TaxTMI 
TaxTMI 
2025 (11) TMI 682
X X X X Extracts X X X X
X X X X Extracts X X X X
.... released prior to the lay time, the vendors have to pay money to the Appellant at half of the demurrage rates in terms of Section 14 of the Customs Act, 1962, read with Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, and relying on Circular No.38/2007-Customs dated 09.10.2007, demurrage was added as cost of transportation and as a corollary, the Appellant reduced the despatch money from the assessable value. The Revenue characterized this discharge money as incentive by the Appellant for facilitating early despatch of the vessel from the port. Hence, a Show Cause Notice dated 08.10.2013 was issued proposing, inter alia, to subject this despatch money to service tax under the category of "Port Service" under Section 65 (105) (zn) of the Finance Act, 1994 for the tax period from April 2008 to June 2012. The above SCN culminated in the impugned OIO and in the impugned order the Commissioner formulated the issue to be decided as to whether the despatch charges and the demurrage charges were taxable; and to decide the person by whom such tax was to be paid. The Commissioner found that, if the goods were unloaded faster than the time provided for in the contrac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....powners' Association Vs Union of India [2009 (14) S.T.R. 289 (Bom.) to contend that since the activity of transport of goods by a vessel from a place outside India upto the Customs station of clearance in India was made taxable only w.e.f. 22.01.2007, no tax could therefore be levied for the periods under consideration. It was also submitted that demurrage and despatch money had the effect of increasing and reducing the cost of transportation for which reliance was placed on Board's Circular No.38/2007 dated 07.10.2007. 6.2 We are unable to accept this contention; Freight is consideration paid for the use of a conveyance for the transportation of goods. This understanding of freight is in consonance with Appellant's contention that the demurrage and despatch money are related to the transport of goods. However, we find that the demurrage and despatch money were not paid for transport itself, but were in relation to the detention (or otherwise) of the vessel at the port of entry into India. The activity upon which the charge of demurrage and despatch money depended was not the transport of the imported goods but was, instead, how the vessel carrying such goods was dealt with at t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the definition of 'Port Service' after the amendment of 1-7-2010, the focus/emphasis is on any service rendered within a port or other port. Thus prior to the amendment of 1-7-2010 each and every service rendered within a port or other port cannot be covered by the category of "Port Services" unless it was specially rendered by such Port (a port or other port) or by a person 'authorized by such Port or other Port'. 9. In the present case, so far as the period prior to 01.07.2010 is concerned, it is nobody's contention that the Appellant is a "port" or an "other port". On the question of whether the Appellant was authorized by such port or other port, there is no allegation from the side of the Revenue that such authorization exists. Therefore, it is safe to conclude, as we do, that there was no express authorization for the alleged activities characterized as 'services'. We also find it hard to imagine that the mere importation of goods and the payment to the transporter therefor is consequent to any implied authorization for the port. From a reading of the definition of the term "Port Service" as it stood prior to 01.07.2010, the conclusion that we reach is that what is contemp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....105). The term "port service" is defined in clause (zn) thereof. Therefore, the definition of the term "port service" is a subset of the definition of the term "Taxable Service" and, as such, occurs within the definition of the term "Taxable Service". The construction of a definition of a term cannot obviously depend on that term itself. To require the Revenue, therefore, to establish the existence of a taxable service to establish the existence of a further taxable service would be to require the Revenue to do the impossible. We therefore hold that the word "service" occurring in Section 65 (82) on and after 01.07.2010 does not connote a 'taxable service' but merely a 'service'. In the absence of a definition of the term "service", it must be construed in its ordinary commercial sense to mean any activity performed by one person for another which, coincidentally, is broadly the theme of the definition of that term on and from 01.07.2010 of the Finance Act, 1994. 11. Bearing this in mind, we now proceed to understand what the Board's circular say on this subject. The Board explained this amendment in D.O.F. No.334/1/2010-TRU dated 26.02.2010 as follows : "1.1 Two servic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re remains is whether the transporter permitting the delayed unloading of the goods constitutes a 'service' for which the consideration is the demurrage, and, correspondingly, whether the importer permitting the ship to department early is a 'service' for which the consideration is the despatch money. We note, in this context, the reliance placed by the Appellant on the circular of the Board No.121/3/2010-ST dated 26.04.2010 is apt. In the context of stuffing or de-stuffing of containers, the Board has taken the view that "to retain the container beyond the pre-holding period is neither a service provided on behalf of the client....nor is it an infrastructural support.... Such charges can at best be called as 'penal rent' for retaining the containers beyond the predetermined period." 14. We are of the opinion that this reasoning applies here too. In our opinion, in the present case, the transporter (in the context of the demurrage) or the importer (in the context of the despatch money) does not do anything or perform any act. All that happens is that they tolerate or bear some action or inaction on the part of the other party. This tolerance was not, at the relevant point in tim....