CENTRAL EXCISE & CUSTOMS COMMISSIONERATE
CENTRAL EXCISE BHAVAN : RACE COURSE RING ROAD
RAJKOT 360 001
P h o n e - (0281) 2442030, 2441980, 2441982
F a x - (0281) 2443313, 2452967
Email: cexrajkoad lfVrsancharnet.in
By RPAD/HAND DELIVERY
F.No. V.ST/15-192/Adj./2011
25.02.2013
ORDER IN ORIGINAL
23/COMMR/2013
NO.
Dateof qrder
^ze7o2^20T3
Date of Issue
eft
Ordered by
V, Padmanabhan
Commissioner,
Customs & Central Excise.
Rajkot.
In the case of
Show Cause Notice No. & Date
M/s. Jaisu Shipping Co. Pvt. Limited,
8, Sindhu Co-op Housing Society Ltd, Adipur,
Tal. Gandhidham
No. v".ST/AR-Gnd/Commr/235/2011
dated 18.10.2011
This copy is granted free of charge for private use of the person(s) to whom it is
sent.
2.
cb^-Mlie-5, 3T^^RK-3H() 016 cpt
Any person deeming himself aggrieved by this Order may appeal against this
Order to the Customs, Excise and Sendee Tax Appellate Tribunal, Ahmedabad Bench
within three months from the date of its communication. The appeal must be
addressed to the Assistant Registrar, Customs, Excise and Service Tax Appellate
Tribunal, O-20, Mcghani Nagar, Mental Hospital Compound, Ahmedabad-380 016.
3.
The Appeal should be filed in form No. S.T.-5 specified in rule 9(1) of Sen-ice
Tax Rules, 1994. It shall be filed in quadruplicate and shall be accompanied by an
equal number of copies of the order appealed against (one of which at least shall be
certified copy). All supporting documents of the appeal should be forwarded in
quadruplicate.
V.ST/15-192/Adj/2011
OiO No. 23/COMMR/2013
M / s . J a i s u Shipping Co. Pvt. Ltd.
Page 2 of 46
The Appeal including the statement of facts and the grounds of appeal shall be
filed in quadruplicate and shall be accompanied by an equal number of copies of the
order appealed against (one of which at least shall be a certified copy.)
5.
The form of appeal shall be in English or Hindi and should be set forth concisely
and under distinct heads of the grounds of appeals without an}" argument or narrative
and such grounds should be numbered consecutively.
6.
'URT 3 5 eft
^TT3=r
The prescribed fee under the provisions of Section 35 B of the Act shall be paid
through a crossed demand draft, in favour of the Assistant Registrar of the Bench of the
Tribunal, of a branch of any Nationalized Bank located at the place where the Bench is
situated and the demand draft shall be attached to the form of appeal.
The copy of this order attached therein should bear a court fee stamp of Re. 1.00
as prescribed under Schedule 1, Item 6 of the Court Fees Act, 1^70.
S.
R" 3ft ?. 5.00^1
Appeal should also bear a court fee stamp of Rs. 5.00.
V.S f/15-192/Adj/2011
OiO No. 23/COMMR/2013
M / s . J a i s u Shipping Co. Pvt. Ltd.
Page 3 of46
BRIEF FACTS OF THE CASE :
M/s. Jaisu Shipping Co. Pvt. Limited, having their registered office at 8,
Sindhu Co-op Housing Society Ltd, Adipur ,Ta. Gandhidham Distt. Bhuj (Kutch)
Gujarat (hereinafter referred to as 'the noticee') are providing different taxable
services and registered with Central Excise Commissionerate, Rajkot, having
registration No. AAACJ 6998 HST0019 (AR/ CAM/ DS/ 05-06) under the
category of "Dredging Services", under Section 69 of the Finance Act, 1994
(hereinafter referred to as "the said Act").
02.
Whereas the officers of the Directorate General of Central Excise
Intelligence Ahmedabad Zonal Unit (AZU), have conducted an investigation
against the said noticee regarding evasion / non payment of service tax on the
various services rendered by the said noticee up to the month of March-2009 /
Septcmber-2009, and a Show Cause Notice bearing No. F. No. DGCEI/AZU/36116/2008-09 dated 25/01/2010 has been issued by the Additional Director
General, DGCEI, Ahmedabad to the said noticee. Further a show cause notice
was also issued by The Commissioner of Central Excise, Rajkot, amounting to
Rs 2,01,99,107/-for the period from 2009-2010. The Superintendent, Service
Tax Range-1, Gandhidham requested vide his letter dated
15.03.2011,
05.04.2011 and 18.05.2011 to the noticee for furnishing the information of such
services rendered for the further period i.e. from April-2010 to March-2011.
03.
Whereas the noticee supplied the required information vide their letter
dated 22.06.2011 (marked as Anncxure "A" to the Show Cause Notice) viz.
Receipts from Bunker Income (receipts Bunker), Water Receipt, Receipts of Boat
/ Barges Hire, Receipts of Charter Hire,
Misc. Income, (Import of Services -
Expenses in foreign currency), for the year of 2010-11. The noticee has declared
a value of Rs. 3,47,63,154/- and Rs. 12,75,83,836/- in respect of Receipts from
Bunker income and Receipt from Water income and
Expenses in foreign
currency respectively for the period from April-2010 to March-2011.
04.
Whereas it
appeared on verification of the information furnished vide
letter dated 22.06.2011, that the noticee has not paid Service Tax on the Bunker
Receipts (Bunker Supply) for the year of 2010-11. The amount received towards
Bunker Receipts is declared as Rs. 3,47,63,154/-, in Annexure " 1" to the letter
dated 22.06.2011.
05.
Bunkering, procedure and regulations :- The
services provided by the
noticee is related to bunkering. The noticee is registered bunker supplier with
V.ST/15-192/Adj/2()11
OiO \o 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 4 of 46
the Director General of Shipping. To understand the job of bunkering performed
by them, the procedure/ regulations and other formalities related to bunkering
is required to be appreciated.
06.
As per the shipping Glossary "Bunkers means the oil or Fuel which a
ship needs for running its engines to move from one place to another or within
the Port."
07.
Under
sub- section (l)(eec) of Section 6 of the Indian Ports Act, 1908,
Government is empowered to make part rules for regulating the supply of
bunker to vessels with liquid fuel in any such port and the description of barges,
pipe lines or tank vehicles to be employed in such supply of bunker.
08.
Engineering Circular No. 45, from F. No. No: ENG/OPP/MARPOL-38(5)/04
dated 28.02.2005,
is issued, by the Director General of Shipping with regard
to Guidelines for registration as Bunker Suppliers as per MARPOL Annex VI
7 3 / 7 8 . The salient features of the said circular are as under:(I)
With effect from 19 May 2005, all bunker suppliers, bunker craft
operators and bunker surveyors are required to comply with the Annex VI
Protocol of MARPOL 7 3 / 7 8 .
(ii)
In complying with the requirements bunker suppliers shall also meet the
following requirements as set out in Regulation 18 of MARPOL 7 3 / 7 8 Annex
VI
(iii)
Regulations for the Prevention of Air Pollution from Ships:
(a)
Provide the Bunker Delivery Note (BDN) and bunker sample as
required by the regulation,
(b)
Certify that the bunker fuel oil delivered meets the requirements of
regulations 14 and 18 of Annex VI of MARPOL 7 3 / 7 8 , and
(c)
Retain a copy of the BDN for at least three years for inspection and
verification by the Port State as necessary.
In connection with the requirement as stated in paragraph (b) above,
bunker suppliers should make the certification in the BDN in the column
provided for suppliers confirmation, as follows:
We
certify
that
the
bunker fuel
oil
delivered
meets
the
requirements
of
regulations 14 and 18 of Annex VI of MARPOL 73/78.
(iv)
Ship owners, charterers and operators arc kindly urged to advise their
officers to follow the procedures and requirements as stipulated in "the
V.ST/15-192/Adj/201 1
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 5 of 46
Guidelines for registration as Bunker Suppliers" when their vessels call at
India for bunkering. Shipping agents are requested to be familiar with the
guidelines procedures and requirements
(v)
Bunker Delivery Note : -
It is mandatory for the Bunker Supplier to provide
a Bunker Delivery Note (BDN) for each individual consignment of bunkers.
To elaborate further, if two barges deliver same bunker under one bunker
order, total two BDNs are to be provided (i.e. one BDN for each barge). The
BDN is for the purpose of certifying that the bunker delivered meets the
Sulphur and Fuel Quality regulations. The supplier must retain a copy of
BDN for 3 years and make it available to Port State Administration for
inspection and verification.
As per
information:
•
•
•
•
•
•
•
•
•
9.
the
Regulation,
BDN
should
include
following
minimum
The name & IMO number of the receiving vessel;
The port of bunkering;
Date of commencement of bunkering;
The name, address and telephone number of the bunker supplier;
The bunker/s name/s;
Quantity of b u n k e r / s delivered in metric tones;
Density at 15"C in kg/m 3 by hydrometer method (ISO 3675);
Sulphur content in %m/m by x-ray fluorescence spectrometry (ISO 8754)
method;
Declaration to the effect that the supplied bunker meets sulphur limit
regulations and fuel quality requirements of Annex VI of MARPOL 73/78.
Kandla Port Trust vide Circular No. G dated 12.06.07 as approved by the
Tariff Authority of Major Ports charges "wharfage" on bunker delivered both on
the coastal vessels as well as foreign going vessels.
10.
In view of the above facts, it appeared that bunkering is a Port service
rendered by them to vessels and goods (bunkers) within the port area, and thus
it appeared taxable under the category of "Port services".
11.
Whereas on scrutiny of the documents seized by the DGCEI,
Ahmedabad, it revealed that the said noticee have charged service tax in many
cases on activity of bunker transportation and water supply from their clients,
which shows that they do consider such activities as taxable. Scanned images
V.ST/15-192/Adj/2011
of two
such
OiONo. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 6 of 46
transactions for the purpose
of evidence
are
as
undcr:-
JOURNAL VOUCHER
JAISU SHIPPING COMPANY PRIVATE LTD.
R-66
ADIPUR (KUTCH) 370205.
Date
06/09/2006
Ps.
DEBIT
KANDLA PORT TRUST (D)
CREDIT
RECBIPT FRESH WATER
SERVICE TAX OUTPUT
EDU. CESS 2% (OUTPUT)
5,000.00
600.00
12.00
INVOICE NO. ISCPL/KIny 06-07/Fw-ni
iHupees
)
|
Prepared by
Director
OiONo. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 7 of 46
V.ST/15-192/Adj/201
JAISU SHIPPING COMPANY PVT. LTD
SHIP OWNERS, CHARTERSRERS AND CONTRACTORS
'PLEASE RTPLY AT SHIPF![1Q OfflCE :
"KEWAL RAMAJ1I HOUSE"
D1N511AW RLDG. RD., NR. CUSTOP1 1I0U5F,.
KAMDU, PORT - INDIA - 370 220
nCH OfPICE :
LAME,
JAMNAGAR- 361 0 0 1
Phone : (O) 2676443
PHONE : (01-2B36) 270420 / 270536 / 270120
RES! : (91 -2936) 260235 / 260224 / 260295
TAX : {91-2836} 270556 / 270650 / 260389
E-mail : Jaisu shlpping@yahoo com
Jaisu_ drcdgingittyahoo.com
TO : SAMSON MARITIME LIMITED
Bi
l,No
JSH/SML/BNK/2006/01
The Master & Owner's
M.V./M.T.
12/10/2006
Date
"OCEAN OPAL"
at Kandla.
KANDLA
Dr.
Cr
JAISU SHIPPING COMPANY. PVT. LTD.
WAI. HAMANI HOUSE" 0INSHAW BLDG. RD., NR. CUSTOM HOUSE. KANDLA PORT
Amount
S.
No.
(A)
Particulars
TRANSPORT
OF
HFIiSD
AT
Rate par Unit
Ps.
Rs.
Lump-Sum
Rs
20,000.00
Total
Rs.
20 ,000 .00
Service Tax (12%)
Rs.
2,400 .00
(ii) Edu. Cess (2% on ST.)
Rs.
48 .00
Rs
22 ,448 .00
Rs.
22 ,448 .00
Rs.
0. 00
0)
BUNKER
KANDLA
Quantity
G. Total
(B) Received amount by Cheque No.702436 (SBl)
on 09/10/06
Out Standing Amount
JSP R VIC ETAXREGD, NQ.-AR/GIM/DS-Q02/2005-06"]
For, JAISU SHIPPING CO, PVT LTD
DIRECTOR
12.
In another case of barge hire charges for bunker supply, they have
charged service tax on 26.05.2006 in one case, and for similar work on
29.05.2006, they have not charged service tax. Images of both the transaction
are reproduced as under:-
V.ST/15-192/Adj/201
OiO\o.23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Paue8 of 46
JAISU SfflPPING COMPANY PVT, LTD.
