TaxTMI 
TaxTMI 
2025 (8) TMI 935
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....operator etc., The appellants are registered with the jurisdictional service tax authorities under Centralized Service Tax Registration No. AAALJ0036 DST0001 for providing taxable services and for compliance with Chapter V of the Finance Act, 1994. 2.2 In pursuance to the Government's policy for private sector participation in the development of ports sector, the appellants had invited applications from interested parties for construction of container terminals at appellants' premises on Build Operate Transfer (BOT) basis through private sector participation. Accordingly, the appellants have entered into BOT agreement/contract with the entities viz., Nhava Sheva International Container Terminal (NSICT) for designing, engineering, financing, constructing, equipping, operating, maintaining etc., the container terminal for a period of 30 years. As per the terms of the agreement the principal obligation in relation to management and operations of the container terminal has been provided to NSICT, and they shall be entitled to recover from the consignees or vessel owner or agents, the rates and charges due and payable to them for use of the container terminal services including termi....
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....y on the appellants. In adjudication of these SCNs, learned Commissioner of Service Tax vide common impugned order dated 14.09.2016 had confirmed all the proposals made in the SCNs. Feeling aggrieved with the impugned order, the appellants have preferred this appeal before the Tribunal. 3. Heard both sides and perused the records of the case including the case laws relied upon by both sides. 4.1 We find that the issue of demand of service tax on royalty charges collected by the ports from the port terminal operators who have been awarded contracts on BOT basis etc., have already been addressed by various Co-ordinate Benches of the Tribunal and the Hon'ble High Court. In the aforesaid cases it has been held by the Tribunal that royalty received by the port, as a part of revenue earned from terminal operator as consideration for allowing such terminal operator to operate the port terminal is being in the nature of letting out port premises and shall not amount to rendering of 'port service'. Therefore, it was held that no service tax is payable on such royalty charges received by the port. We find that the present dispute is no more res integra, in view of the judgements relied....
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....service tax is payable on the royalty paid by the terminal operator to the port trust. This decision has reached finality with the Hon'ble Apex Court dismissing the department's appeal against this order of Tribunal in the case of Mormugao Port Trust on merits as well as on limitation. In view of the above, we find that the appellant is not liable to pay any service tax on royalty charges received by them from their container terminal operator because the service is in the nature of a joint venture and not in the nature of service provider and service recipient relationship." 4.3 In the case of Cochin Port Trust (supra) it was held by the Tribunal that the royalty received by it from port terminal does not amount to rendering port services. The relevant paragraphs of the said order is quoted below: "5.1 As regards royalty, we find that CPT received part of revenue earned by IGTPL as consideration for allowing IGTPL to operate the port whereas IGTPL rendered services taxable under port services and paid the tax due on the total revenue. We do not find 1/3rd of that revenue received by CPT liable to tax under Port Services at the hands of the appellant. Letting out the po....
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....PL. We hence find the order of the Tribunal to be perfectly in order." 5.1 We further find that the Co-ordinate Bench of the Tribunal have also held in the case of Mormugao Port Trust (supra) that service tax is not payable on royalty charges received by the port from the terminal operator. The relevant paragraphs of the said order is extracted and given below: "12. The arrangement between the Assessee and SWPL is the public- private partnership. In our view this arrangement in the nature of the joint venture where two parties have got together to carry out a specific economic venture on a revenue sharing model. Such PPP arrangement are common nowadays not only in the port sector but also in various other sectors such as road construction, airport construction, oil and gas exploration where the Government has exclusive privilege of conducting businesses. In all such models, the public entity brings in the resource over which it has the exclusive right, whether land, water front or the right to exploit the said land and water front, and the private entities brings in the required resources either capital, or technical expertise necessary for commercial exploitation of th....
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....artner does for the furtherance of the business of the partnership, he does so only for advancing his own interest as he has a stake in the success of the venture. There is neither an intention to render a service to the other partners nor is there any consideration fixed as a quid pro quo for any particular service of a partner. All the resources and contribution of a partner enter into a common pool of resource required for running the joint enterprise and if such an enterprise is successful the partners become entitled to profits as a reward for the risks taken by them for investing their resources in the venture. A contractor- contractee or the principal-client relationship which is an essential element of any taxable service is absent in the relationship amongst the partners/co-venturers or between the co-venturers and joint venture. In such an arrangement of joint venture/partnership, the element of consideration i.e. the quid pro quo for services, which is a necessary ingredient of any taxable service is absent. 18. In our view, in order to render a transaction liable for service tax, the nexus between the consideration agreed and the service activity to be undertak....
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....agreement it is not the Board but the licensee who keeps the said jetty in such condition that it is capable of enabling vessels to berth alongside it to load and unload goods. This being the position, we agree with Shri Tripathi, learned Senior Counsel on behalf of GMB that no service is rendered by GMB to UCL under the agreement. The agreement makes it clear that it is an agreement entered into under Section 35 of the GMB Act allowing the licensee - UCL to construct a jetty and thereafter maintain it at its own cost. We may add that the rebate in wharfage charges of 80% is a condition imposed statutorily under Section 35 of the said Act. To say that it is in the nature of lease rent or licence fee, would not be correct inasmuch as a separate licence fee is payable under the agreement. (See : clause 3 of the agreement). To that extent we agree with Shri Adhyaru, learned senior advocate appearing on behalf of revenue that the CESTAT does not seem to be correct in this behalf. But this would make no difference to the result of this case inasmuch as the very first condition that must be met under the definition of "port service" is not met on the facts of the present case. 1....
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....ub-sections (3) and (4), the Board may authorize any person to perform any of the services mentioned in sub-section (1) of the said section which includes landing of goods at wharves. We asked Shri Adhyaru to show us where such authority is given and his reply was only that it was given under the self-same agreement referred to hereinabove. We are afraid that we are unable to agree with Shri Adhyaru. The authority given to perform any of the services must first and foremost be under terms and conditions as may be agreed upon by the Board and the private person. Further, under sub-Section (4) of Section 32, it is the private person who is then authorized to charge or recover any sum in respect of such service rendered. This is conspicuously absent in the aforesaid agreement. There is no doubt on a reading of the agreement that it is the Board itself that charges or recovers wharfage charges from the licensee - UCL and does not authorize UCL to recover such charges from other persons. This being the position, it is clear that no service is rendered by a port or by any person authorized by such port and, therefore, the very first condition for levy of Service Tax is absent on the fact....