TaxTMI 
TaxTMI 
2023 (11) TMI 310
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....ellant 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 also added that as per Section 22A (2) of the Guj....
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....e 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 mentioned Board Circular same cannot be subjected to Service Ta....
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....ant 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 sub ports. The relevant parts of the written reply submitted by the appellant to the Adjudicating Authority dated 21.01.2023, wherein the re....
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.... (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, Operations & Services, Priority Services, Sub-Contracting, Leasing, Personnel, Security and Maintenance were responsibilities of Port Developer i.e. GPPL and GMB/State Government had no role, whatsoever, in any of the said aspects. 14.10 Furt....
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....ty 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. ANNEXURE 5: 20 PAGES: Relevant Bank Statement. ANNEXURE 6: 90 PAGES: WFR Bill and statement ANNEXURE 7:01 PAGE: Annual Reconciliation Statement 14.20 Thus in the revenue (income) accounts of GMB / State Government, the actual amount of WFR and TDS thereon would be credited and at no point of time the total in....
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....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 collected and paid along with applicable interest for the perid April, 2010 to March, 2011. This fact is confirmed in present SCN para 2 and is not in dispute at all. 14.28 The commencement of levy/collection of service tax by GMB was initiated by way of letter no. PO/JFD/AC/44 dated 20.04.2011 (ANNEXURE 10: 01 PAGE] addressing it to Chief Operating Officer and Accounts Officer of GPPL. ....
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....ing 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 paying service tax on "Water Front Royalty" as above. Further, as per our understanding the service tax being paid to GMB must have been claimed by GPPL as service tax/cenvat credit against the amount arrived at as payable by it. Thus the same, even if hypothetically considered as taxable would give rise to a revenue neutral situation Even subsequent to Finance Act, 2010, in our humble interpretation. the same is neither collectible from GPPL nor payable to ....
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....te 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 examined. The Board is of the view that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfilled in accordance with law. The fee collected by them for performing such activities is in the nature of compulsory levy as per the provisions of the relevant statute, and it is deposited into the Government treasury. Such activity is purely in public interest and it is undertaken as mandatory and statutory function. ....
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....ce 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 Gujarat. 5.6 We also find that similar matter has already been decided by this Tribunal in the appellant's own case of Gujarat Maritime Board Vs.Commr. C.E reported under 2015 (38) STR 776 (Tri.-Ahmd) as follows: "8.3 in the present case, neither of the above two conditions is being fulfilled. except for the ownership of the waterfront, gmb had no role to play. the entire port with infrastructure was built by m/s. ucl ltd. and would be owned and operated also by m/s. ucl ltd. under boot scheme. thus, no service of w....
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....ervice 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 it is assumed that the grant of licence to use waterfront is a port service, appropriate tax on the 'gross amount' actually charged by gmb for such service has already been discharged. the question whether there was any additional consideration received by gmb towards such service rendered by it has to be seen in the context of the valuation provisions in the finance act, 1994. section 67 of the finance act, 1994 provides that the value for the purposes of levy will be the 'gross amount charged'. the expression 'gross amount charged' is defined in section 67 in the fol....
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....estments 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 capital expenditure being adjusted or deducted would not arise. the reason why gmb was still required to know the extent of capital investment made was to ascertain and/or work out the period for which the rebate would continue to be available to the user industry. therefore, it can be said that the tracking of the capital expenditure as well as the extent of rebate granted to the user industry was only done for the purpose of determining the period during which the concessional rate would apply. this tracking was not intended to hold that it was squaring off account or adjustment or deduction. the gross ....
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....ears 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 jetty or a ro-ro jetty or an spm whose shelf life is less than 20 years, the benefit that would accrue to gmb at the end of concession period would be nil as the facilities would have become unusable by that time. this itself shows that the understanding between gmb and the user industry did not contemplate the passing on of any benefit to gmb at the end of concession period. any such benefit, even if it accrues to gmb, is clearly contingent for industry and in the absence of any mechanism or machinery provision for following the present value of such contingent benefit, no addition can be made to the assessable value on acco....
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....d 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 be so, any amount collected after 1-4-2008 by gujarat maritime board, can be considered as statutory levy only and service tax liability thereon may not arise. 11. since we have disposed of the appeal on merits of the case, we are of the view that detailed discussion on other various points raised by both sides would be academic nature and hence, we are not recording any finding. 12. in view of the foregoing, we find that the impugned order is unsustainable and is liable to be set aside. 13. the impugned order is set aside and the appeal is allowed with consequential relief, if any." 5.6 The Hon'ble Apex Court also in the same matt....