TaxTMI 
TaxTMI 
2023 (6) TMI 239
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.... 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 stands disposed off. 28. This order is passed without prejudice to any ....
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....quently, 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]; Ultratech Cement [2021-TIOL-161-CESTAT-AHM]; Saurashtra Cement Ltd. [2018-TIOL-2749-CESTATAHM]. Services were not towards construct....
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....l 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 is used by service provider for providing an Output service is an input service and eligible for cenvat credit. In the instant case, the service of capital dredging procured by them was very much required for the purp....
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....on, 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 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. ....
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.... 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 on 24.06.2008 and as per clause 16.2, the scheduled Construction period shall be a period of 3 years starting from the effective date. 18.5 In the present case, by issuing the subject show cause notice, the Cenvat credit availed on the invoices issued by M/s Boskalis Smith India LLP as detailed below of the Capital dredging services mentioned therein is proposed to be denied. S No Invoice No. & date Details of service provided as per invoice Total Cen....
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....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 depth of such channel, regular maintenance is required to carried out. On going through the above invoices, it is noticed that these were issued for the capital dredging services provided. As mentioned earlier, as per the agreement MMB- the Licensor grants to M/S JSWJPL-the Licensee, a licence for designing, financing, constructing, operating, maintaining and managing the port complex during the license period as specified in the Agreement. Accordingly, the above services of capital dredging were obtained and utilised by M/s JSWJPL in connection with the develop....
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....e 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 grants exemption to construction, erection, commissioning or installation of original work for specified structure. Serial no. 14 of Notification no. 25/2012-ST reads as follows. "81. Services by way of "construction, erection, commissioning and installation" of original works pertaining to, (a) An airport, port or railways inciuding mono rail or metro, (b) a single residential unit otherwise that as a part of a residential complex. (c) ----, (d)----, (e)..... (the exemption granted to airport, port is withdrawn from 1.04.2015, as such from 1.4.2015, these also become taxable service) Further, Rule 2(e) of Cenvat credit Rules, 2004 defines the 'exempted ....
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....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 service of labour for handling of goods. The port or the person authorised by the port rendering these services is the service provider. 2.1 Some of the specific charges for the services rendered in respect of port services are as fallows. (i) Port and dock charges consisting of berthing and mooring charges, port dues, pilotage and towage, water supply charges, salvage and diver charges, anchorage fee. (ii) Cargo handling and storage charges consisting of wharfage for general cargo, warehousing charges, carnage charges, ore handling charges, wharfage on petroleum products, weighment charges for lorries, traffic appliance charges, weighment charges for goods. (iii) Railway haulage charges for rail-borne goods, local haulage and storage; (iv) Container handling charges....
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....s 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 dredging service and they had availed the credit wrongly with is recoverable from them under the provisions of Rule 14 of Cenvat Credit Rules, 2004 read with Section 73(1) of the Finance Act, 1944. Whether the dredging services were rendered to MMB as alleged in the notice? 20. The show cause notice also alleges that the dredging was undertaken in navigation channel belonging to Maharashtra Maritime Board therefore the services were actually rendered to MMB and not to M/s JSWJPL who had availed the Cenvat Credit. Therefore, the credit is not admissible on this count also. 20.1 M/s JSWJPL submitted that title and ownership is not relevant for availing credit under rule 3.1 of Cenvat Credit Rules 2004.The relevant ingredients for availing credit are the payment of duty/tax and receipt of services by service recipient for use in the outpu....
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....xclusive 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 Licensor and shall vest in the Licensor at all times. As per clause 1.6, the Licensor (MMB) has agreed to grant license for 50 years to Licensee which means they had given mere permission for construction and development of port on their property without any transfer of interest. This is not a lease agreement under which for the agreed period property remains in the possession of the Lessee. Therefore, it is necessary to understand the difference between a Lease and License agreement The terms 'lease' and 'license' are defined under Section 105 of the Transfer of Property Act and Section 52 of the Indian Easements Act respectively as under. Section 105 of Transfer of Property Act: "Lease" - A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, o....
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..../-(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. for the first fifteen years from the date of Commencement of Commercial Operations Subsequent revisions till expiry of the Term shall be decided in consultation with Licensee by the Licensor Government taking into account the situation prevailing at that time, Provided ..... Provided further ... 40. PAYMENT AND PAYMENT TERMS 40.1 One time Licensee Fee In consideration of the grant of this License, the Licensee shall 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 volume of cargo handled in the previous month and shall be paid latest by the 7 Day of the subsequent Month." 20.4 From the above terms and conditions mentioned in the agreement towards monthly charges and payment thereof it is noticed that as per the above clause 39, M/s JSWJPL has to pay certain portion of charges collected to MMB which are revisabl....
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....oskalis Smit India LLP, Mumbai for providing capital dredging services and they had provided services for development and construction of port, which does not belong to M/S JSWJPL, but for which they have received license. Though the expenditure on capital dredging has been made by M/s JSWJPL and the invoices were raised on M/s JSWJPL, the ultimate ownership of channel remains with MMB. Even though the services are received by M/s JSWJPL, these are in relation to development and construction of port which is an exempted service and therefore cannot be held to be received as input services for port services. 20.7 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 (2016 (42) STR 1010 (Tri-Ahmd). On going through the case law it is observed that in this case the services were received by Adani Port themselves and not by other party to whom they entrusted the work of port services. In the present case, MMB has entrusted the work of construction and providing port services to M/s JSWJPL and therefore the ratio of this decision is not applicable to the present case. In view of the above disc....