SHIPOWNERS, CHARTERERS
DREDGING & MARINE CONTRACTORS
PHONE ; (91-2836) 270428/ 270536/ 270128
R£SI
: (91-2836)260235/260224/260295
"KEWAL RAMAN1 HOUSE"
FAX
E-mail
DIMSHAW BLDO. RD., MR. CUSTOM HOU!
KAflDLA PORT (OUJARATJ INDIA - 370 22
MAIN OFFICE :
: (91-2836} 27055G / 2 7 0 6 5 0 / 2 6 0 3 0 9
: jaisu_shipping(« yahoo.com
jjisujJredgingtii yahoo, corn
mail@jaisu.in
Web s i t e : www.jaisu.in
MOBILE : 098242 00428 / 098210 139C
Ref: JSH-GT/2006-07ATRANS/07
Date ;26/05/2006
INVOICE
INVOICE FOR BUNKER SUPPLY TO M.V. "LEONARDO DA VINCI" AT PJPAVAX
QUANTITV
S/NO PARTICULARS
01)
03)
04)
05)
AMOUNT
RATE
Tran spon at ion of Furnace Oil by Barge from
Kandla to Pipavav.
382.429
KLS
Transportation of Furnace Oil by Tank Trucks
from Terminal to Barge Point.
382.429
KLS
Rs
120.00 Rs.
Per KL
45 891 ,48
Passing of Shipping Bill
01 Nos,
Rs 2,000.00 Rs.
2 000 00
Rs. 1,100.00 Rs. 420 ,671 ,90
PerKL
Outward clearance at Pipavav including Misc
—
,
—
H\p & Sundries Customs &. Port Charges
TOTAL
I
12% SERVICE TAX
2 % EDU. CESS ON S.TAX
•- - — —
CTOTAL (TOT+S.TAX-t-EDU.CESS)
"•—
-=i- ' — - - - — Wharfage Charges (Copy Enclosed)
TOTAL
(G.TOTAL+WHARFAGE CHARGES)
Rs.
35 000 00
Rs. 503 563 38
Rs. 60 427 61
1 208 55
Rs.
Rs. 565 199 54
-
Rs
TO 968 00
Rs. 576, 168. 00
(TOTAL RUPEES ,ivi£ LAC SEVENTY SIX THOUSAND ONE HUNDRED AND SIXTY EIGHT ONLY)
Request you to please transfer funds to following account:
AC No
A C Name
A C With
001U07376
UTI Bank Lid., Miunbai (SWIFT - UTIBINBB)
JP MORGAN CHASE DANK. 4 CHASE METROTECH CEN1RE
BROOKLYN N.Y.. NEW YORK 11245,USA, (CHIPS ABA No. 002)
(FIIDWIRE No. 021000021), (SWIFT CODE - CHASUS33)
With the Following instructions :
1.
2
3.
For further credit to :
A/C No. 178010200000028 of M/s. Jaisu Shipping Co. Pvt. Ltd.
With UTI Bank Ltd., Gandhidham Branch, (SWIFT CODE - UTIBrNBB178)
Name of Remitter
: Global Services
Purpose of Remittance
: Barge Hire Charges
SR.T.S.NODATE :
A c T I v i T ACCOUNTS
For, JAISU SHIPPING CO. PVT. LTD.
DIRECTOR
CARGO SHIP AND CHEMICAL TANKERS, BUNKER SALES AT INDIAN PORTS, BUNKER STORAGE TANKS A T . K A N D L A ,
FLOATING DRY DOCK AT KANDLA, O F F S H O R E T U G S , CREWBOATS, H O P P E R , BA(fCES>*B A L L A S T & S L O P BARGESII R A N C H E S :
B/l, COMMON WEALTH. 181.MADAME CAMA ROAD, OPP. AIR 1NCHA BLDG, MUMBAl - 400 020 TEL, : (02
0-A. TRITON. SHANMUGHAM ROAD. MARINE DRIVE, MENAKA JN, COCHIN - 31, TEL. : (0484) 23807
HANS NIWAS". UMDA LANE, JAMNAGAR. PHONE/FAX : (0288) 2676443
FAX: 22021259/22021805
V.ST715-192/Adj/201
PHONE
RESI
FAX
E mall
:
:
:
:
OiONo. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 9 of 46
(91-2836) 27O428 / 270538 / 27O12B
(9 1 -2036) 260235 / 2GO224 / 2CO295
(91-2836) 270550 / 27O65O / 260389
jaisu_shipplng'<* yahoo.com
MAIM OFFICI
"KEWA1, RAMAN! HOUSE"
DIMSHAW DLDQ. RD., MR. CUSTOM I
KANDLA PORT (GUJARAT) INDIA - 3~,
MOBILE : 090242 00428 /O982 10
jaisu _dredgtrig
mail@jaisn.in
Web site : www.jaisui in
Rtf • JSH-GT/200G-07/TRANS/07 (a)
Date ;2°/05/2006
INVOICE
INVOICE FOR BUNKER SUPPLY TO M.V. "LEONARDO DA VINCI" AT PJPAVAV
|Receipt No
[SANG PARTICULARS
Date
01)
Ship Stores for 48 MT HSD for L.DV
j
3073
22.05 06
02)
Marine dues for MV AI- N1MS
':
3072
22 05.06
03)
Office opening charges
NIL
22 05.06
TOTAL
AMOUNT
Rs
4,250.00
Rs
9,750.00
Rs
900 00
Rs.
14,900.00
(TOTAL RUPEES FOURTEEN THOUSAND AND NINE HUNDRED ONLY)
Request \ou to plense transfer funds Io following account :
VC No
\ C Name
v C Wiih
00 [ [-107376
l/TJ (3;mk Lid . Mumbni (SW1I-T - U T I B I N B B )
Ji> M O R G A N CMASL-; BANK. 4 C H A S E NU-TROTECH C L N T R L
B R O O K L Y N N . Y . NKW YORK I 1245.USA. (CHIPS ABA No 0(12
(.MID W I R E No O2 1OOOO2I). ( S W I F T C O D E - CHASUS3 3)
\ itli the I- ollu« iii<; instructions :
Fur l\irihcr credit to •
AC No 1780 1O2OOOOOO28 of M/s. Jaisu Shipping C o . P \ t . Lid
\\ nil UTI H;nik Ltd . G a i i d h i d h n m Branch. (.SWII-T C O D E - UTIBIN liB I 7H)
N a m e o!" Remitter
: Global Services
Purpose of R e m i t t a n c e
Barge Hire C h a r g e s
SR.T.S. NODATE :
ACCOUNTS
13.
O PVT LTD
For. JAISU SHIP
OR
The above transaction appeared to reveal that their services of water
supply, bunker transportation and barge charges were taxable under port
services.
14.
Whereas it appeared from the information called from Kandla Port Trust
by the DGCEI, Ahmedabad, about the noticec to know if any kind of
authorisation has been given to the said noticee to perform services within port
area.
The
information
from
Kandla Port was
supplied vide
letter No.
TF/SH/Scrvice Tax/2009-10 dated 15.12.2009 wherein it was informed that
they have issued trade license to the noticee for rendering ship chandlers
services at Kandla Port, which involves supply of materials/ goods with the
permission of Commissioner of Customs and permission of the master, owner or
agent of such vessel as mentioned at Sr. No. 137 of Kandla Port Regualtions
1967.
V.ST/15-192/Adj/2011
15.
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 10 of 46
The rclavant portion of Sr. No. 137 of Kandla Port Rcgualtions 1967
is as under:" No person/ finn shall canvas for or conduct business within the port or on board
any vessel in the port without a valid licence issued by the Traffic Manager. For
this purpose the Traffic Manager may issue Hscences to approved person/ firms,
these licencses shall be renewable yearly, provided such person/firms shall have
first obtained the approval in writing of the collector of Customs and that such
licencses shall not entiltled the holder to go on board any vessle without the
permission of the Master, owner or agent of such vessles.
The issue of such
liscecne shall be subject to payment of annual fee as specified."
Provisions of Port Service:16.
The Service tax on the 'Port Services' provided by the major ports and their
authorized persons was
introduced with effect from 16-7-2001, and the same
was extended to minor ports with effect from 1-7-2003.
17.
The 'Port Services' has been defined under Section 65 (82] of the Finance
Act, 1994. "Port Service" means any Service rendered by a Port or other Port or
any other person authorized by such port or other port, in any manner, in
relation to vessel or goods".
With effect from 1.7.2010, vide Finance Act 2010, above definition is
amended to read as under:
"Port Service" means any service rendered within a port or other
port, in any manner".
The definition of "Port Service", prior to 01.07.2010, has three
essential components;
(i) The services are rendered by a major port or minor port or b\r any
person authorized by the major or minor port;
(ii)The services are rendered in any manner;
(iii)The services are in relation to vessels or goods.
With effect from 01.07.2010, the same stand amended to the
following
(i) the services must be rendered within a port
(ii) the services may be rendered in any manner.
18.
The taxable service under section 65(105)(zn) and section 65(105) (zzl) of
the Finance Act, 1994,
means any service provided or to be provided to any
person, by a port and other port or any person authorized by the port or any
other port, in relation to port services, in any manner, is a taxable service.
V.ST/15-192/Adj/20l 1
19.
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 11 of46
As per section 65(81), "port" has the meaning assigned to it in section 2(q)
of the Major Port Trusts Act, 1963. As per section 2(q) of the Major Port Trusts
Act, 1963, 'port' means any major port to which this Act applies within such
limits as may, from time to time, be defined by the Central Government for the
purposes of this Act by notification in the Official Gazette, and, until a
notification is so issued, within such limits as may have been defined by the
Central Government under the provisions of the Indian Ports Act.
20.
As per section 65(118), "vessel" has the meaning assigned to it in section
2(z) of the Major Port Trusts Act, 1963. As per that section, 'vessel' includes
anything made for the conveyance, mainly by water, of human beings or of
goods and a caisson. Thus, it includes all types of transport conveyances by
water like ships, barges, boats, tankers, etc.
21.
The said service viz. Port Service is taxable vide Section 65(105) (zzl) of
the Act, which read as under:"Any service provided or to be provided to any person by other port or
any person authorized by that
port in relation to port Service in any
manner."
With effect from 1.7.2010, vide Finance Act, 2010 above definition is
amended to read as under:Any services provided or to be provided to any person, by any other
person, in relation to port services in port in any manner"
The expression 'in any manner' has been used in the definition of taxable service
mainly to emphasize that the manner in which the service is provided is not at
all relevant. The service can be rendered in any manner that is possible, and
need not necessarily be rendered in a particular manner. The manner
contemplated here may relate to the following factors:(i)The place of rendering or providing the service. It can be
under
one roof, or at different places.
(ii)The means by which the service is provided. It can be directly by
the service provider himself without the help of any body else, or it
can be provided by deployment of staff, agents or contractors
(iii)The services can be provided with or without use of equipments,
lighters, barges, cranes, etc.
22.
The CBEC vide circular dated 09.07.2001 issued from F.No.B. 1 1 / 1 / 2 0 0 1 -
TRU, clarified the various issues in regard to new services introduced from 16lh
July, 2001. The same in respect to port services have been
discussed and
Y\ST/15-192/Adj/2011
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 12 of 46
clarified in the Annexurc- VIII to the said circular. The same is reproduced as
under:Annexure VIII
Port services:
1. As per the section 65(51), the "port services" means any service rendered by
a port or any person authorized by the port, in any manner, in relation to a
vessel or goods. As per section 65 (72)(zn), taxable service is any service provided
to any person by a port or any person authorized by the port, in relation to port
services, in any manner.
2.
Port services generally consist of port and dock services (these are for
services rendered in relation to vessels), cargo handling and storage services,
railway haulage services, and container handling services (these are for services
rendered in relation to goods). The Dock Labour Board of the Port provides
service of labour for handling of goods. The port or the person authorised by the
port rendering these services is the service provider.
2.1
Some of the specific charges for the services rendered in respect of port
services are as follows.
(i)
Port and dock charges consisting of berthing and mooring charges, port
dues, pilotage and towage, water supply charges, salvage and diver charges,
anchorage fee;
(ii)
Cargo handling and storage charges consisting of wharfage for general
cargo, warehousing charges, cranage charges, ore handling charges, wharfage
on petroleum products, weighment charges for lorries, traffic appliance charges,
wcighment charges for goods;
(iii)
Railway haulage charges for rail-borne goods, local haulage and storage;
(iv)
Container handling charges consisting of import, export and transhipment
wharfage on containers, equipment charges for handling of containers, container
storage charges;
(v)
Labour charges.
2.2
All these charges form part of taxable value of poit services. Demurrage
charges are recovered by port authority as a rental for storage of goods. The fact
that these charges apply only if the goods overstay a prescribed free period, does
not detract from their being in the nature of a charge for providing a service in
relation to goods. Accordingly they would form part of taxable value. The Dock
Labour Board is liable to pay service tax on the labour charges recovered by
them. However, estate rentals of the port which is charged for renting of
accommodation provided to outsiders and port users, lease rental for land, etc.
will not be liable to service tax as these are not services rendered in relation to
goods or vessels. For any other charge not mentioned above, the Commissioner
may decide the inclusion/exclusion in the value of taxable service on merits.
