TaxTMI 
TaxTMI 
2023 (11) TMI 310
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....as "port service" since April 2010, but the appellant have not paid the Service Tax on the taxable amount received by them during the period from 2006-07 to 2009-10. The amount on the water front royalty charges/wharfages received by them from M/s. GPPL. Accordingly, a SCN dated 21 October, 2011 came to be issued demanding Service Tax of Rs. 1,52,52,812/-, under Section 73 of the Finance Act 1994, invoking the extended time proviso for demand of the duty. Interest and penal provisions have also be invoked as per the provisions of Finance Act, 1994 in the SCN. The matter was adjudicated vide order-in- original dated 30 January, 2013, whereunder the learned Adjudicating Authority has confirmed all the charges as invoked in the SCN. The appellants have before us avail the above mentioned order-in-original. 3. Learned Advocate appearing for the appellant have contended that the water front royalty charged by the appellant M/s. GPPL, is statutory levy charged by the Government of Gujarat in respect of sovereign/staturory function, and therefore, in view of the CBIC's clarification vide Circular No. 89/7/2006-ST dated 18.12.2006, same are not taxable service. The learned Advocate has ....
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....on, mis-representation, fraud with an intent to evade Service Tax cannot be invoked in their case. The learned Advocate has drawn our attention to audit report dated 05.01.2009, which covers the audit period covered under this report is from October, 2005 to March 2008, and the audit report dated 03.05.2010, covers the period from March 2008 to September 2009. Thus, the learned Advocate is emphasis that it was wrong on the part of the department to invoke larger period of demand while all the facts have been before the department and the appellant have never tried to suppress or mis-representation any facts with regard to amount received by them from M/s. GPPL-Pipavav. 3.3 Learned Advocate has drawn our attention to the Board Circular No. 89/7/2006-ST dated 18.12.2006, and emphasis that it has been clarified by the CBIC that any mandatory statutory levies which are deposited into the Government and which are in the nature of statutory fee/levy, same cannot be subjected to Service Tax. Since the wharfage charges is being charged as per Section 22A (2) of the Gujarat Maritime Board Act, 1981 and the same are in the nature of the statutory levy and therefore, in view of the above m....
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.... in any manner." The relevant definition in this case is the definition & port services as it exists prior to 01.07.2010. 5.3 The relevant facts in the matter are that M/s. Gujarat Maritime Board (the appellant) is a statutory body appointed under Gujarat Maritime Board Act, 1981. As per the Maritime Board Act, 1981, the state of the Gujarat has authorized Gujarat Maritime Board to administer and operates the minor ports. The appellant as per the authority granted to them by the Maritime Board Act, 1981, collects shipping and landing fees for cargo handled at water front/minor ports and captive jetty in the State of Gujarat. The appellants have prescribed the rate of shipping, landing fees and other charges for use of the port of the appellant. For the purpose of development of the minor ports and for creation of the better infrastructure for the State of Gujarat. The Government of Gujarat has allowed the appellants to enter into agreement with the various private operators for developments of minor ports. In view of the policy of State Government of Gujarat, the appellant have granted license to Gujarat Pipavav Prt Ltd, Pipavav for development of port of Jafarabad and others....
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....of cargo handled at the Port based on the actual cargo throughputs achieved and to be paid in accordance with Clause 11.3 for the various options given therein." 11.3 Waterfront Royalty Payments (a) From the effective Date, the Licensee shall pay the Licensor a monthlyWaterfront Royalty per ton of cargo handled at the Leased Premises. Such Waterfront Royalty payment shall be based on the actual cargo throughputs achieved, which shall be determined on the basis of customs and other statutory declarations. (b) The Licensee shall submit for verification to the Licensor every month, the cargo wise throughput achieved in that month. (c) The total royalty payable by the Licensee shall be the aggregate sum in respect of all types of cargo, of the applicable per ton royalty for each particular type of cargo multiplied by the actual throughput of that particular cargo in the month (d) The Licensee shall pay Waterfront Royalty payments by cash and/or negotiable instrument on the last day of each month." 14.9 In terms of the aforesaid agreement, as laid down in Clause 10 on its pages 13 to 15, the total aspects encompassing Pilotage, Opera....
