NEW DELHI : THE respondent - Gujarat Maritime Board (" GMB
") is a statutory body constituted under the Gujarat Maritime Board
Act, 1981. This authority administers and operates minor ports in the
State of Gujarat. GMB entered into an agreement dated 28.2.2000 with
Larsen & Toubro which
ultimately became M/s Ultratech Cement Limited
(" UCL ") whereby a licence was granted to UCL to construct and use a
jetty for landing of goods and raw materials manufactured by UCL in
their cement factory which was situated close to the said jetty at
Pipavav port.
It is alleged that service tax was
payable on wharfage charges by GMB collected by them from their licensee
UCL under the taxable category of "port services". A show cause notice
dated 6.3.2009 was issued to collect 80% of service tax payable on
wharfage charges which was not paid by the assessee. This was for the
period 1.10.2003 to 31.3.2006, the differential amount being a sum of
Rs.1 ,67,45,620 /-. A further amount of Rs.12 ,53,076 /- was also
demanded for the period 2003 October upto 2007-2008 on account of the
provision of direct berthing facilities provided for captive cargo of a
ship size of 10,000 DWT and above on account of lease rent for use of
the waterfront. By the order in original dated 16.7.2009, the
Commissioner, Central Excise held that it is clear that the nature of
service provided, which is wharfage , is squarely covered under the head
"port services" as defined in the Finance Act, 1994. The amount of
rebate/concession granted in wharfage charges amounting to 80% allowed
to the licensee should, therefore, be included for purposes of
calculation of service tax. Equally, the amount that was demanded on
account of lease rent for waterfront usage was also confirmed, together
with interest and penalty, which was imposed on the assessee.
In
appeal from this order, CESTAT reversed the Commissioner's order
holding that no service at all was rendered by the Gujarat Maritime
Board in relation to any vessel and, therefore, no amount was payable by
way of service tax. Equally, on an analysis of the agreement between
GMB and UCL , it was held that 20% of wharfage charges which was payable
under the agreement was really payable as licence fee/rental and,
therefore, the balance 80% being of the nature of licence fee/rental and
not being of the nature of payment for services rendered would equally
render the payment bad in law.
Revenue Argument : it is
clear on a correct reading of the agreement between GMB and UCL that
service was rendered by GMB as owner of the jetty, the service being the
provision of a space for landing of goods from vessels which are
allowed to berth there. As an alternative argument, GMB had authorized
UCL to render the service of wharfage and since what was collected was
actual wharfage charges in accordance with the schedule of rates
prescribed under the Gujarat Maritime Board Act, it was in relation to
goods that were loaded or off-loaded from vessels on the said jetty. The
reason why only 20% of the wharfage charges was collected and not the
entire amount was a pure internal arrangement between GMB and UCL with
which revenue is not concerned. The Tribunal's finding that the
ownership of the jetty vests in UCL is contrary to the agreement between
the parties and that 20% of wharfage levied and collected cannot be
said to be rental or licence fee but is wharfage charges collected under
the GMB Act for the service of allowing goods to be landed at the said
jetty. Gujarat Maritime Board was the owner and in control of the said
jetty throughout the term of the agreement and all findings to the
contrary by the Tribunal were incorrect.
Assessee's
Arguments : the very basis for service tax was absent in the present
case as there is no service rendered of any kind by the assessee on the
facts of the present case to UCL nor has UCL been authorized by GMB to
render any service Act and that, therefore, the authority to levy
service tax was absent. The 20% of wharfage charges that was paid under
the agreement was really only a measure to calculate what is in fact
payable as licence fee and that, therefore, the agreement read as a
whole would lead to the conclusion that no service was in fact rendered
by the respondent and, therefore, no service tax could be collected.
Section 65(82) defined "port service" as :-
"Port
service" means any service rendered by a port or other port or any
person authorized by such port or other port, in any manner in relation
to a vessel or goods;"
The Supreme Court observed,
The
question which arises is, whether any service is rendered by GMB or by
any person authorized by GMB in relation to a vessel or goods. The
agreement makes it clear that it is the duty of the licensee, i.e., UCL
to maintain the jetty in good order and condition during the tenure of
the agreement. Further, it is UCL that is to provide all services at or
around the jetty including dredging, navigation, water supply etc. This
makes it clear that during the currency of the 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, 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. 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. To that extent 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.
Though
GMB is the owner of the jetty under the said agreement, yet for
providing the service of allowing a vessel to berth at the said jetty,
it is necessary for GMB itself to keep the said jetty in good order.
Wharfage charges are collectible because they are in the nature of fees
for services rendered. The expenses that are defrayed by the Board for
the maintenance of the jetty is sought to be collected as wharfage
charges. This amount would necessarily include all amounts that are
spent for keeping the said jetty in good condition including dredging so
that vessels can berth alongside the jetty. It is clear that so far as
jetties operated by the Board are concerned, the Board itself defrays
such expenses. It is only in cases like the present where the jetty is
primarily meant for loading and unloading goods belonging to a
particular private party that repair and maintenance expenses are to be
borne by the private party and not by the Board. It is in this
circumstance that we find that there is no service, therefore, rendered
by GMB to UCL .
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 facts of the present
case. So far as the direct berthing facilities provided for captive
cargo is concerned, the lease rent charged for use of the waterfront
also does not include any service in relation to a vessel or goods and
cannot be described as "port service". This being so, it is unnecessary
to go into any of the other contentions raised by both parties.
The appeals of the revenue are, therefore, dismissed accordingly.
(See 2015-TIOL-155-SC-ST)