23.
The CBEC vide circular dated 01.08.2002 issued from F. No. B.I 1/1/2002
-TRU further clarified in respect of port services. The clarification is reproduced
as under :"Cargo handling services are provided in the port also. Wliether such service will
be covered in the category of port services or cargo handling service. In this
context it may be mentioned that port services cover any service provided in
Y.S 1715-192/Adj/201 1
OiO No. 23/COMMR/2013
M / s . J a i s u Shipping Co. Pvt. Lid.
Page 13 of 46
relation to goods or vessels by a port or a person authorized by the port. This
includes the cargo handling service provided within the port premises. Therefore to
this extent there may be an overlap in cargo handling service and the port service.
However since port services covers all the service in relation to goods and vessels
and therefore more specific to port, the service provided in a port in relation to
handling of good would be appropriately covered under port service and no
separate levy will be attracted wider the category of cargo handling agency
service. Similar would be the case in respect of service provided for storage of
goods in the port premises".
24.
The CBEC vide circular No. 6 7 / 16/2003-ST dated 10.11.2003 issued from
F. No. 160/3/2002-CX-4 gave following clarification, which is relevant to the
present case also . The same is reproduced as undcr:"J am directed to say that a doubt has been raised regarding levy of Service Tax
on ship repair during the dry docking by the person duly authorised in this behalf
by port authorities. This involves removal of damaged parts and replacement by
fiew parts. This may involve repairing the outside bottom area of a Ship/ Vessel by
supplying huge quantities of MS plates etc.
The matter has been examined, Port services means any service rendered
by port or any person authorised by them, in any manner, in relation to a vessel or
goods, Thus, all such services rendered, including during dry dock and repairs to
the ship, are taxable which should include not only the minor repairs provided by
ship chandlers but also the dry dock facilities and any repairs canied out to the
vessels. However,
the benefit of notification no.
12/2003-ST dated 20.6.2003
would be available.
A clarification issued by the Board in this matter vide letter of even number dated
1.7.2003 is also enclosed for information. "
The Board's letter dated 1.7.2003, as referred above, which is relevant to the
issue is reproduced as undcr:F. No.
160/3/2002-Cx 1.7.2003
Sub: Registration of Ship Chandlers under Service Tax.
I
am
directed
to
refer
out
letter
No. V/DGST/21-2 I/Port
Services/1/200/1291 dated 29.04.2003 on the subject mentioned above and to
say that Ship Chandlers engaged in (A) supply of provisions called 'ship stores'
such as fresh vegetables, dried/fresh fruits, provisions, meat, engineering
materials and deck stores etc. to the vessel and (B) undertake minor repair works
to clear technical snag of the vessel through their locally arranged resources as
workshop etc, are the Service Tax. These are services rendered in relation to the
vessel under authorization from port authorities and hence come within the ambit
of Port Services in terms of Section 65(51) of the Finance Act, 1994 as amended.
V.ST/15-192/Adj7201 i
25.
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 14 of 46
In respect of Major Ports, the Board of trustees of the Major Port have
power to undertake the services as defined under section 4.2(1) of the Major Port
Trust Act, 1963 which are under :(a) landing, shipping or transshipping passengers and goods between vessels in
the port- and the wharves, piers, quays or docks belonging to or in the possessioti
of the Board;
(b) receiving, removing, shifting, transporting, storing or delivering goods brought
within the Board's premises;
(c) carrying passengers by rail or by other means within the limits of the port or
port approaches, subject to such restrictions and conditions as the Central
Government may think fit to impose; '??[***]
(d) receiving and delivering, transporting and booking and dispatching goods
originating in the vessels in the port and intended for carriage by the neighboring
railways, or vice versa, as a railway administration under the Indian Railways
Act, 1890 (9 of 1890); ^/***/
49
[(e) piloting, hauling, mooring, remooring, hooking, or measuring of vessels or any
other service in respect of vessels. 49A[andj.
'19li[(f) developing and providing, subject to the previous approval of the Central
Government, infrastructure facilities for ports.]
26.
The notieee have been authorized by the Kandla Port trust to perform
services as a ship chandelier to perform services in relation to vessels within
port area, thus the services provided by the said noticce to the vessels will fall
under port services.
27.
In view of the para supra, and information supplied by the notieee, Total
Receipts from
Bunker Income
(Receipts Bunker)
has
been
shown
Rs.
3,47,63,154/- for the period from April-2010 to March-2011, and it appeared
that the notieee has not paid the Service Tax on such amount which is
calculated to the tune of Rs. 35,80,605/- including Education Cess and
Secondary' & Higher Education Cess, for the period from April-2010 to March201 1 as details mentioned in Annexure "B" (marked as Annexurc -"B" to the
Show Cause Notice) which is required to be demanded and recovered from the
said notieee under Section 73 of the Finance Act, 1994 and interest at
appropriate rate on such Service Tax under Section 75 of the Finance Act, 1994
is required to be recovered from the notieee. Further, the services provided as
Bunker Supply are rightly classifiable under the category of "Port Services" as
detailed and described in para supra.
Import of services by the notieee
28.
The noticce vide their letter dated 22.06.2011 (as per Annexure "A")
supplied Month- wise details of expenses in foreign currency for the
period from April-2010 to March-2011, against services received from
foreign service providers and the payments made to foreign parties for
charter hire of vessels. The services provided for which expenses have
V.ST/15-192/Adj/20n
OiONo. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 15 of46
been incurred in foreign currency appeared to be classifiable under the category
of "Supply of Tangible Goods" as detailed and described in Para below. Whereas,
the noticee have paid Rs.
1 2 , 7 5 , 8 3 , 8 3 6 / - to the foreign companies
towards s u c h services imported by t h e m , which a p p e a r e d to be taxable
services rendered in India, on which service tax leviable is worked out Rs.
1,31,41,135/-
including
Education
Cess
and
Secondary
&
Higher
Secondary Education Cess as per Annexure "C" (marked as Anncxure "C"
to the Show c a u s e Notice), which is required to be demanded and recovered
from the noticee under Section 73 of the Finance Act, 1994 and interest at
appropriate rate on such Service Tax is required to be recovered from the notice
under Section 75 of the Finance Act, 1994.
Provisions of "Supply of tangible goods for use service "
29.
As per section 65(105)(zzzzj), any service provided or to be provided to any
person, by any other person in relation to supply of tangible goods including
machinery, equipment and appliances for use, without transferring right of
possession and effective control of such machinery, equipment and appliances,
is a 'taxable service'
30.
Such services were introduced in the Finance bill 2008, and are leviable to
service tax from 16.05.2008.
Finance bill, 2008,
The CBEC, while clarifying the
issues of the
vide D.O. F. No.334/ 1/2008-TRU, dated 29th February,
2008, provided following clarification about the above service, the relevant para
4.4 of the D.O. letter is reproduced as under:SUPPLY OF TANGIBLE GOODS FOR USE:
4.4.1 Transfer of the right to use any goods is leviable to sales tax / VAT as
deemed sale of goods [Article 366(29A)(d) of the Constitution of India]. Transfer of
right to use involves transfer of both possession and control of the goods to the
user of the goods.
4.4.2 Excavators, wheel loaders, dump trucks, crawler earners, compaction
equipment, cranes, etc., offshore construction vessels & barges, geo-technical
vessels, tug and barge flotillas, rigs and high value machineries are supplied for
use, with no legal right of possession and effective control Transaction of allowing
another person to use the goods, without giving legal right of possession and
effective control, not being treated as sale of goods, is treated as service.
4.4.3 Proposal is to levy service tax on such services provided in relation to supply
of tangible goods, including machinery, equipment and appliances, for use, with
no legal right of possession or effective control. Supply of tangible goods for use
and leviable to VAT / sales tax as deemed sale of goods, is not covered under the
scope of the proposed service. Wlxether a transaction involves transfer of
possession and control is a question of facts and is to be decided based on the
terms of the contract and other material facts. This could be ascertainable from the
fact whether or not VAT is payable or paid.
V.ST/15-192/Adj/2011
31.
OK) No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 16 of 46
Under the Taxation of Services (Provided from Outside India and Received
in India) Rules, 2006, the supply of tangible goods
service will be 'service
provided from outside India and received in India', if service is received by a
recipient located in India for use in relation to business or commerce. As per
second proviso to rule 3(iii) of Import of Service Rules, inserted w.e.f. 16-52008], service is provided to a recipient located in India, service will be 'import'
only if the tangible goods are located in India.
32.
In view of the above, it appeared that the services received by the noticee
from foreign companies, falls under category of import of services, and due
service tax on the same had to be paid by the noticee. The noticee were required
to pay service tax on Rs. 12,75,83,836/- paid by them to the foreign
companies for services received from April-2010 to March-2011 under
Rule2(d)(l)(iv) of the Service Tax Rules, 1994 read with Taxation of Services
(Provided from Outside India and Received in India) Rules, 2006 and section
66 A of the Finance Act, 1994. The service tax of Rs. 1,31,4 1,135/including Education Cess and Secondary- & Higher Secondary Education
Cess as per Annexure "C" to the show cause notice was required to be
paid by them.
33.
Section 68 of the Finance Act, 1994 provides that every person providing
taxable service to any person shall pay service tax at the specified rates and in
such manner and within such period as may be prescribed. Further, Rule 6 of
the Service Tax Rules 1994 stipulates that service tax shall be paid to the credit
of the Central Government, by the 5th of the month immediately following the
calendar month, in which the payments are received, towards the value of
taxable services;
34.
Section 70 of the Finance Act, 1994, provides that every person liable to
pay the service tax shall himself assess the tax due on the services provided by
him and shall furnish to the Superintendent of Central Excise, a return in such
form and in such manner and at such frequency as may be prescribed. Rule 7 of
the Service Tax Rules, 1994, prescribes that every assessee shall submit a halfyearly return in Form ST-3 or ST-3A as the case may be, alongwith a copy of the
Form TR-6, in triplicate for the months covered in the half-yearly returns.
Further sub-rule [2] thereto also provides that every assessee shall submit the
half yearly return by the 25 th of the month following the particular half-year.
35.
In view of the above, it appeared that M/s. JSCPL have contravened the
provisions of:
V.S lV15-192/Adj/2011
>
Oi() No. 23/COMMR/20I3
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 17 of 46
Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax
Rules, 1994, inasmuch as they have not paid service tax as detailed in Annexurc
-'B' and Annexure 'C to the Show Cause Notice to the credit of the Government;
>
Section 70 of the Finance Act, 1994 read with Rule 7 of the Service Tax
Rules, 1994, inasmuch as they had not declared the correct value of taxable
service in their periodical ST-3 Returns.
36.
Whereas, the noticee have not paid the sendee tax in prescribed time limit
on such services as discussed above, and contravened the provisions / Section
68 and 70 of the Finance Act, 1994 as discussed in Para supra, and therefore,
the said noticee appeared liable for penalty under Section 76 and 77 of the
Finance Act, 1994.
37.
Therefore, show cause notice No. V.ST/AR-GDM/Commr/235/201 1 dated
18.1 0.2011 was issued to M/s. Jaisu Shipping Co. Pvt. Limited,8, Sindhu Co-op
Housing Society Ltd, Adipur, Ta. Gandhidham. Distt. Bhuj (Kutch) Gujarat (the
noticee) calling upon to Show cause, as to why:(i)
the
services
rendered
by
them
for
supply
of
bunkers
and
water/provisions should not be classified as ' port service ' as defined
under Section 65(82) of the Finance Act, 1994, as amended and covered
as taxable service under Section 65(105) (zzl)of the Finance Act, 1994, as
amended
(ii)
the Service Tax amounting to Rs.35,83,180/-
(Rupees Thirty five
l a k h s eighty three T h o u s a n d One Hundred eighty only) including
Education Cess and Secondary and Higher Secondary Education
Cess, should not be demanded and recovered from them for the period
from April-2010 to March-2011 (as calculated in Annexure - "B"), under
Section 73 of the Finance Act, 1994.
(iii)
The services received by the notice in India for which expenses in
foreign currency h a s been incurred should not be classified as any
service provided or to be provided to any person, by any other
person in relation to supply of tangible goods including machinery,
e q u i p m e n t a n d appliances for u s e , without transferring right of
possession and effective control of s u c h machinery, e q u i p m e n t s
and appliances, as taxable service u n d e r section 65(105)(zzzzj) of
the finance act, 1944 as a m e n d e d u n d e r the categoiy of Supply of
tangible goods read with section 66A(b) o[ the Finance Act. 1944
V.ST/15-192/Adj/2011
OK) No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 18 of46
and Rule 2(l)(iv) of the Service Tax Rules, 1944 as a m e n d e d as
explained in t h e foregoing p a r a s .
