI 239
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.... under the provisions of Rule 14 of the Cenvat Credit Rules 2004 read with Section 73(2) of the Finance Act, 1994 from M/s JSW Jaigarh Port Limited, 24, Kunbiwadi, At - Nandiwade, Jaigad, Ratnagiri; (ii) I order M/s JSW Jaigarh Port Limited to pay interest at appropriate rate on aforesaid disallowed Cenvat Credit amount mentioned at St. No. (i) above under the provisions of Section 75 of the Finance Act, 1994 read with Rule 14 of Cenvat Credit Rules, 2004. (iii) I impose penalty of Rs. 26,19.63,369/- (Rupees Twenty Six crore nineteen lakh sixty three thousand three hundred sixty nine only) on M/s JSW Jaigarh Port Limited, 24, Kunbiwadi, At- Nandiwade, Jaigad, Ratnagiri under the provisions of Section 78 of the Finance Act, 1994 read with Rule 15(3) of the Cenvat Credit Rules, 2004. 1 further give option to JSW Jaigarh Port Limited, to pay the amount of wrongly availed Cenvat Credit along with interest plus 25% penalty within the period of thirty days from the receipt of this order, then penalty liable to be paid them shall be twenty five percent. 27. With this, the show cause notice issued under F. No. V(JSW)15-68/A-II/ Pune/Tech/2017 dated 14.02.2017 sta....
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....edging service is not required by the Appellant for providing the output service and consequently, there was no direct nexus between the dredging service and output port services. It was further alleged that the dredging services were carried out outside the limits of the Jaigarh port, Le outside the customs notified area and hence, the dredging service cannot be considered as "input service". 2.5 This show cause notice has been adjudicated as per the impugned order referred in para 1 above. Aggrieved appellant has filed this appeal. 3.1 We have heard Shri Vishal Agarwal with Shri Abhishek Deodhar, Advocates for the appellant and Shri Nitin M Tagade, Joint Commissioner, Authorized Representative for the revenue. 3.2 Arguing for the appellant learned counsel submits: Issue is no longer res integra having been decided in the Appellant's favour in several decisions of this Hon'ble Tribunal Essar Bulk Terminal Ltd. [2022 (57) GSTL 53 (Tri. - Ahmd.)]; Essar Bulk Terminal Ltd. [E/12243/2019 (Ahmedabad Bench)]; Adani Ports & SEZ Ltd. [2016 (42) STR 1010 (Tri.- Ahmd.)]; Sanghi Industries [2020-TIOL-328-CESTAT-AHM]; Ultr....
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....capital dredging service received by M/s JSWJPL from M/s Boskalis. The cenvat credit availed of the Capital dredging services appears to be inadmissible for the reason that these services received were of capital nature and therefore not eligible as input services. 18.1 M/s JSWJPL submitted that the dredging service received is used to provide output services. There is a direct nexus between the dredging services received and the port services provided by them. M/s JSWJPL submitted that dredging is one of the notified services defined under Section 65 (36a) of the Finance Act, 1994 and the word "Capital Dredging" is used for deepening of the channel for the first time. Thereafter to maintain depth of such channel, regular maintenance is required to be carried out. This is referred to as "Maintenance Dredging" in normal parlance and in accounting terms. In the instant case, they had procured the service of Capital Dredging from M/s. Boskalis Smit India LLP to deepen the navigation channel, berth pocket and turning circle for movement of arriving vessel to dock at the port (jetty/berth). It is submitted that as per the definition of 'input service' any service which ....
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....3rd Floor, 14, Ramjibhai Kamani Marg, Ballard Estate, Mumbai- 400 038 (hereinafter called "THE LICENSOR '----) as the First part and M/s JSW Jaigarh Port Limited, a company incorporated under the Companies Act, 1956 and having its Registered Office at Jindal Masion, 5A, Dr. G. Deshmukh Marg, Mumbai 400 026 (hereinafter referred as the "Licensee", ---) as party of the Second part. 1. PREAMBLE Whereas 1.5 The Licensor has agreed to grant license for 50 years to the Licensee under this Agreement to build a Multipurpose, commonuser port at Dhamnakhol Port, Jaigad, Dist- Ratnagiri on Build, Own, Operate, Share and Transfer (BOOST) basis on the terms and conditions contained hereinafter. 1.7 The Licensee has agreed to design, finance, construct, operate, maintain and manage the Port Complex and the Licensor has agreed to grant License to the Licensee to do so on the terms and conditions set forth below. I. LICENSING AND REGULATORY FRAMEWORK I. GRANT OF LICENSE 3.1 In consideration of the Licensee agreeing to pay one time license fee of Rs. 10 lakhs and in consideration of the Licensee agreeing to pay a monthly Ch....