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....2 issued by the Commissioner of Service Tax, Ahmedabad to the appellant M/s. Adani Port & Special Economic Zone Ltd. In that show cause notice, it has been alleged that M/s. APSEZ has availed Cenvat credit on services Goods Transport Agency, Cargo Handling Services, Clearing & Forwarding Agent Services, Manpower Recruitment & Supply Agency Service, Steamer Agent Services, etc. These services have no relationship/nexus with the provisions of output service of Port service inasmuch as the said services had been directly provided to the cargo imported by others. Hence, it does not appear to be an "input service" within the meaning of Rule (l) of Cenvat Credit Rules, 2004. 20. The adjudicating authority had denied Cenvat credit on input service on the ground that the appellant had not submitted any evidence for use of input service in the output service. In this context, the finding of the adjudicating authority vide Orderin- Original Nos. STC/41 to 43/Commr./AHD/2011, dated 11-11- 2011, may be referred. It has been observed that during the course of scrutiny of the records, it is noticed that the appellant had availed Cenvat credit of duty of Central Excise and Service Tax on Capit....
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....lude range of services which may be provided in relation to a vessel or goods. 22. The Hon'ble Supreme Court in the case of State of Punjab v. Paper Mills Limited (supra), while dealing with the words "used for the purpose of factory" in Rule 18 of the Punjab Urban Immovable Property Tax Rules, 1941, observed that the use of buildings for providing such facilities and amenities which are necessary for maintaining a proper standard of efficiency of factory workers must also to be used for the purpose of factory. The allotment of the buildings for the use of the workers was made for the purpose, which was necessary for the efficiency of workmen. All such quarters is clearly necessary to the efficiency of the workmen and it must be held that the buildings were used for the purpose of factory. The Hon'ble Supreme Court dismissed the appeal filed by the appellant. In the present case, considering the scope of an output service (i.e. Port Service), it may be construed that any service used in relation to Port service in any manner would cover under the definition of "input service". In the case of Sai Samhita Storages (P) Ltd. (supra), the Hon'ble Andhra Pradesh High Court observed....
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....here they are able to satisfy the above criteria." 4.4 In case of Essar Bulk Terminal Ltd. [2022 (57) GSTL 53 (TAhmd)] following has been held: "4.3 As regard the ground for denial of Cenvat that the Navigation channel for which dredging was availed is not a private property of the appellant but it was done on behalf of GMB, We find that the entire coastline is a sovereign property of Government of India through various Port Trust, Maritime Board etc. In none of the case of constructing the port the ownership belongs to the operator of the port. The sea coast parcel on which construction of the port is allowed is always on lease basis and not on the ownership basis however, the operation of port is carried out by the port operator. It is also undisputed position that the entire port operation on the port including the Port service and cargo handling service are liable to payment of service tax on the said output service. Therefore, any service is availed in relation to the operation of port or construction of port is indeed the input service. Accordingly, the assessee is entitled for Cenvat credit in respect of such input service i.e. dredging service used for providing output ....
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.... credit of excise duty paid on parts, components and accessories would be admissible under the Capital Goods Credit scheme even if they are assembled into goods which are immovable or exempted. Similarly, in the ICL Sugars Ltd. (supra), it was held that immovability has no bearing on eligibility for availment of Cenvat credit on capital goods. In the light of these decisions, the interpretation of law undertaken in the impugned order does not appeal to any common sense or logic. So long as the individual machinery, equipment or appliance or parts and components thereof fall within the definition of capital goods under Rule 2(A) of the Cenvat Credit Rules, 2004 and so long as they are used within the factory of production for the manufacture of excisable goods which are chargeable to duty, the benefit of capital goods credit cannot be denied and we hold accordingly." * Pepsi Foods Ltd. - 2010 (254) E.L.T. 284 (P & H) "5. Counsel for the respondent has submitted that Modvat credit cannot be denied to the respondent in view of the law laid down in Sharda Motors Industries Ltd. v. CCE, Chennai, reported as 2002 (150) E.L.T. 759 and HIS Automotives Ltd. v. CCE, Chennai, reported a....
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....by the service provider and the same is borne by the input service recipient. In the present case also as regard the service provision of dredging service there is a direct contract between the service provider viz M/s. Van Oard Dredging and Marine Contractor and M/s. Van Oard India Pvt. Ltd. and the appellant. The said service providers rendered the service to the appellant only and not to the Gujarat Maritime Board. Therefore, the appellant being the sole recipient of the service entitled for the Cenvat credit. It also not disputed that the entire service charges along with service tax there on for dredging of navigation channel was paid by the appellant to the aforesaid contractors who carried out the dredging services. In this undisputed fact the appellant is the service recipient for dredging service which is undisputedly used for providing Port Services and cargo handling services, hence, the appellant is entitled for taking Cenvat credit on dredging services. 4.5 As regard the allegation of the department that the navigation channel is meant for other users also therefore, credit is not admissible to the appellant, We find that firstly, the entire contract of dredging of ....
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....vice. It is also a fact that dredging service is nothing to do with the customer to whom final product is sold. The service charge of dredging service is borne by the appellant only which stands absorbed in the overall cost of manufacturing of cement. Therefore, it cannot be said that the Dredging service is used for the removal of final product from place of removal. Also as per Hon'ble Bombay High Court judgment in the case of CC Ex., Nagpur v. Ultratech Cement Ltd. 2010 (20) S.T.R. 577 (Bom.) = 2010-TIOL-745-HC-MUM-ST it was held that if the cost of input service borne by the assessee and the same stand absorbed in the cost of final product, such services are qualified as input services and accordingly Cenvat credit is admissible. Considering the ratio laid down by the Hon'ble High Court and the facts of the present case, I am of the considered view that the Dredging services used by the appellant is an input services, hence, Cenvat credit is admissible. I also observed that merely because the service was availed outside the factory of the appellant the credit cannot be denied. Whether the service is availed in the factory or outside the factory, only requirement is that it shou....