(iv)
Service Tax amounting to Rs. 1,31,41,135/- ( Rupees One Crores
Thirty one Lakhs Forty one T h o u s a n d one h u n d r e d thirty five only)
including Education Cess and Scconday and Higher Secondary
E d u c a t i o n Cess should not be demanded and recovered from them for
the period from April-2010 to March-2011 (as calculated in Anncxurc-C)
under section 73 of the Finance Act, 1994.
(v)
Interest at appropriate rate should not be recovered from them on the
aforesaid amountunder the provisions of Section 75 of the Finance Act,
1994 on the above Service Tax;
(vi)
Penalty should not be imposed upon them under Section 76 of the
Finance Act, 1994.
(vii)
Penalty should not be imposed upon them under Section 77 of the
Finance Act, 1994
DEFENCE AND PERSONAL HEARING :
38.
The noticee submitted reply to the SCN vide letter dated 08.02.2013 and
inter alia, contended that:
(i)
The SCN demands service tax on bunker receipts under the category of
port service without appreciating their commercial transaction. It has
been noted in the SCN that the said receipts were the considerations
for supply of bunker, without explaining as to how such transaction
amounts to rendering of taxable service. The transaction consist of sale
of marine fuel which includes transportation of the same for a total
price as agreed to with the customer and they have undertaken
transportation activity in order to fulfill the contractual obligation of
transferring the property in the goods. The whole transaction is one of
sale and not for rendering any service.
(ii)
The concept of "sale" is different from that of "service". In "Encyclopedia
Britannica", it has been explained that a transaction resulting in
transfer of ownership of anything is not a transaction for rendering
service. They relied upon the case laws of (a) Hindustan Shipyard Ltd.
Vs. State of A.P. - (2000) 119 STC 533 and (b) Bharat Sanchar NIgam
Ltd. Vs. UOI - (2006) 3 SCC 1.
(iii)
The Port Trust has merely issued license to them to earn.' on its trading
activities. Their activities under the license of the Port Trust cannot be
described as activities carried out by a person authorised by the "port".
V.S'1715-192/Adj7201 1
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 19 of46
The SCN has failed to appreciate that their activities arc not classifiable
under the category' of "port service" as these services are not supposed
to be carried out by the port. The SCN relied upon letter dated
15.12.2009 of Kandla Port Trust but their activities cannot be classified
under the category of port service
without appreciating the nature of
their activities for which these charges were received and scope of the
service covered under the category of "port service''.
(iv)
None of their activities can be classified under the category of "port
service" by considering one by one. As per sub-section (82) of the
section 65 of the Act,
services rendered by a port or a person
authorised by such port is "port service". The intention of the
legislature is to tax the services of the "port" only which are carried out
by the "port" itself or though its authorised person and not all services
carried out in the port. The expression "person authorised by port"
should be interpreted in the context of the expression "port"' which
immediately precedes the former. Therefore, "person authorised by
such port" means the person who is authorised by the "port" for
rendering the services which are otherwise required to be provided by
the "port" itself.
(v)
The SCN has relied upon the expression "in relation to" which has been
used in the definition clause to interpret the scope of the taxable
category broadly. The service tax provisions use expressions like
"connected with", "in relation to" and "in respect of. Such expressions
are used in taxing statutes in India in various situations. The Supreme
Court, in State of Madras Vs. Swastik Tobacco Factory (1996) 3 SCR 79
has held that Indian tax laws use the expression 'in respect of as
synonymous
with
the
expression
'on',
In
Navin
Chemicals
Manufacturing & Trading Co. Ltd. Vs. CCE 1993 (68) ELT 3 (SC), the
Supreme Court h a s held that the expression "in relation to" is to be
read as meaning direct and proximate relation ship with the subject
matter. In Jaypee Rewa Plant Vs. CCE 2003 (159) ELT 553 (Tri-LB), the
Larger Bench of Tribunal interpreted the expression 'used in or in
relation to manufacture of the final product' and held that repairs and
maintenance of machinery cannot be considered to have been used to
"in relation to the manufacture of final products". The scheme of
service tax uses the expression "in relation to" as synonymous with the
expression "on". Thus, it is not that every supporting activity which his
rendered by the person to some other person undertaken to render a
taxable service would become taxable.
V.ST/'15-192/Adj/2011
(vi)
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 20 oi'46
The Finance Act, 2004 had introduced 'construction service' as a
taxable service. Finance Act, 2005, has introduced completion and
finishing etc., which are nothing but part of the construction service,
as
separate
taxable
service
if
rendered
on
standalone
basis.
Construction service has been renamed as 'commercial or industrial
construction service', wherein certain activities were added. As these
activities are undoubtedly segments of construction activity, there was
no necessity for introducing each of these component activities as
separate taxable service if this could have been considered as part of
construction service, being in relation to construction service. Thus,
unless the service provider falls under the description of a taxable
service, it is not taxable even if it is provided to a customer, who in
turn is using the service to provide the taxabLe service. Applying this
principle to the taxable service quoted above, it would mean that only
the activities which are required to be performed by a Port Trust are
taxed under this category.
(vii)
Regarding demand of service tax on the amount paid by them to the
foreign vessels owners for hiring the vessel on the ground that they
were the recipient of service under the category of "supply of tangible
goods service", it is not permissible to adopt any commercial or general
meaning when it is specifically defined under the statute. They relied
upon the case laws of (a) Feroz N. Dotivala Vs. P. M. Wadhwani - (2003)
1 SCC 433 and (b) Kesoram Industries & Cotton Mills Ltd. Vs. CWT
1966 (59) ITR767 (SC).
(viii)
The taxable service category" "supply of tangible goods for use" has a
negative condition that it should not involve transfer of right of
possession and effective control of the equipment. The Hon. Mumbai
High Court, in the case of Indian National Shipowner's Association Vs.
UOI - 2009 (14) STR 289 (Bom.), has interpreted the scope of this
taxable category^ and held that the services covered by entry (zzzzj) can
be identified by the presence of two characteristics namely (a) supply of
tangible goods including machinery, equipment and appliances for use,
(b) there is no transfer of right of possession and effective control of
such machinery, equipment and appliances. The dictionary meanings
of "supply", "possession" and "control" were reproduced and contended
that the SCN failed to consider the terms of time charter party through
which these dredging vessels were hired by them. It can be appreciated
that they were having the rightful possession and effective control over
the dredging vessel during the term of the charier party. The contract
allows the charterers to sub-let the vessel. This cannot happen without
V.ST/15-192/Adj/201 1
OiO No. 23/COMMR/20I3
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 21 of 46
any rightful possession. The charter party states that during the
contract period, the Captain, though appointed by the owner, shall be
under the
orders and directions of the charterers,
as regards
employment and agency. This gives effective control to the charterers
over the vessel. They has got right of possession and effective control
from the owners. Therefore, this arrangement does not answer the
description of taxable service called "supply of tangible goods for use".
(ix)
It is clear from the above submission that they were not liable for
payment of service tax and there is no justification for levy of any
interest and penalty on them. Further, it is a periodical notice and
hence the allegation of willful suppression or fraud etc. cannot be
made.
(x)
They were under bonafide belief that it was not liable to pay service tax
and the SCN has not brought on record any evidence to the effect that
they were aware of the tax liability and yet deliberately suppressed the
facts or mis-stated anything in order to intentionally evade payment of
tax.
(xi)
Even if they have paid the service tax under the supply of tangible
goods services, the same would be available as credit to them and
hence there is no revenue loss to the department. Similarly, in bunker
supply service, the recipient of services would be eligible for credit and
the situation would be revenue neutral. Therefore, as the issue relates
to pure question of interpretation and they ha\e not suppressed any
facts, no penalty should be imposed under section 76 and 77of the act.
(xii)
Section 80 of the Act provides for not imposing penalties under section
76, 77 and 78 of the Act, in case of reasonable cause shown by
assessee. They relied upon the case laws of (a) Hindustan Steel Ltd. Vs.
State of Orissa 2002 - TIOL - 148 - SC - CT - LB and (b) CST Vs.
Motor-world and others 2012 - TIOL - 418 - HC - KAR - ST.
39.
Personal hearing in the matter was held on 08.02.2013, which was
attended by CA Abhishck Doshi, authorised representative of the noticee. He
reiterated the contents of their written reply dated 08.02.2013.
DISCUSSION AND FINDINGS :
40.
I have carefully gone through the entire case records, SCN issued and
defence put forth by the noticee in writing as well as contentions raised during
personal hearing. 1 find that the issue to be decided in present proceedings is whether the noticee is liable to pay service tax under the categories of "Port
Service" and "Supply of Tangible Goods Service" or otherwise.
V.ST/15-192/Adj/2011
41.
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 22 of 46
I find that Service tax is demanded from the noticee on various charges
received by them for services provided by them in relation to the vessels. In this
regard, I find that the noticee has argued that the amount received by them for
supply of bunker is not transaction for rendering of service as it was sale of
goods at the places desired by the customers; that they have received the
consideration for sale of bunker which includes transportation of the same for a
total price agreed with the customers. They have also pleaded that the property
in bunker gets transferred from them to the ship/vessels at the point of delivery
inside the sea; that there is only one commercial transaction of sale of delivered
bunker; that they had undertaken the transportation activity in order to fulfill
the contractual obligation of transferring the property in the goods; that the
whole transaction is one of sale and not for rendering any service. They have
also submitted that the concept of "sale" is different from that of "service"; that
the transaction is essentially a sale transaction as the customers are interested
in receiving bunker at its vessels in sea and not the other activities; that the
entire transaction is one single transaction for sale of water. In support of these
arguments, they have cited the following decisions:
42.
i)
Hindustan Shipyard Ltd.
-
(2000) 119 STC 533
ii)
Bharat Sanchar Nigam Limited v / s UOI, (2006) 3 SCC 1.
In this regard, I find that as per Section 65(82} of the Finance Act, 1994,
for the period upto 01.07.2010, "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. Further, as per Section 65(105)(zn) and
65(105)(zzl) applicable for the period upto 01.07.2010, "taxable service" means
"any service provided or to be provided to any person, by a port or any person
authorized by the port, in relation to port services, in any manner" and "any
service provided or to be provided to any person, by other port or any person
authorized by that port in relation to port services, in any manner", respectively.
However, the said definitions have been changed with effect from 01.07.2010.
After 01.07.2010, the definition of "Port Service" reads as - "Port Service" means
any service rendered within a port or other port, in any manner" and the
definition of taxable service after 01.07.2010 read as - "Any service provided or
to be provided to any person, by any other person, in relation to port services in
port in any manner". The period covered under the present SCN is from
01.04.2010 to 31.003.2011. Therefore, the amended definition would be
applicable in the present case after 01.07.2010.
V.ST/15-192/Adj/201 I
43.
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 23 of 46
I find that the noticcc have mainly challenged the demand of Service tax
on the ground that the dominant purpose of the transaction was to sell bunkers
to the ships and therefore, the activity of bunker supply carried out by them
ought to be treated as sale of bunkers falling outside the scope of Service tax
le\y. In this regard, I find that there is no dispute over the fact that the noticee
has supplied bunkers to the vessels and therefore, it is an admitted position that
the service provided by them was in relation to the vessels. However, the bone of
contention is whether there was any sale of bunkers, as argued by them. In this
regard, I find from the scanned copy of invoice No. R-66 dated 6.9.2006
reproduced
on
page
No.
4
of
the
show
cause,
invoice
No.
JSH/SML/BNK/2006/01 dated 12.10.2006 reproduced on page No. 5 ibid and
invoice No. JSH-GT/2006-07/TRANS/07 dated 26.5.2006 reproduced on page
of 6 ibid that the noticee has described the transactions as "receipt fresh water",
"bunker transport of HFHSD at Kandla", "transportation of furnace oil by barge
from Kandla to Pipavav" and "transportation of furnace oil by tank trucks from
terminal to barge point". The noticee has not disputed the genuineness of the
invoices reproduced in the show cause notice. They have also not produced any
evidence regarding payment of VAT in support of their argument that bunker
was indeed sold by them. They have also not placed any evidence to show that
they had incurred any cost in producing or buying bunker that was eventually
supplied by them to the vessels. There is also no evidence produced to indicate
cost/value of the bunker incurred by them. On the contrary, the invoices
reproduced in the show cause notice clearly show that the transaction was
"supply" for which they had also charged Service tax. Thus, the noticee was well
aware that the transaction was not "sale" but only service which attracted
Service tax. However, on being called upon to discharge the Service tax liability
in terms of the show cause notice under consideration, they have argued that
the activity involved sale on the ground that property in water got transferred
and therefore, the transaction ought to be treated as "sale". However, this
argument is not acceptable considering that they have not provided any
evidence to show that bunkers being supplied by them to the master of the
vessel by using water-borne barge was not mere supply but actually involved an
element of sale and in lieu thereof; some definite consideration was paid or
payable to them by the master. Therefore, merely because they arranged for
transportation of bunker by barge to the vessel cannot bring the supply within
the ambit of sale particularly when no evidence regarding payment of VAT, etc.
is produced by them. Their submission that the customers were interested in
receiving bunker at their vessels in sea and not any other activities, when
examined in proper perspective would only translate into the fact that the
V.ST/I5-192/Adj/201 1
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 24 of 46
customers wanted the notieec to transport bunker from shore to the master of
the vessel. Considering that the noticee has issued invoices for transportation,
the contrarian argument made by them that they had sold bunker without any
supporting evidence like contract, invoice, sale note, etc. showing the sale price
of bunker, payment of VAT, etc. is not acceptable.