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....e inspection, to the Customs Department for the declaration of the area as a Landing and Shipping place. 22. COMMENCEMENT OF OPERATIONS 22.1 Date of Commencement of Operations 22.1.1 The date of Commencement of Operations of the Port shall be the date of issue of Landing and Shipping Declaration by the Customs or the date of expiry of the Scheduled Construction Period whichever is earlier. 40. PAYMENT AND PAYMENT TERMS 40.1 One time License fee. In consideration of the grant of this License, the Licensee has pay to the Licensor one time license fee for an amount of Rs. 10 lakhs simultaneously on the Date of signing of this Agreement. 40.2 Monthly payment Monthly charges shall be paid every month on the basis of valume of cargo handled in the previous month and shall be paid latest by the 7th Day of the subsequent Month. 18.4 From the above terms and conditions of the Agreement, it is noticed that by this agreement, MMB has granted License to M/s JSWJPL to build a Multipurpose, common-user port at Jaigad Dist- Ratnagiri on Build, Own, Operate, Share and Transfer (BOOST) basis. The agreement was signed o....
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....s of dredging services. Capital dredging: Capital dredging are primarily port creation and expansion projects, while also involve the deepening and/or widening of channels to allow access by larger and deeper draught ships and also the provision of land fill for building additional port facilities, thereby enhancing port capability Because capital works usually involve hard material or highvolume works, the work is usually done using a cutter suction dredge or large trailing suction hopper dredge; but for rock works, drilling and blasting along with mechanical excavation may be used. Maintenance dredging: Maintenance dredging consists of the restoration of designed depths of waterways and harbours by removing silt, sand and other accumulated sediments. Due to natural sedimentation, active channels generally require periodic maintenance dredging if the navigability of the channels is to be maintained. Thus, the capital dredging is mainly carried out for development and construction of new ports and expansion projects. In the reply, M/s JSWJPL also stated that "Capital Dredging" is used for deepening of the channel for the first time. Thereafter to maintain....
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....vices: or [B] .... [C].... 19.1 As per the above definition to qualify any service as 'input service' it should be used by a provider of taxable service for providing an output service or should be used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products. But, some of the services have been specifically excluded from definition of 'input service' and those would not be eligible to the credit even if these would be eligible as per inclusive part of the definition of 'input service'. Following services have been specifically excluded from definition of 'Input services". From 1.07.2012, the service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act, 1994have been excluded from definition of 'Input services.". Further, notification no. 25/12- S. T. dated 20.6.2012 (effective 1.7.2012) services provided to construction of Port are exempted. Serial no.14 of Notification no. 25/2012-ST dated 20.06.2012 which g....
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.... limits as may, from time to time, be defined by the Central Govt. for the purposes of this Act, by notification in the official gazette, and, until a notification is so issued, within such limits as may have been defined by the Central Govt. under the provisions of the Indian Ports Act. " and "other port" has been defined under Section 76 of the Act as "Other port" has the meaning assigned to "port" in clause (4) of section 3 of the Indian Ports Act, 1908 (15 of 1908), but does not include the port defined in clause 80." (Clause (4) of section 3 of the Indian Ports Act, 1908 provides that ports include any part of river or channel in which this Act is, for the time being in force.") The CBEC, vide letter F. No. B-II/1/2000-TGRU dated 9.07.2001 issued clarification regarding the Port services. The relevant paras are reproduced below. "2. Port services generally consist of port and dock services (there are for services rendered in relation to vessels), cargo handling and storage services, railway haulage services, and container handling services (these are for services rendered in relation to goods). The Dock Labour Board of the Port provides serv....
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..../s JSWJPL have obtained capital dredging services for developing/ construction of the navigational channel as an activity of port development. As these services were used in relation to development and construction of port, these services cannot be held to be used in providing taxable port services. Providing taxable"port service' will commence only after completion of construction of port and declaring the port fit for operation. Therefore, the services which are utilised for construction of port are not eligible as input service tax credit for port services. 19.6 M/s JSWJPL placed reliance on the decision of the Hon'ble Tribunal in the case of Adani Port & Special Economic Zone Ltd V/s CST Ahmedabad (2015-TIOL-288-CESTAT-AHM)/ (2016(42)STR(1010)(Tri-Ahmd). On going through the case law it is observed that in this case the service of dredging is held to be an input service, but the decision does not differentiate whether these are capital dredging or maintenance dredging. Therefore the ratio of this decision is not applicable to the present case. 19.7 In view of above discussion, I hold that M/s JSWJPL is not eligible to the Cenvat credit on capital dredg....