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....by GPPL first in a separately opened PLD (personal ledger deposit) bank account (similar to escrow account maintained in similar transactions) and then, on computation of Waterfront Royalty payable to GMB State Government, residual amount would be transferred to GPPL and the amount of Waterfront Royalty arrived at would transferred to GMB /State Government account. 14.19 For arriving at the amount of Waterfront Royalty receivable by GMB State Government and residual amount belonging to GPPL, a periodical bill would be prepared by GMB under the nomenclature Waterfront Royalty Bill" which would have a statement annexed to it duly enumerating vessel wise account of financial transaction (similar to the one attached as Annexure-D to SCN). Thereafter, on crystallisation of specific amount of WFR, a cheque of residual amount would be issued in favour of GPPL with simultaneous issue of WFR amount to GMB / State Government. For your kind perusal, records and complete view of all transactions, a 2006-2007, are being complete set of relevant documents, for financial year submitted hereinafter: ANNEXURE 4:52 PAGES: PLD Ledger account maintained at GMB level in vernacular. ....
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.....2004 to 2008-2009 and concluded with final submission of PO JAFARABAD on 19.02.2010 during which PO was called personally and statement taken on all pertinent aspects. A copy of his statement may please be called from the file of DGCEI-AZU and also given to us. All this goes on to substantiate that it was not that the fact came to notice of HQ Audit first without being known to Department earlier but that HQ Audit NOW chose to interpret it differently and against the stance/interpretation of GMB. At this juncture, We are submitting herewith synopsis of all audits/litigations and proceedings of DGCEI etc. as (ANNEXURE 8 02 PAGES) to substantiate our stance about Department, all along, having knowledge of all the relevant facts and how HQ Audit ignored ground realities to arrive at a predetermined conclusion. 14.26 14.26 Even, the issue raised in present SCN dated 21.10.2011 (received at GMB on 15.11.2011) seemingly has its origin in Final Audit Report No. 20/ST/11-12 dated 31.10.2011 ANNEXURE 9 02 PAGES 14.27 As given to understand by our Port Officer, We have been informed that after commencing collection of service tax on WFR since April, 2011, service tax was c....
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....rabad replied vide letter dated 06.09.2011 [ANNEXURE 13: 02 PAGES] clarifying the entire issue inter alia that Please refer to item I sent by your goodself subsequent to our letter no. PO/JFD/AC/44 dated 20.04.2011 questioning our interpretation of "taxable port services" GMB since 01.07.2003, has always collected and paid applicable Service Tax on "Wharfage Charge(s)" collected by it on its own ports. Liberally interpreting and mainly for buying peace, GMB has also collected and paid Service Tax on jetties etc. wherein it was not providing any service whatsoever, in context and/or for vessel and/or cargo and legally speaking, service tax was neither leviable nor payable to your department for cargo handled by respective party wherein GMB was not providing any port service in terms of Finance Act, 1994. In present case raised by you. "Waterfront Royalty" is being received from Gujarat Pipavav Port Limited [GPPL] on cargo discharged/handled by it. Please note that GPPL is a private port and separately registered with your department and must be collecting/paying applicable service tax on its "taxable port services" and out of its revenue thus raised, it is also pay....
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....of view that actual service with regard to a vessel or goods are being provided by M/s. Gujarat Pipavav Port Ltd at the minor port not by the appellant. It has also been contended by the leaned Advocate that State Government of Gujarat exercises sovereign right over the water front of minor ports in Gujarat and in view of such sovereign right of the State Government, the Gujarat Maritime Board Act, 1981 inter alia provides for levy of water front and royalty in respect of goods landed at the private ports for in behalf of the other parties. From 01 April 2008, the water front Royalty was levied by the appellant in exercise of powers under the Gujarat Maritime Board Act, 1981. The royalty is levied by the state Government itself under Section 22A of the Maritime Board Act, 1981. Thus, it has been contended that Water Front Royalty in respect of goods landed by the private port authority for other persons in Gujarat is statutory levy in respect of sovereign activity /function of a sovereign/ public authority. We take note of the Board Circular No. 89/7/2006-ST dated 18.12.2006, in this regard, the relevant extracted of the same is reproduced below: "2. The issue has been exa....