44.
I also find that the dictionary meaning of the word "supply" cited by the
noticcc from the Shorter Oxford English Dictionary also does not make the event
of "sale" as an indispensable, integral and intrinsic component of "supply".
Consequently, merely because noticee supplied bunkers, by itself, cannot mean
that they had sold the bunkers. Consequently, I find that Service tax is rightly
demanded on the amount received by noticcc on account of supply of bunker to
the vessels.
45.
I also find that Board has categorically specified "water supply charges"
and "berthing charges" as charges for the services rendered in respect of port
services. Relevant extract of Board's circular F. No. B-l 1/1/2001-TRU dated
9.7.2001
as contained in Anncxure VIII dealing with "Port services" is
reproduced below for the ease of ready reference:
"1.
As per the section 65(51), the "port services" means any service
rendered by a port or any person authorized by the port, in any
manner, in relation to a vessel or goods. As per section 65(72)(zn),
taxable service is any service provided to an person by a port or any
person authorized by the port, in relation to port services, in any
manner.
2.
Port services generally consist of port and dock services (these
are for services rendered in relation to vessels), cargo handling and
storage services,
railway
haulage services,
and container handing
services (these are for services rendered in relation to goods). The Dock
Labour Board of the Port provides service of labour for handling of
goods. The port or the person authorized by the port rendering these
services is the service provider.
2.1
Some of the specific charges for the services rendered in respect
of port services are as follows:
(i)
Port and dock charges consisting of berthing and mooring
charges,
port dues,
pilotage
and
towage,
salvage and diver charges, anchorage fee;
water
supply
charges,
V.S'lVI5-192/Adj/201 1
2.2
OiO No. 23/COMMR/2013
M / s . J a i s u Shipping Co. Pvt. Ltd.
Page 25 of 46
All these charges fonn part of taxable value of port services... For
any other charge not mentioned above, the Commissioner man decide
the inclusion/ exclusion in the value of taxable service on merits."
(Underline supplied)
Considering that service involved in supply of bunkers is also of similar
nature and can be said to fall in the same league as other services like berthing
and water supply, etc. illustratively mentioned in SI. No. (i) of Para 2.1 of the
Board's circular as above, I find that the service namely-
supply of bunker, is
required to be treated as port services. Consequently, I hold that the noticee is
liable to pay Service tax amounting to Rs. 35,83,180/- on the total amount of
Rs. 3,47,63,154/- received by them for providing the service.
46.
Apart from this, I find that subsequent clarification issued by the Board
by way of enclosure to Board's circular No. 67/ 16/2003-S.T., dated 10.11.2003
also clarifies the position with regard to levy of Service tax on the supplies of
ship stores that are made to the vessels. The same is reproduced below for the
ease of ready reference:
"Subject :
I
am
Registration of Ship Chandlers under Service Tax.
directed
Services/1/200/1291,
to
refer
dated
our
letter
29-4-2003
on
No.
the
V/DGST/21-21/Port
subject
mentioned
above and to say that Ship Chandlers engaged in (A) supply of
provisions called 'ship stores' such as fresh vegetables, dried/fresh
fruits, provisiofis, meat, engineering materials and deck stores etc. to
the vessel and (B) undertake minor repair works to clear technical
snag of the
vessel through their locally
arranged
resources as
workshop etc., are liable Service Tax. These are services rendered in
relation to the vessel under authorisation from port authorities and
hence come within the ambit of Port Services in terms of Section 65(51)
of the Finance Act, 1994 as amended."
In view of the above, I find that the activity of bunker supply undertaken
by the noticee is liable to Service tax.
47.
Another argument advanced by the noticee is to the effect that they had
undertaken the transportation activity in order to fulfill the contractual
obligation of transferring bunkers to the ship and therefore, the Department
cannot split the composite transaction and treat a part of it as taxable service.
In this regard, I have already held in the foregoing paragraphs that the noticee
has to demonstrate that the transaction involved an element of sale, Owing to
V.ST/15-192/Adj/2011
OiO No. 23/C'OMMR/"2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 26 of 46
this, the argument that supply of bunkers was a composite transaction is
required to be rejected. Notwithstanding this, I find that the larger Bench of
Hon. Tribunal in the case of Commissioner of Central Excise, Raipur v/s BSBK
PvL. Ltd., 2010 (253) ELT 522 (Tri.-LB) has held as follows with regard to levy of
service tax on the service component of any composite contract:
"11.
In view of the aforesaid legal and Constitutional provisions it
can irresistibly be concluded that a contract whether composite or
Turnkey may involve an activity or cluster of activities in the nature of
services and such services may be provided in the course of execution
of such
contracts
while
incorporating
goods
into
the
contract
concerned. Such discernible services may be advice, consultancy or
technical assistance and depending upon the nature of the activity,
they
may
be
classifiable under appropriate
category
service under Section 65A of the Finance Act,
of taxable
1994. When Article
366(29-A)(b) to the Constitution has made indivisible contracts of the
aforesaid nature divisible to find out goods component and value
thereof it can be unambiguously be stated that the remnant part of
the contract may be attributable to the scope of service tax under the
Provisions of Finance Act, 1994."
48.
I further find that although the noticcc has failed to establish that the
transaction
involved
an
clement of sale,
ratio
of Board's
circular
No.
67/16/2003-ST dated 10.11.2003, reproduced below, clarifying the position visa-vis applicability of Notification No. 12/2003-S.T., dated 20.6.2003 extending
exemption to goods and materials sold by service provider to the sendee
recipient, would have squarely applied even in the event of the noticee being able
to establish the event of sale:
"I am directed to say that a doubt has been raised regarding levy of
Service Tax on ship repair during the dry docking by the person duly
authorised in this behalf by port authorities. This involves removal of
damaged parts and replacement by new parts.
This may involve
repairing the outside bottom area of a Ship/ Vessel by supplying huge
quantities of MS plates etc.
The matter has been examined, Port services means any service
rendered by port or any person authorised by them, in any manner,
in relation to a vessel or goods. Thus, all such services rendered
including during dry dock and repairs to the ship are taxable which
should include not only the minor repairs provided by ship) chandlers
but also the dry dock facilities and any repairs carried out to the
V.ST/15-192/Adj/2011
OiONo. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 27 of 46
vessels. However, the benefit of Notification No. 12/2003-S.T., dated
20-6-2003 would be available."
(Underline supplied)
49.
I have also perused the various judicial pronouncements cited by the
noticee in support of the above arguments.
In the relied upon decision in
Hindustan Shipyard Ltd. v. State of A.P., (2000) 6 Supreme Court Cases 579,
the question was whether the transactions involved in manufacture and supply
of ships by the appellant to its customers were "sale" as defined in Section 2(n)
of the A.P. General Sales Tax Act, 1957 or a "works contract" as defined in
Section 2(1) thereof and hence, not exigible to sales tax as contended by the
appellant assessee. Thus, the dispute in the relied upon case was about
classification of the ship building activity between the two provisions of A. P.
General Sales Tax Act, 1957 and the same cannot be applied to the activity of
bunker supply carried out by the noticee by using barge that is covered by the
"port service". The decision of Hon. Supreme Court in the relied upon case of
Bharat Sanchar Nigam Ltd., 2006 (2) S.T.R. 161 (S.C.) was delivered in the facts
where the petitioners, who were telephone service providers pleaded that
providing mobile phone connection was a service & not sale and therefore, the
States cannot levy any tax on the same. It was their case that the transaction in
question was a service and the Union Government alone was competent to levy
tax thereon. Thus, none of the above decisions were rendered in the facts and
circumstances involving supply of bunker where neither any evidence regarding
the cost/value of bunker nor any evidence regarding payment of sales tax (VAT)
thereon has been placed on record to support the plea that the transaction
involved sale and therefore, these do not advance the cause of the noticee,
50.
It has also been further argued that the show cause notices wrongly
alleged that they have undertaken the activities on behalf of the port; that the
Rules framed by the port authorities to regulate trading activities has no
implication for the taxability of the transaction. They have further submitted
that the Port Trust has merely issued licence to them to cam- out trading
activities; that their activities under the licence of the Port Trust cannot be
described as activities carried out by a person authorized by the "port" because
these services were not supposed to be carried out by the port; that none of their
activities can be classified under the category of "port sen ice"; that the intention
of the legislature is to tax the services of the "port" only which are carried out by
the "port" itself or through its authorized person and not all services carried out
in the port; that the expression "person authorized by such port" should be
interpreted in the context of the expression of "port" which immediately precedes
V.ST/15-192/Adj/2011
OiO No. 23/COMMR/20 13
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 28 of 46
the former; that therefore, "person authorized by such port" means the person
who is authorized by the "port" for rendering the services which are otherwise
required to be provided by the "port" itself or through its authorized person and
not all services carried out in the port; that they were merely having the licence
to undertake commercial activities inside the port; that the licence does not
amount to authorization from the port to provide the services which were
supposed to be rendered by the port.
51.
They have further argued that the expression "in relation to" used in the
definition clause of "port service" is to be read as meaning direct and proximate
relationship with the subject matter. They have also argued that the scheme of
service tax uses the expression "in relation to" as synonymous with the
expression "on", which is borne out by the amendments to the provisions
relating to classification of taxable services; that it is not that every supporting
activity which is rendered by the person to some other person undertaken to
render a taxable service would become taxable. To buttress this point, they have
submitted that Finance (No. 2) Act,2004 had introduced 'construction service' as
a taxable service.
Finance Act,2005 introduced completion and finishing
services, which are nothing but part of the construction service, as separate
taxable service if rendered on stand alone basis; that construction service has
been renamed as 'Commercial or industrial service'; that these activities arc
segments of construction activity and therefore, there was no necessity for
introducing each of these component activities as separate taxable service. On
this basis, the noticee has argued that only the activities which arc required to
be performed by a port trust are taxed under this category; that the show cause
notice has not established that their activities answer the description of such
activities. They have also relied upon the decisions in Swastik Tobacco Factory,
(1966) 3 SCR 79: AIR 1966 SC 1100: (1966), Navin Chemicals Manufacturing &
Trading Co. Ltd., 1993 (68) ELT 3 (S.C.) and Jaypee Rewa Plant, 2003 (159) ELT
553 (Tri.-LB) in support of this argument.
52.
In this regard, I find that the noticee has themselves agreed with the fact
that they were issued licence by Kandla Port Trust for undertaking chandler's
operations. The service of bunker supply that is under consideration was
rendered by them in pursuance to this licence. As already discussed above,
Board, vide circular No. 6 7 / 16/2003-S.T., dated 10.1 1.2003 has clarified that
ship
chandling
services
are
rendered
in
relation
to
the
vessel
under
authorization from port authorities and hence, come within the ambit of "Port
service". This circular has nowhere been challenged by the noticee. Therefore,
the same would apply in the present case for the purpose of lew and collection
V.S'I715-192/Adj/201 1
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 29 of 46
of Service tax. The noticce has also argued that the Ship Chandling licence
issued to them by the port cannot be equated with authorization envisaged in
the statutory provisions of the Finance Act, 1994. This argument is untenable
considering that there is no dispute over the fact that the noticee has been
authorized to provide services and perform activities as a ship chandler within
the port area of Kandla port. Apart from this, I also find that Hon. Tribunal has
already negated a similar argument in the case of Western Agencies Pvt. Ltd. v/s
Commissioner of Service Tax, Chennai, 2008 (12) S.T.K 739 (Tri.-Chennai. The
other argument advanced by the noticee that services of the port are alone
covered under the taxable category of "port service" also stand rejected by Hon.
Tribunal in the decision of Hon. Tribunal in the ease of Western Agencies Pvt.
Ltd. v/s Commissioner of Service Tax, Chennai, 2008 (12) S.T.R. 739 (Tri.Chennai) and again by the Larger Bench of Hon. Tribunal in the case involving
the same assessee reported at 2011 (22) S.T.R. 305 (Tri.-LB).
53.
The findings of Hon. Tribunal in the case of Western Ageneies Pvt. Ltd.,
2008 (12) S.T.R. 739 (Tri. - Chennai) are reproduced below for ease of ready
reference:
"7.
We
have
carefully
considered
the
submissions.
In
Ho?na
Engineering case, the party was engaged in the activity of repairing,
chipping, cleaning and painting of the vessels of Coast Guard, Naval
Dock and ONGC within the territorial limits of a major port. During the
period 16-7-2001
awarded
by
to 30-9-2003,
their
customers.
they had undertaken these works
The
department
issued
a
SCN
demanduig service tax from the party on the total amount collected by
them from their customers (owners of the vessels), alleging thai the
above activities fell within the ambit of "port service" wider the
Finance Act, 1994. The notice relied on the Board's Circular No.