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....RAMEWORK 3. GRANT OF LICENSE 3.1 In consideration of the Licensee agreeing to pay one time license fee of Rs. 10 lakhs and in consideration of the Licensee agreeing to pay a monthly Charges and lease rent and other payments under this Agreement and subject to the provisions of this Agreement, the Licensor grants to the Licensee, an exclusive license for designing, financing, constructing, operating, maintaining and managing the port complex during the license period as specified in the agreement. 3.2 .... 3.3 .... 3.5.7. Subject to the proviso to clause 3.4(d) of this Agreement the ownership of the land provided by the Licensor and/or the reclaimed area and the water area shall remain with the Licensor and shall vest in the Licensor at all times. From the above, I find that this is a Licence agreement under which M/s JSWJPL has been granted exclusive license for designing, financing, constructing, operating, maintaining and managing the port complex during the license period as specified in the agreement, but the ownership of the land provided by the Licensor and/or the reclaimed area and the water area shall remain with the Lic....
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....ion in his own right. Whereas, a licensee cannot defend his possession in his own name as he does not have any proprietary right in the property. vi. A lessee in possession of the property is entitled to any improvements or accessions made to the property, while a licensee is no authority for any improvement or change without the sanction from Licensor. 20.3 Further, Clause 39 of the Agreement prescribes monetary charges and payment terms which reads as under. "39. MONTHLY CHARGES The Licensee shall pay to the Licensor a portion (hereinafter called "Monthly charges") of an amount collected by him for the cargo handled at port as per the scale of rules for providing services, starting from the Date of commencement of Commercial Operations. The rate at which the portion of such payments to be made from the charges collected by the Licensee shall be as follows. i) a sum of Rs. 3/- (Rupees Three only) per Tonne of cargo (or) 1) Rs. 36/-(Rupees Thirty six only) per loaded TEU (Twenty Foot Equivalent Unit) in the case of containers The Monthly charges will be subject to revision by Licensor at the compounded rate of 20% p.a. ....
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.... operational obligations on M/s JSWJPL. 20.6 M/s JSWJPL in their reply submitted that "Capital Dredging" is undertaken for deepening of the channel for the first time. Thereafter to maintain depth, regular maintenance is required to be carried out, which is referred as 'maintenance dredging'. Thus, the capital dredging is carried out only for first time. Which means, the capital dredging undertaken will remain for forever and only maintenance dredging is required in future. Thus, the deepening of channel undertaken by capital dredging will remain for future use by M/s MMB even after completion of licence period. Thus, the capital dredging undertaken is ultimately will be for MMB only. 20.6 It is noticed that the capital dredging services have been availed for developing and construction of the navigational channel which does not belong to M/s JSWJPL. As per clause 3.5.7 referred above, the ownership of the land, reclaimed area and the water area remains with the Licensor (MMB). In this case, M/s JSWJPL had made contracts with M/s Boskalis Smit India LLP, Mumbai for providing capital dredging services and they had provided services for development and construction o....
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....be within factory of production or within the area from which outward service operations carried out. Therefore, I find that the denial of Cenvat credit on this ground is not sustainable, however the Cenvat credit on the services capital dredging services are not eligible for reasons discussed in the paras mentioned above." 4.3 From the impugned order it is evident that it seeks to deny the credit in respect of the dredging service on the following grounds: The dredging services were used in relation to development and construction of port and hence cannot be said to be used for the providing the taxable services under the category of port services; Dredding services are in relation to development and construction of port, which is an exempt service. Dredging work is for the benefit of MMB 4.3 In case of Adani Port & SEZ Ltd. [2016 (42) STYR (TAhmd)] following has been held: "19. The third issue is denial of Cenvat credit on input services. It has been alleged that the input services have no nexus with output service. It may be referred to show cause notice dated 23-4-2012 issued by the Commissioner of Service Tax, Ahmedabad to the appellant M/s.....
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....of taxable service for providing output service. The words "any service" and "used for providing an output service" in the "input service" definition, make it clear that the use of input service is depending on the scope of "an output service". So, it is required to examine the scope of an output service for deciding the input service. In the present case, the main output service is "Port service". The term 'Port Service' has been defined to mean, 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. In the case of Kandla Shipchandlers and Ship Repairers Association v. UOI - 2013 (29) S.T.R. 233 (Guj.), the Hon'ble Gujarat High Court observed that the term "Port" has been defined in an extensive manner. It includes within its sweep any service rendered in any manner in relation to a vessel or goods. The expressions "in any manner" and "in relation to" both tend to expand the scope of such service. The words "in any manner" would further go to show that the legislature intended to make the definition wide and inclusive and to include range of services which may be provided in relation to a ve....