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....in the nature of a compulsory levy and are deposited into the Government account. Such activities are purely in public interest and are undertaken as mandatory and statutory functions. These are not to be treated as services provided for a consideration. Therefore such activities assigned to and performed by a sovereign / public authority under the provisions of any law, do not constitute taxable services. Any amount/fee collected in such cases are not to be treated as consideration for the purpose of levy of Service Tax. However, if a sovereign/public authority provides a service, which is not in the nature of statutory activity and the same is undertaken for a consideration (not a statutory fee), then in such cases, Service Tax would be leviable as long as the activity undertaken falls within the scope of a taxable service as defined. 5.5 In view of above circulars, the fact that water front royalty is being charged from 1 April 2008 as per the provisions of the Maritime Board Act, 1981 per Section 22A, and therefore in our view the maritime board is collecting the water front royalty as a statutory levy provided by Maritime Board Act, 1981, on behalf of State of ....
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.... 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 not convert the same into port charges because basis of quantification or measurement is not relevant while deciding on the nature of the charges. 9. in essence, the service rendered by gmb is one of grant of a licence to use the waterfront at the minor ports over which the state government has a sovereign right. such service, without any other attendant service for handling the vessels or goods, cannot be considered to be a port service. such a service is akin to the service of renting of an immovable property but that has not been the case of the revenue at any stage. even if the taxable sentry of renting of immovable property had been invoked, no tax would have been payable at least till 2010 as renting of a vacant land was expressly kept out of tax net till 2010. 9.1 even if ....
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....s amount charged' and 'money' to the present case, it is evident that the only amount received by gmb is the amount equivalent to 20% of the usual wharfage charges, as the remainder 80% was rebate or a discount offered by gmb. 9.3 it is not in dispute that the remainder amount which was offered as rebate was not paid back to gmb either as 'deduction from account' or 'credit note' or 'debit note' or by book adjustment. the question of such deduction from account or issue of credit note, debit note or book adjustment would have arisen, if the capital investments made by the user industry were investments made on behalf of or on account of gmb. if that had been the case, the amounts spent by the user industry would have been shown as amount receivable from gmb not only in the user industry's books but also in gmb's books. the agreement between gmb and the user industry makes it clear that all and any expenditure incurred by the user industry for development of waterfront will not be the liability of gmb and therefore will not be remissible by gmb under any circumstances. this is the essence of the agreement between the two parties. this being the case, the question of such ca....
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....as done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise." 9.6 even if the capital expenditure incurred for development of waterfront is regarded as 'construction', the next logical question that will arise is whether the entirety of such construction is liable to be included in the value. as per the understanding between gmb and its user industry, the infrastructure developed by the user industry goes into the possession and exclusive control of gmb even after the expiry of 20 years or thereabout. significantly, the agreement between gmb and the user industry does not require or stipulate the user industry to construct the infrastructure of such quality and type which can last beyond the concession period of 20 years or so. the agreement between gmb and the user industry does not require the user industry to ensure that the facilities and infrastructure so created are of such quality that they outlive the concession period so as to become usable for gmb at a later date. therefore, if the user industry decides to construct a temporary je....
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....cal and absurd as it seeks to assess the services rendered by gmb with reference to the normal wharfage charges which it recovers from users at the full-fledged ports developed and operated by gmb, such as the kandla port. this is clearly illogical as in the present case the service rendered by gmb was limited and confined to the grant of licence to use the waterfront for which it charged a limited amount (20% of the usual wharfage). considering the limited nature of the service rendered, gmb could only charge a limited consideration. this amount, which happens to be 20% of the usual wharfage charge, is the amount actually paid and in the absence of any book adjustment or deduction from the account constitutes the 'gross amount' actually charged for the service. 10. it is also to be mentioned that w.e.f. 1-4-2008, the govt. of gujarat has amended the gujarat maritime board act, 1981, wherein section 22a has been inserted. the said section 22a specifically states that any amount provided by gujarat maritime board, the appellant herein, is a state levy and a statutory levy and proceeds of such levy are credited to the consolidated treasury fund of state of gujarat. if that b....