67/ 16/2003-ST dated 10-11-2003, wherein it was clarified that not
only minor repairs of ships by the ship chandlers but the repairs
carried out in dry dock were also taxable as "port services". The
demand of service tax raised in the notice was contested. When the
dispute ultimately came up before the Tribunal, the Revenue invoked
Section 35 of the Major Port Trusts Act to show that repairs and
overhauling of the vessels were functions which the Board of Trustees
could either perform themselves or authorize any other person to
perform. On this basis, it was argued that such activities were to be
treated as "port services". On the other hand, the assessee argued
that onlu those services which were specified under Section 42(1) of
the Act could be provided by the Board of Trustees bu themselves or
V.S1715-192/Adj/201 1
OiO No. 23/COMMR/2013
M / s . J a i s u Shipping Co. Pvt. Ltd.
Page 30 of 46
through an authorized person. Most of these services were in relation
to goods and a few services were in relation to vessels.
The
Departmental Representative referred to the latter category of services
mentioned under clause (e) of sub-section (1) of Section 42 of the Act,
reading
:
"piloting,
hauling,
mooring,
remooiing,
hooking,
or
measuring of vessels or any other service in respect of vessels". He
argued that the expression "any other service in respect of vessels"
was wide enough to cover the assessee's operations on the vessels.
On the other hand, the party's counsel argued that the expression
should be read ejusdem generis with the specific terms like piloting,
hauling, mooring etc. It was pointed out that piloting, hauling, mooring
etc. were activities directly connected with the entry or exit of the
vessel and, therefore, the expression "any other service" should also
be understood as indicating an activity directly connected with the
entry or exit of the vessel. The repairing and the other activities
carried out by the assessee on the vessels of their customers did. not
belong to this category and, therefore, the said activities were not
covered bu the services specified wider Section 42(1) of the Act to be
performed bu the Port or a person authorized bit it. Accordingly, it
was argued that the charges collected by the assessee from their
customers for repairing etc. of the vessels were not exigible to service
tax under the head, "port services". This argument was accepted by
the Tribunal, which also held that the clarification issued by the
CBEC in Circular No. 67/16/2003-S.T., dated 10-11-2003 was not in
accordance with the law.
8.
The view taken in Hoina Engineering case toas followed by
another coordinate Bench of the Tribunal in Velji case (supra),
wherein the question which arose for consideration was whether the
functions performed by a Customs House Agent within the limits of
the minor port of Pipavav [administered by Gujarat Pipavav Port Ltd.,
(GPPL, for short)] during the period July 2003 to January '05 were to
be classified as "port services" for the purpose of payment of service
tax. The CHA was holding a valid licence from the jurisdictional
Commissioner of Customs wider the provisions of the Customs House
Agents Licensing Regulations, 1984. They were also paying service
tax as a CHA after obtaining the requisite registration with the
department. Moreover, they also Yield a licence issued by GPPL for
hiring barges, cranes, forklifts etc. for stevedoring operations for their
clients in the port area. The department issued a SCN demanding
service tax from the party in respect of the charges collected by them
V.ST/15-192/Adj/2011
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 31 of 46
for the above services during the above period. The demand was
under the head,
"port service". Contesting the demand, the party
submitted that the services rendered by them to their clients in the
port area were not liable to be classified as "port services" as those
services were not required to be rendered bi\ M/s. GPPL themselves
under the Major Port Trusts Act. Then also submitted that then were
not authorized bu the Port to provide the above services. Whe?i the
dispute came up before the Tribunal, the party relied on Homa
Engineering (supra). Then also argued that the licence issued bu M/s.
GPPL for the aforesaid purposes was not to be construed as an
'authorization' under sub-section (3) of Section 42 of the Major Port
Trusts Act. All the arguments were accepted by the Bench with
reference to various provisions of the Major Port Trusts Act and it was
held, that the functions performed by the CHA in Pipavav port, were
not "port services" defined under Section 65(82} of the Finance Act,
1994. Accordingly, the demand of service tax was sei aside.
9
10
11.
Reverting to Velji case, we find that the services ui question
were rendered by the party within the limits of the port of Pipavav, a
minor port in the State of Gujarat, governed by the provisions of the
Indian Ports Act, 1908 (Act No. 15 of 1908). The provisions of the
Major Port Trusts Act, 1963 (Act No. 38 of 1963) are not applicable to
the port of Pipavav. In clause (82) of Section 65 of the Finance Act,
1994 ["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 underlined words were
inserted w.e.f. 14-5-2003 by the Finance Act, 2003. The expression
'otherport' was defined thus : "otherport" has the meaning assigned
to "port" in clause (4) of Section 3 of the Indiaji Ports Act, 1908 (15 of
1908), but does not include the "port" defined in clause (81)". This
definition was incorporated under Section 65 of the Finance Act, 1994
w.e.f
14-5-2003. The period of dispute in Velji's case commenced
after 14-5-2003 and, therefore, the question whether the party had
rendered, at Pipavav, "port services" as defined under Section 65(82)
of the Finance Act, 1994 during the period of dispute ought not to
have been examined with reference to any thing contained in the
Major Port Trusts Act. If necessary, only the relevant provisions of the
Indian Ports Act, 1908 were to be invoked. With great respect to the
Bench which dealt with Velji case, we find that the decision in that
V.ST/15-192/Adj/201 1
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 32 of 46
case was rendered with reference to various provisions of the Major
Port Trusts Act, which were not applicable at all. Further, the view
taken in that case to the effect that the licence issued by the Port was
not recognizable as authorization for purposes of Section 42 of the
above Act also does not appear to be correct. We note that, in the case
of Konkan
Marine
Agencies
(supra),
the
Bencli
accepted
the
appellants' plea that the stevedoring licence issued to them by the
Mangalore Port Trust was a permission to widertake stevedoring
operations within the port premises. In the instant cases also, the
assessees were utidertaking stevedoring and allied operations within
the respective port areas on the strength of licences issued by the Port
authorities, and they have no case that then had been undertaking
the said operations unauthorizedlu. Then can only be held to have
been
authorized
by
the
Port
authorities
to
undertake
such
operations/services. In Velji case, the party did not plead that their
operations in the port area were unauthorized, nor was anything
found to this effect by the Bench. For all these reasons, we do not
think that the decision in Velji case or any of the subsequent
decisions, which followed the ratio decidendi of Velji, is a good
precedent for the present batch of appeals.
12.
The Id. counsel for the assessees have exhaustively referred to
various provisions of the Major Port Trusts Act,
1963 and the
provisions
of Stevedores)
of the
Madras
Port
Trust
(Licensing
Regulations, 1987 as also to the rates prescribed by TAMP in their bid
to restrict the scope of "port services" under Section 65(82) of the
Finance Act, 1994 to stevedoring. However, the fact is that some of
the assessees have since started paying service tax on the ancillary
services by classifying these services as "port services" under Section
65(82) ibid, purportedly
"for avoiding future litigation" with the
Revenue. It goes without saying that a payment of service tax for
avoiding litigation with the Revenue is a voluntary payment. In other
words, in the case of most of the assessees, the liability to pay
service tax under the head "port services" in respect of operations
(such as intercarting and storage of goods in port area) ancillary to
stevedoring (loading of cargo into vessels, unloading of cargo from
vessels
and
transshipment
of cargo
within
port
area)
stands
conceded for subsequent periods.
13.
Since 14-5-2003,
the law of service tax as regards "port
services" does not discrirninate between major and minor ports. A
major port is one defined under Section 2(q) of the Major Port Trusts
V.ST/15-192/Adj/2011
OiO No. 23/COMMR/2013
M / s . J a i s u Shipping Co. PvL. Ltd.
Page 33 of 46
Act, 1963 and the same is covered by the expression 'port' occurring
in the definition of "port service" under Section 65(82) of the Finance
Act, 1994. A minor port is one defined under Section 3(4) of the Indian
Ports Act, 1908 and the same is covered by the expressioji 'otherport'
occurring in the definition of "port service" under Section 65(82) ibid. It
appears to us that, as rightly submitted bu the Id. Sr. Consultant for
the Revenue, one need not look into other provisions of the Major Port
Trusts Act or the Indian Ports Act for the purpose of interpreting the
definition of "port services" given under the Finance Act, 1994. The Id.
counsel have argued that only those services specified under Section
42(1) of the Major Port Trusts Act can, if provided by the Port or by a
person authorized by the Port, be charged to service tax as "port
services".
We have not found any corresponding provision in the
Indian Ports Act specifying services to be provided by a minor port or
a person authorized by such Port. (Section 35 of the India?i Ports Act,
which provides for charging of fees by a minor port for pilotage,
hauling, mooring, remooring, hooking, measuring and other services
rendered to vessels, however, seems to indicate that a minor port can
get these operations undertaken by a licensee or authorized person)
Would it mean that, in respect of minor ports - our country has as
many as 187 minor ports (as per the records oj the Ministry of
Shipping, Gout, of India) as against only 12 major ports - in this
country, no activity/operation (including stevedoring) is liable to be
exigible to service tax under the head "port services" defined under
Section 65(82) ibid? Certainly, the law of service tax cannot, be
expected to have envisaged such an anomalous situation. It is a
cardinal principle of statutory interpretation that, wfien the language
of a statute is capable of two interpretations, one of which is
reasonable and the other wireasonable, the court should hold that the
former must prevail.
The definition of "port service" given under
Section 65(82) of the Finance Act, 1994 is referable to both major and
minor ports, not by reason of identity of service but by reason of
identity of port. While the Major Port Trusts Act specifies certain
services to be provided by the Board of Trustees of the Port or by a
person authorized by them, the Indian Ports Act does not so specify.
Therefore, if the meaning of "port services" defined under Section
65(82) ibid is gathered from the former Act, it is bound to lead to
absurd results for minor ports. An interpretation leadi?ig to such
results is unreasonable and cannot be resorted to. Therefore, in our
view, it would be prudent to hold that the scope and ambit of "port
V.ST/15-192/Adj/2()ll
services"
should
OiONo. 23/COMMR/2013
M / s . J a i s u Shipping Co. Pvt. Ltd.
Page 34 of 46
defined
be
under
Section
65(82}
of the
out
without
reference
to
found
Section 42(1) of the Major Port Trusts Act,
Finance
anything
Act,
1994
contained
in
1963. Broadly speaking, it
would appear that all services otherwise taxable would qualify to be
"port services" when rendered within the territorial limits of a
"port"
or "other port". The view taken approximately to this effect in CBEC's
Letter No.
"14.
Bl 1/ 1/2002-TRU dated
1-8-2002 is plausible.
"Port service" means any service rendered by a port or other
port or anu person authorized by such port or other port,
in any
manner, in relation to a vessel or goods. None of the assessees before
us has pleaded that they undertook stevedoring and allied operations
in port premises unauthorizedly. It is not open to them to plead so.
They would admit that all their operations in port area
were duly
authorized,
stevedoring
for
which
they
have
licences to draw support from.
and
responsibilities
Regulations,
and
the
operations
of a
other
than
Under these licences read with "duties
stevedore"
assessees
ancillary
nothing
were
thereto
laid
down
under
to
undertake
authorized
in
the
the port premises.
relevant
stevedoring
This satisfies
the requirement that "port service" may be rendered by a person only
if authorized
by
a
major or minor port.
The
expression
"in
any
manner" used in the definition of "port service" under Sectio?i 65(82)
of the Finance Act,
1994 appears, in our view, to be indicative of the
wide coverage of taxable services.
that
any
service
otherwise
We have already
taxable
will
be
taken
a port
the
service
view
when
rendered within the limits of a port by the Port or a person authorized
by it."
15.
We realize that we have taken a view contrary to the one taken
by coordinate Benches in Homa Engineering,
Judicial discipline
requires
that the issue
by a Larger Bench... Accordingly,
Velji,
and other cases.
be considered
and settled
we direct the Registry to place the
records before the Hon'ble President to constitute a Larger Bench to
consider and decide upon
(a)
the following issues:-
Whether any provisions (other than clause (qj of Section (2) of
the Major Port Trusts Act,
1963 or any provisions (other than
clause (4) of Section (3) of the Indian Ports Act,
applicable
to
interpretation
of
Section 65(82) of the Finance Act,
(b)
..
(c)
-."
"port
service''
1908
defined
1994;
(Underline supplied}
are
under
V.S'1715-192/Adj/2011
OiONo. :3/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 35 of 46
7.20 The Larger Bench of Hon. Tribunal, in its decision reported at 2011 (22)
STR 305 (Tri-LB) decided the above reference as under:
"9.1
pre
All the matters before the referring Bench for answer related to
2010
amendment years.
Economy
has
already
experienced
incidence of service tax for more than a decade. Taxable event under
Finance Act, 1994 is the rendition of service and service tax is levied
on activity/service rendered by the service provider to its customer.