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.... namely Mobile Phones, CHA Services, Rent-a- Cab Service, Surveyor Charges, Other input services (such as profession fees, construction, soil testing, labour charges, etc.), and duty paid on Air Conditioners. From an analysis of the statutory provisions, definitions, and the decisions of the Hon'ble High Courts and the Tribunal, it is evident that "any" service used by a service provider "for providing" Port Service in any manner, is eligible for credit. The definition of input service by way of "means" and "includes" also amplify the scope of the same. Further, the definition also mentions certain specific services. The definition also includes services used in relation to "activities relating to business". These further enlarge the scope of the input services. The net result of such a wide definition as rightly held by the High Courts and Tribunal, is that any input service which has any nexus or is in relation to the output services in any manner whatsoever, or is in relation to the activities relating to business would be eligible for credit. Therefore, the appellants would be eligible to take credit on the input services where they are able to satisfy the above criter....
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....ed under the Finance Act, 1994. Therefore, on the ground of ownership of jetty belongs to GMB the Cenvat credit cannot be denied. The issue whether the ownership of the location is relevant for availment of Cenvat credit or otherwise the courts has passed various judgments. Some of the judgments are reproduced below : * CCE v. JSW Ispat Steel Ltd. - 2015 (327) E.L.T. 549 (Tribunal) "5.2 In the decisions relied upon by the appellant, the issues contested by the Revenue have been adequately addressed. For example, in the case of Pepsi Foods (supra), it has been held that ownership of goods is not a criterion for denial of credit on capital goods and even if it is leased for a particular period, the assessee is eligible to take Cenvat credit. In the present case, merely because M/s. Inox Air Products Ltd. has leased out the plant to the appellant, that does not disentitle the appellant from availing Cenvat credit of the excise duty paid on capital goods. Similarly, in the case of Gujarat Ambuja Cement Ltd. (supra), Rajarambapu Patil SSK Ltd. (supra) and KCP Ltd. (supra), this Tribunal and the Hon'ble High Court of Himachal Pradesh held that Cenvat credit of excise du....
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....ndia. Accordingly, both the questions of law are answered in favour of the assessee and against the Revenue. The order of the Tribunal is upheld." In view of the above judgments it is settled that ownership has no criteria either for allowing the Cenvat or for charging service tax on the output services. For Cenvat credit as well as for charging service tax the only criteria is that there should be service provider and service recipient irrespective of ownership of the premises from where the service is provided. It is very common in commercial parlance that the service provider takes the premises on lease which is owned by the leasor. However, irrespective of services received related to such premises or not but the credit cannot be denied on the service received by the service provider in respect of the leased premises for a simple reason such that such leased premises is used by the service provider for providing the output service. The only condition is that in respect of input service the relationship between the service provider and input service recipient is that of service provider and the service recipient. The payment of any service including the service....
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....d by others. Moreover, the revenue has not adduced a single incident of the said navigation channel being used by any other persons. Therefore, even though the condition for allowing the navigation channel to other as per the agreement but in fact there is no user of said navigation channel except the appellant. Accordingly, the case of the revenue is not sustained on this count also. 4.6 The very same issue has been considered by this Tribunal in the case of Saurashtra Cement Ltd. 2018-TIOL-2749 CESTATAHD wherein the Cenvat credit was allowed even though the private jetty does not belong to the assessee and consequently it was used by other jetty owners also. The Tribunal after considering various judgments given the following order : "On careful consideration of the submissions made by both the sides and perusal of the records, I find that the Jetty is a captive active jetty of the appellant, which is exclusively used by the appellant only. At time, the appellant have to get the dredging done at the jetty for proper function of jetty to improve the draft. Since jetty is used primarily for import of coal which is used in the manufacture of final product, Dredging....
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....the port is under construction and the GMB will give permission for commencement of the operation for which the agreement was signed on 25-3-2010. The availment of Cenvat credit on dredging service utilized for construction of port and the water channel was in the knowledge of the department as during the course of EA, 2000 audit conducted in March, 2011, June & July, 2012 for the period 2010-11 and 2011-12, several objections were raised regarding the availment of credit. The audit report No. FAR/190/ST/2012- 13, dated 7-9-2012 was conveyed to appellant by the Jurisdictional Superintendent vide its letter dated 1-2-2013 wherein it was specifically referred to condition No. 22 of the appellant's license agreement dated 25-3-2010 with GMB and has pointed out short payment of service tax on wharfage charges as the service tax was paid on the concessional rate granted to the appellant and not on the full rate. This makes it clear that copy of agreement dated 25-3-2010 entered into by the appellant with GMB along with its all enclosures including NOC dated 14-5-2007 was submitted to the department and it is on the basis of this agreement only the entire present case of Cenvat credit wa....