TaxTMI 
TaxTMI 
2026 (3) TMI 751
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng with equal penalty. The issue involved is whether the 'despatch money' received for expeditious unloading of cargo and quick turnaround of the vessel, from the vessel owner to the appellant can be classified as 'Port Service' under section 65(105)(zn) read with section 65(82) of the Finance Act, 1994, and service tax can be charged on said despatch money received by the appellant from the vessel owner. 2. The brief facts of the case are that the appellants are a Government of India Undertaking and are, inter alia, engaged in import of raw materials, etc. Further, in order to import, the appellants are entering into charter party agreement with vessel operators/owners and are also entering into separate agreements for unloading of good....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appellant to the vessel owner and the said provision is only a condition of the contract for transportation. He has relied on the judgment of Hon'ble Supreme Court in the case of Super Poly Fabricks Ltd Vs CCE [2008 (10) STR 545] in support that the contract cannot be split and that the attempt to sever the agreement, especially when the consideration of contract and demurrage/ despatch money are inseparably connected in the agreement, such conclusions derived are impermissible under law. He has also highlighted the fact that as per charter party agreement, it is the vessel owners, who are providing transportation of goods to the appellant. However, such services are not subjected to service tax as they do not fall within the ambit of trans....
X X X X Extracts X X X X
X X X X Extracts X X X X
....emurrage, then net despatch money is paid by the vessel owner. The department's view is that the appellants are engaging stevedores to expedite the turnaround time and quicker unloading and in a way, therefore, are providing 'port service'. For this particular activity, the vessel owners are paying them despatch money, which has been treated as consideration for such port service. On the other hand, the appellants have mostly contended that this is more by way of discount on freight or as an incentive for quicker turnaround time and all these things cannot be subjected to service tax under the category of 'port service'. 7. In the case of Vedanta Ltd (supra), the Coordinate Bench at Chennai examined the issue as to whether the despatch m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....said amount the appellant had agreed to the obligation to refrain from an act or to tolerate the non-performance of the terms of the contract by the other party. 15. Section 65B(44) defines 'service' to mean any activity carried out by a person for another person for consideration, and includes a declared service. Under Section 66E(e), a declared service shall constitute agreeing to the obligation to refrain from an act, or to tolerate an act or situation, or to do an act. Section 66B provides that service tax shall be levied at the rate of 12 per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....case where the appellant had to perforce clear the consignment before the agreed upon time in order to earn despatch money or for that matter, delay the consignment and incur demurrage charges. These are various incentives or dis-incentives/penalties, which are conditions of the agreement regulating faster turnaround time. Therefore, there is force in the submissions made by the appellant that the said amount cannot be considered as consideration paid to the appellant for especially providing port services for quicker turnaround. It is not the case of the department that they have always been getting despatch money, rather, they have been getting both despatch money as well as paying out demurrage charges depending on early despatch of carg....