According to law in force prior to 2010 any service provided to any
person, by a "port" or any person authorised by the port, in relation to
goods or vessels in any manner became taxable with effect from 16-72001 enacting Section 65(72)(zn) to the 1994 Act. For such purpose,
the terms "port" and "port services" were defined by that Act. Section
65(51) of the Act defined the term "Port services", to mean any
services rendered by a port or any person authorised by the port, in
any manner, in relation to vessel or goods. Section 65 (50) of the 1994
Act defined the term "port" to mean the same as that has been
assigned to such term in clause (a) of Section 2 of the 1963 Act (38 of
1963). Except to this extent, the 1994 Act has not sought aid of the
1963 Act no adoption or reference to any other provisions of that Act
for levy of service tax.
9.2
While at the initial stage, "port services" provided by a Major
port or any person authorised by that port became taxable,
the
services provided by "other ports" were brought to tax net with effect
from
14-5-2003
by
Finance Act,
2003.
The
taxing
entry
u/s
65(105)(zn) under the 1994 Act underwent amendment to give effect
to such proposal. Meaning of the term "other port" was provided, by
Section 65(76) of the 1994 Act to mean the same as that has been
assigned to "port" in clause (4) of Section 3 of the 1908 Act but not to
mean the port defined in clause (80) of the said Act. The 1994 Act to
this limited extent of meaning of "other port" sought assistance of the
1908 Act. Consequently, after 14-5-2003 the "ports service" provided
to any person by a "port" or "other port" or any person authorised by
such port or other port in relation to vessels or goods became taxable
in terms of Section 65(105)(zn) of the 1994 Act.
9.3
For the purpose of knowing what "port" is, tiie meaning of that
term from the 1963 Act was adopted by the 1994 Act to rule out any
other concern to be port. The taxing provisions of the 1994 Act provide
a self contained code to levy service tax. Nature of activitu of each
case
decides
taxability.
What
precisely
is
"port
service"
is
exhaustively and restrictively defined by the term "port services"
V.ST/15-I92/Adj/201 1
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 36 of 46
under the 1994 Act. Port services are intended by legislature to be in
relation to vessel or goods provided "in any manner" either by the
port or other port or "any person authorised" bu such port or other
port. That left no ambiguitu under the 1994 Act to draw conclusion
what that is port service means when anu service provided bu a port
or other port or any authorised person is in relation to vessel or goods.
Services touching these two objects are safely classifiable as port
service. This is the onlu rule of classification of such service. The
provisions of 1963 Act or the 1908 Act do not prevail over taxation
under the 1994 Act in absence of legislative mandate except the
definition of the term "port" or "other port" as defined by those two
Acts for the purpose of levy of service tax. Purpose of 1994 Act being
clear and that is for taxation of taxable services provided by a "port"
or "otherport" or persons authorised, "in relation to vessel or goods" it
is not required to borrow any other provision from the law dealing
with port administration.
9.4
Pleading of the assessees was that the provisions of the 1963
Act and the 1908 Act govern the 1994 Act, to determine what port
service means. Reading of the provisions relating to taxing entru on
the subject of "port service" under Section 65{105)(zn) of the 1994 Act
do not throw light as to such dependency. Accordingly, such a
proposition is not tenable ..
9.5
The 1994 Act, is a piece of fiscal legislation serving its
purpose of gathering Revenue for union. While the 1963 Act and the
1908 Act are enacted to set up ports and administer such ports, the
1994 Act, is a self contained code and has made provisions to
prescribe incidence of service tax on any service provided by a port or
other port or persons authorised by such port while such service
relate to vessels or goods. A clear mandate of 1994 Act no way
disturbs to understand the object of gathering Revenue, using the
words "any service" provided by a port or other port.
Thus by
necessary implication nothing can be gathered from any of the port
laws except to the extent of adoption to mean the term ''port" or "other
port" from the 1953 Act or 1908 Act as the case may be. Service
provided by port relating to vessel or goods submit for classification
under the category of "port service" for levu of service tax. ... The
exhaustive definition of the term "port service" limits the scope to take
assistance of either 1963 Act or 1908 Act except to the extent
expressly permitted bu the 1994 Act.
9.6
V.ST/15-192/Adj/2011
9.7
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt., Ltd.
Page 37 of 46
.... The precise, restrictive and exhaustive definition of the term
"Port services" did not intend to borrow meaning of the said term from
any
other legislation for the obvious
reason
that
there
is
no
intendment or equity about tax. Thus :
(i)
"Any" service provided by a "port" or "other port" became
taxable as port service;
(ii)
Port service provided m any manner and even by "any person
authorised" by a port or other port came to purview of taxation;
and
(Hi)
The port service provided in relation to vessels or goods is
subject matter of taxation.
9.8
It may be stated that the object of interpretation of a statute is to
discover the intention of the Parliament as expressed, in the Act. The
dominant purpose in construing a statute is to ascertain the intention
of the legislature as expressed in the statute, considering it as a
whole and in its context. That intefition, and therefore the meaning of
the statute, is primarily to be sought in the words used-in the statute
itself which must, if they are plain and unambiguous, be applied as
they stand. Legislature exercised wide latitude not only to prescribe
varied range of services provided by a port or other port or authorised
persons to be taxable wider the class of "port service", so also
intended that what that can be done directly can, also be done
indirectly recognising "authorized persons" achieve the object of a
port or other port. However, the service so prescribed to be taxed shall
necessarily relate
to
vessels
or goods.
For the restrictive and
exhaustive meaning of the term "port services" envisaged by the 1994
Act, express statutory grant has taken withi?i its fold all that is
required to do, so as to make that grant effective. Definition of the
term "port service" by necessary implication did not leave scope to
seek aid of Section. 65A of the 1994 Act for classification of varied
range of services provided by a port or other port to submit to different
classes.
9.9
The phrase "in relation to" has been construed by Apex Court to
be of the widest amplitude. In M/s. Doypack Systems Pvt. Ltd. v.
Union of India and Others, (1988) 2 SCC 299 at 302 = 1988 (36)
E. L. T. 201 (S.C.), Hon'ble Court observed as under :
"The expressions 'pertaining to', 'in relation to' and 'arising out of,
used in the deeming provision, are used in the expansive sense. The
expression
'arising out of has been used in the se?ise that it
comprises purchase of shares and lands from income arising out of
V.ST/15-192/Adj72011
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 38 of 46
the Kanpur Undertaking. The words "pertaining to" and "in relation
to"
have
the
same
interchangeably for
wide
among
meaning
other
and
reasons,
have
which
been
may
used
include
avoidance of repetition of the same phrase in the same clause or
sentence, a method followed in good drafting. The word 'pertain' is
synonymous with the word 'relate'. The term 'relate' is also defined
as
meaning to bring
into
association
or connection
with.
The
expression 'in relation to' (so also 'pertaining to'), is a very broad
expression
words
which presupposes
of comprehensiveness
another subject
which
might
matter.
have
These
both
a
are
direct
significance as well as an indirect significance depending on the
context."
[Emphasis
9.10
supplied]
In Renusagar Power Co. Ltd. v. General Electric Company and
Another, (1984) 4 SCC 679, Hon'ble Court observed as under:
"Expressions such as "arising out of' or "in respect of or "in
connection with'' or "in relation to" or "in consequence of or
"concerning" or "relating to" the contract are of the widest amplitude
and content and include even questions as to the existence validity
and effect (scope) of the arbitration agreement."
[Emphasis supplied]
9.11
It is well settled that in matters of taxation laws, the court
permits greater latitude to pick and chose objects and rates for
taxation and has a wide discretion with regard there to. Reference
may be made to the decision of Mafatlal Industries Ltd. and Others v.
Union of India and Others, (1997) 5 SCC 536 = 1997 (S9)^LT 247
(S.C.). In para 343 at page 740, Hon'ble Supreme Court held as under
"....In the matter of taxation laws, the court permits a great latitude to
the discretion of the legislature. The State is allowed to pick and
choose
districts,
objects,
persons,
methods
and
even
rates for
taxation, if it does so reasonably. The courts view the laws relating to
economic activities with greater latitude than other matters."
[Emphasis supplied]
9.12
Learned Sr. Counsels' proposition was that provisions of 1963
Act and the 1908 Act are to apply to interpret the provisions of 1994
Act is inconceivable because 1994 Act serves different purpose than
the Port Trust Law. ..
9.13
Shri Dattar relied on the judgment In Rec (Minor) (1993) 3 WLR
249 to submit that meaning of the term "Port. Services" can be
V.ST/15-192/Adj/2()i 1
OK) No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 39 of 46
gathered from the 1963 Act and 1908 Act. So also, pleading was
when different terms used in the 1994 Act have been borrowed from
different statutes, question (a) needs to be answered in favour of the
assessee. This is inconvi?icible when the text and context of the
statutes are noticeably different...
9.14
....
9.15
....When the provisions of law are unambiguous and if from, the
provisions the legislative intend is clear, that does not call for aid of
the other rules of construction. The other rules of constructions are
invoked when the legislative intend is not clear.
interpretation
laid
down
by Apex
Court
in
Bihta
Such rule of
Co-operative
Developments and Cane Marketing Union Ltd. v. Bank of Bihar - AIR
1967 (S.C.) 389 has been given salutaiy effect by this order. So also
to understand the meaning of the essential element "in relation to"
used in the taxing provision under the 1994 Act, guidance is available
from the Apex Court decision in Doypak Systems Pvt. Ltd. v. Union of
India and Others, (1988) 2 SSC 299 = 1988 (36) E.L.T. 201 (S.C)."
54.
By relying on the findings of Hon. Tribunal in the case of Western
Agencies Pvt. Ltd., reported at 2008 (12) S.T.R. 739 (Tri. - Chcnnai) and 2011
(22) S.T.R. 305 (Tri. - LB) reproduced above, I reject the arguments advanced by
the noticee for opposing the demand of Service tax on bunker supply charges in
relation to the vessels during the period covered by the show cause notice.
55.
1 have also gone through the other decisions cited by the noticee. The
decision in the case of Swastik Tobacco Factory, (1966) 3 SCR 79: AIR 1966 SC
1100: (1966) was rendered by Hon. Supreme Court in the case involving Section
5(l)(i) of the Madras General Sales Tax (Turnover and Assessment)Rulcs,1939.
However, I find that this judgment deals with the expression "in respect of in
Rule 5(l)(i) of the Madras General Sales Tax Rules, 1939 and it has been held
therein that the expression "in respect of the goods" means only "on the goods".
The decision in Navin Chemicals Manufacturing & Trading Co. Ltd., 1993 (68)
ELT 3 (S.C.) was rendered over the meaning of phrase "relation to" in the context
of Section 129C of the Customs Act, 1962. The decision in the case of Jaypec
Rewa Plant, 2003 (159) ELT 553 (Tri.-LB) was rendered in the context whether
welding electrodes and gases used in or in relation to the final product can be
treated as "inputs" within the meaning assigned to the term under Rule 57AA of
Central Excise Rules, 1944. Thus, none of the decisions were rendered in the
facts and circumstances involving dispute over levy of service tax on port
V.S'IV 15-192/Adj/2011
Oi() No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 40 of 46
services under Finance Act, 1994. Therefore, they are not applicable to the
present case.
56.
I further find that after the change in definition of "Port Services" and
related definition of taxable service after 01.07.2010, the clause relating to
authorisation by port is removed and therefore, the plea of the noticec that
licence cannot be compared with authorization is void after 01.07.2010.
57.
I shall now deal with the demand of Service tax amounting to Rs.
1,31,41,135/- pertaining to hire charges paid by the noticee to foreign firms,
who had no office in India and who had supplied dredgers/equipments to the
noticee on hire basis for a fixed period.
58.
The noticee has challenged the demand on the ground that the show
cause notice has failed to establish that the vessels were supplied without
handing over possession and conferring effective control; that therefore, hiring of
such vessels is not classifiable under the category of transfer of "supply of
tangible goods" service; that under the law, it is not permissible to adopt any
commercial or general meaning when it is specifically defined under the statute.
In this regard, they have cited the decisions in N. Dotivala v / s P. M. Wadhwani,
(2003) 1 SCC 433 and Kcsoram Industries & Cotton Mills Ltd. v/s CWT 1966
(59) ITR 767 (SC). They have further submitted that this service envisaged
supply of tangible goods without transferring of right of possession. The taxable
service category "Supply of tangible goods for use" has a negative condition that
it should not involve transfer of right of possession and effective control of the
equipment. Hon. Mumbai High Court, in the case of Indian National Shipowners'
Association v/s UOI, 2009 (14) STR 289 (Bom.) has interpreted the scope of this
taxable category and held that the services covered by entry (zzzzj) can be
identified by the presence of two characteristics, namely, (a) supply of tangible
goods including machinery, equipment and appliances for use, (b) there is no
transfer of right of possession and effective control of such machinery',
equipment and appliances. They also cited dictionary' meanings of the words
"supply", "possession" and "control" given in Shorter Oxford English Dictionary',
Judicial dictionary - 13 th edition - K. J. Aiyar - Butterworth and Black's
Law Dictionary - 8 th edition. They have further submitted that the show cause
notice failed to consider the terms of time charter part}' through which the
dredging vessels were hired by them; that they were having the rightful
possession and effective control over the dredging vessel during the term of the
charter party; that the contract allowed them to sub-let the vessel; that this
cannot happen without any rightful possession; that charter party stated that
V.S'IV15-192/Adj/201 i
Oi() No. 23/COMMR'2UI3
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 41 of 46
during the contract period, the Captain, though appointed by the owners, shall
be under the orders and directions of the charterers, as regards employment
and agency, which gave effective control to the charterers over the vessel; that
they had got the right of possession and effective control from the owners; that
therefore, this arrangement does not answer the description of taxable service
called "Supply of tangible goods for use". Hence, no Service tax was payable by
them under the category "Supply of tangible goods for use"'.
59.
I have carefully examined the various arguments advanced by the noticcc.
They have mainly harped upon the decision of Hon. High Court of Mumbai in
the case of Indian National Shipowner's Association v/s UOI, 2009 (14) S.T.R.
289 (Bom.), dictionary meanings of the words "supply", "possession" and
"control" and a sample charter party agreement to argue that hiring of dredgers
by them from foreign companies is not taxable under the import of "Supply of
tangible goods for use" service falling under Section 65l 105)(zzzzj) of Finance
Act, 1994 read with the provisions of Rule 2(d)(l)(iv) of the Service Tax
Rules, 1994, Taxation of Services (Provided from Outside India and Received in
India) Rules, 2006 and Section 66A of the Finance Act, 1944. In this regard, I
find that the decision in the case of Indian National Shipowners' Association
supra was to the effect that introduction of new entry and inclusion of certain
services in that entry presupposes that there was no earlier entry covering such
services. Further, this decision was delivered over a dispute regarding scope of
entry 65 (105) (zzzy) inserted in Section 65(105) of the Finance Act, 1994 and
was not in the context of the intricacies involved in the interpretation of Section
65(105)(zzzzj). Further, in paragraph 37 of the said judgment, relied upon by the
noticee, it is noticed that Hon. High Court did not have the opportunity to
examine the applicability of the provisions of Section 65(1 05)(zzzzj) in the facts
and circumstances peculiar to this case which are discussed hereinafter. In view
of this, reliance placed by the noticee on the above decision of Hon. High Court
is misplaced and is of no avail.
60.
It is further observed that there is no further evidence made available by
the noticee on the basis of which the extracts of the sample charter party
agreement can be correlated with the various occasions on which they had hired
the dredgers from the foreign companies during the period under consideration
and therefore, reliance placed by the noticee on the extracts of the sample
charter party agreement does not advance their cause.
61.
I find that as per Section 65(105)(zzzzj) of the Finance Act,1994, taxable
service means any service provided or to be provided to am person, by any other
V.ST/15-192/Adj/2OI1
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvl. Ltd.
Page 42 of 46
person in relation to supply of tangible goods, including machinery, equipment
and appliances, for use, without transferring right of possession and effecting
control of such machinery, equipment and appliances. Under the Taxation of
Services (Provided from Outside India and Received in India) Rules, 2006, the
supply of tangible goods service will be 'service provided from outside India and
received in India', if service is received by a recipient located in India for use in
relation to business or commerce. As per second proviso to Rule 3(iii) of Import
of Service Rules, inserted w.e.f. 16.5.2008, when service is provided to a
recipient located in India, service will be 'import' only if the tangible goods are
located in India.
62.
I further find that the Central Board of Excise & Excise has issued the
following clarification in the form of M.F. (D.R.) Letter D.O.F. No. 3 3 4 / 1 / 2 0 0 8 TRU, dated 29-2-2008 regarding the scope and ambit of the levy of Service tax
on "Supply of tangible goods for use" service:
"4.4
Supply of tangible goods for use:
4.4.1
Transfer of the right to use any goods is leviable to sales tax
/VAT as deemed sale of goods [Article 366(29A)(d) of the Constitution
of India]. Transfer of right to use involves transfer of both possession
and control of the goods to the user of the goods.
4.4.2
Excavators,
wheel loaders,
dump trucks,
crawler carriers,
compaction equipment, cranes, etc., offshore construction vessels &
barges, geo-technical vessels, tug and barge flotillas, rigs and high
value machineries are supplied for use,
possession
and effective control.
with no legal right of
Transaction
of allowing
another
person to use the goods, without giving legal right of possession and
effective control, not being treated as sale of goods, is treated as
service.
4.4.3
Proposal is to levy service tax on such services provided in
relation to supply of tangible goods, including machinery, equipment
and appliances, for use, with no legal right of possession or effective
control. Supply of tangible goods for use and leviable to VAT/sales
tax as deemed sale of goods, is not covered under the scope of the
proposed
service.
Whether
a
transaction
involves
transfer
of
possession and control is a question of facts and is to be decided
based on the terms of the contract and other material jacts. This could
be ascertainable from the fact whether or not VAT is payable or paid.
V.ST/15-192/Adj/2011
63.
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 43 of 46
It is clear from the above clarification that the proposal to levy Service tax
is on such services which are provided in relation to supply of tangible goods, for
use, with no legal right of possession or effective control. It is clarified in the
opening paragraph that transfer of right to use any goods is leviable to sales
tax/VAT as deemed sale of goods and further, transfer of right to use involves
transfer of both possession and control of the goods to the user of the goods. In
paragraph reproduced above, it is clarified that transaction of allowing another
person to use the goods, without giving legal right of possession and effective
control is not treated as sale of goods and the same is treated as service. Thus,
although a very thin line separates sale from service, the significance of the
words "supply of tangible goods...for use" appearing in the definition of taxable
service can neither be lost sight of nor ignored in the context of the present case.
The noticec has not produced any specific contract between the owner and
themselves laying down the terms and conditions governing the use of the
dredgers hired by them from the foreign companies. Therefore, merely because
they used the tangible goods that were supplied to them by the foreign
companies and paid fixed rental to the foreign companies cannot mean that
right of possession and effective control over such tangible goods was also
transferred. If the tangible goods have been supplied for use, as are the facts of
the case under consideration, it is a service, as clarified in paragraph 4.4.3 of
the Board's clarification reproduced above. The very fact that words "supply for
use", "legal right of possession" and "effective control" have been distinctly
employed in the criteria for determining whether the transaction involved is
deemed sale or service makes it clear that mere supply for use does not
tantamount to transfer of legal right of possession and effective control.
Therefore, applying the Board's circular to the facts involving in this case, I hold
that the noticee is liable to pay Service tax on the amount paid by them for
hiring dredgers from the foreign companies.
Further Section 2 (d) of Finance Act, 1994 defines the "person liable for
paying the service tax" means
1. (i) in relation to ....
2.
(ii)
3. (iii)
4. (iv) in relation to any taxable service provided or to be provided by any
person from a country other than India and received by any person in
India under section 66A of the Act, the recipient of such service;]
5. (v) in relation to taxable service provided by a goods transport agency,
where the consignor or consignee of goods is, 6. (a) any factory registered under or governed by the Factories Act, 1948
(63 of ~1948)
7. (b) any company formed or registered under the Companies Act, 1956 (1
of 1956}
8. (c) any corporation established by or under any law;
9. (d) any society registered
V.ST/15-I92/Adj/2O1I
OiO No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 44 of 46
10. (e) any co-operative
As discussed above, the noticee has received services from a country other
than India. Therefore, I find that he is the person liable for pay service under the
category of (iv) of Section 2(d) of Finance Act, 1994.
64.
With regard to interest, I find that as per Section 75 of the Act, every
person who is liable to pay the service tax and who fails to credit the tax or any
part thereof within the prescribed period, shall pay simple interest at the rates
prescribed by Central Government from time to time for the period involved in
delayed payment thereof. As already held in the foregoing paragraphs, the
noticee has clearly failed to make payment of Service tax on the taxable services
covered by show cause notices under consideration. Applying the provisions of
Section 75 of the Act, I find that noticee cannot escape from the liability to pay
interest on this unpaid service tax amount.
65.
Section 76 prescribes penalty for failure to pay the service tax in
accordance with the provisions of Section 68 or the rules made under Chapter V
of Finance Act, 1994. This penalty is over and above the amount of Service tax
due and interest payable thereon. As Section 76 of the Act very" explicitly
provides, any person liable to pay Service tax in accordance with the provisions
of Section 68 of the Finance Act, 1994 read with rules made under Chapter V of
the said Act, who fails to pay such tax, shall pay, in addition to such tax and the
interest on that tax amount in accordance with the provisions of Section 75 of
the said Act, a penalty of an amount at the rate as specified in the said Section
76. The use of the words, "who fails to pay such tax, shall pay, in addition to
such...a penalty which shall not be less than two hundred rupees every day
during which such failure continues..." in Section 76, ibid indicates that it is an
in-built provision in the statute itself for payment of penalt}' at a specified scale
for every day of delay, in addition to the tax and interest lc\iable thereon under
Section 75 of the Finance Act, 1994. The words "shall pay" as used in Section 76
of the Finance Act, 1994 in regard to penalty on account of non-payment of tax
within the stipulated time indicate that the penalty thereunder has to be paid
mandatorily by the tax defaulter if other requirement under the said provision
are met in any particular case.
66.
I find that in the show cause notice, penalty is also proposed under
Section 77 of Finance Act, 1994 for failure on the part of the noticee to get
themselves registered under the taxable categories of "port service" and "Supply
of tangible goods for use" service within stipulated time limit in accordance with
the provisions of Section 69 of the Act read with Rule 4 of the Service Tax Rules,
V.ST-'15-192/Adj/20] 1
1994.
Oi() No. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
Page 45 of 46
I find that even though the noticee took registration for providing the
services covered by "Dredging Service", they also provided taxable services in the
nature of "port service" and "Supply of tangible goods for use" service without
taking registration for these services although being a duly registered assessec,
they were aware of the requirement to take registration within thirty days from
the date o[ commencement of business in each and every category. Thus, I find
that the noticee have contravened the provisions of Rule 4 of Service Tax Rules,
1994 and therefore, the noticee arc liable for penalty under Section 77 of the
Finance Act, 1994.
67.
In view of the above discussion and findings, I pass the following order:
ORDER
(i)
I order classification of services rendered by the noticee for supply of
bunkers under "port services" as defined under section 65(82) of the
Finance Act, 1994 and covered as taxable service under section
65(105)(zzl) of the Finance Act, 1994.
(ii)
I confirm the demand of service tax Rs. 35,83,180/- (Rupees thirty five
lac eighty three thousand one hundred eighty only) on the noticee on
account of "port services", provided during April-2010 to March-201 1,
under section 73 of the Finance Act, 1994.
(iii)
The services received by the noticee in India for which expenses were
made in foreign currency is classified under "supply of tangible goods
service" under 65(105)(zzzzj) of the Finance Act, 1994, read with
section 66A of the Finance Act, 1994 and rule 2(l)fd)(iv) of the Service
Tax Rules, 1994.
(iv)
I confirm the demand of service tax Rs. 1,31,41,135/- (Rupees one
crore thirty one lac forty one thousand one hundred thirty five only) on
the noticee on account of "supply of tangible goods service", received
from April - 2010 to March - 2011, under section 73 of the Finance
Act, 1994.
(v)
The amount of service tax confirmed at (ii) and (iv) above is ordered to
be paid alongwith interest, as due and payable under section 75 of the
Finance Act, 1994.
V.ST/I5-192/Adj/2011
(vi)
OiONo. 23/COMMR/2013
M/s. Jaisu Shipping Co. Pvt. Ltd.
I impose penalty on the noticce under section 76 of the Finance Act,
1994 at the rate of 2% of such Service Tax, per month, starting with
the first day after the due date till the date of actual payment of the
said outstanding amount of Service Tax due and confirmed for the
period from 01.04.2010 to 31.03.2011, provided that the total amount
of penalty payable shall not exceed the Service Tax due and confirmed
above.
(vii)
I impose penalty of Rs. 10,000/- (Rupees ten thousand only) on the
noticce, under section 77 of the Finance Act, 1994.
(V. PadmanabhanJ^-——~
Commissioner
Central Excise & Customs
Rajkot
F. No. V.ST/15-192/Adj/2011
Date:- 26.02.2013
By Rcgd Post/Hand Delivery
To
Jaisu Shipping Co P Ltd,
8, Sindhu Co-op Housiang Society Ltd.,
Adipur,
Ta: Gandhidham.
Copy to:
1. The Chief Commissioner, Central Excise, Ahmedabad
2.
The Deputy/Assistant Commissioner, RRA/Legal/Recovery, Hq., Rajkot
3. The Assistant Commissioner, Service Tax Division, Rajkot.
4.
The Superintendent of Service Tax, Service Tax Range;, Gandhidham.
5.
Guard File