Customs, Excise and Gold Tribunal - Ahmedabad
Gujarat Chem. Port Terminal Co. Ltd. vs C.C.E. And C. on 22 November, 2007
Equivalent citations: 2008[9]S.T.R.386
ORDER M.V. Ravindran, Member (J)
1. This appeal is directed against the order-in-appeal dated 29-7-2004 which upheld the order-in-original that confirmed the demand and also imposed penalties on the appellants.
2. The relevant facts that arise for consideration are that the appellant is registered as minor port and is rendering the port services. On the basis of some intelligence officers of Central Excise and Service Tax visited the premises of the appellant and after investigation came to the conclusion that during the period 16th August 2002 to 30th June 2003, appellant had rendered services falling under the category "Storage and Warehousing Services" and are liable to pay service tax on the said services. A show cause notice was issued to the appellant demanding the service tax and also proposing for imposition of penalty on them. Appellant contested the said show cause notice on the ground that they are registered as a minor port with the authorities and as such are providers of the port services and are not rendering any services of storage and warehouse. The said contentions were not accepted by the adjudicating authority and the demand of service tax was confirmed and penalties were imposed. On an appeal the learned Commissioner (Appeals) concurred with the findings of the adjudicating authority. The appellants being aggrieved by such order are in appeal.
The learned advocate appearing for the appellant submits that the impugned order is not correct. It is his submission that the services provided by the appellant in this case will not fall under the category of Storage and warehousing services for the reason that the appellant is registered as minor port and started operation in the month of January 2001. It is the submission that the appellant has always projected themselves as minor port and the incidental storing and warehousing of the imported goods and/or goods to be exported are connected with the activity of the port services rendered by them. It is his submission that the clarification dated 1st August 2002 issued by the Department of Revenue would also indicate that the storage and warehousing facility of the ports will be covered in the category of Port services and not under storage and warehousing services. It is also his submission that since the port services provided by the minor ports came in to the service tax net from 1st July 2003, the services tax liability to the period earlier under any other category would not arise. It is also his submission that the tax liability in this case has also been worked out the amounts that were not received by them from their customers. It is his submission that the appellant as per contractual obligation issued invoices to the promoters of the appellant's port for non-fulfilment of committed tonnage but the appellant did not receive the amounts so billed and hence the tax liability on such amount is not-sustainable. It was also submitted that the show cause notice is time barred in as much that the appellant had intimated the department that they are providing the storage facility to the importer and exporters for the usage of their ports on 18th March 2002 itself and the lower authorities have not considered the said submissions in proper perspective. It was also submitted that, the service tax liability is worked out wrongly in as much that the tax is charged on the entire amount of the bill while the billed amount should have been considered as inclusive of service tax, if any.
3. Learned SDR on the other hand would submit that the appellant had in fact rendered the services of storage and warehousing as the invoices issued indicate that they are charging rental charges for the storage of the goods in the facility. It is also his submission that the intention of the appellant is very clear from the invoicing pattern that they intend to provide the services of storage and warehouse during the relevant period. It was also submitted that the appellant has not disputed this fact. It is his submission that during the relevant period the port services of minor port were not covered but that in itself would not preclude the department from demanding the tax from the appellant under other category of storage and warehousing services. He further strongly reiterates the findings of the learned Commissioner (Appeals).
4. Considered the submissions made by both sides at length and perused the records. The issue involved in this case is whether the services of storage of the goods by the appellant in their facility would get covered during the relevant period under the category of 'Storage and Warehousing' or would be excluded from the said category. In order to appreciate the rival claims it is necessary to look into the definition of both the categories:
port service means and 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 storage and warehousing includes storage and warehousing services for goods including liquids and gases but does not include any service provided for storage of agricultural produce or any service provided by a cold storage
5. It can be noticed from the above reproduced definitions that the services provided by both the categories are different and could not be said to be overlapping each other. The service rendered by a port is distinctly different than that is provided by the storage and warehousing services. It is on record that the Port services in respect of the Major ports was introduced in July 2001 and subsequently the services rendered by the minor ports were also included in the service tax net from July 2003. It is also on record and undisputed that the appellant started operation as minor port from January 2001. It is also undisputed that the appellant does not offer the storage facility in their port area for purposes of storage per se, and the storage facility in the appellant's port area is offered only and only to the importers of the goods or exporters of the goods as incidental services. The storage of the goods either for import or for export is a necessity and requirement for the services rendered by the appellant in respect of port services. The storage facility that has been created by the appellant in their port area is a requirement of the law governing the functioning of a port. Section 42 of Major Port Trusts Act, 1963 mandates the following:
42. Performance of services by Board or other person. - (1) A Board shall have power to undertake the following services:
(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 possession 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 neighbouring railways, or vice versa as a railway administration under the Indian Railways Act, 1890.
(e) piloting, hauling, mooring, remooring, hooking or measuring of vessels or any other service in respect of vessels;
(f) developing and providing, subject to the previous approval of the Central Government, infrastructure facilities for ports (2) A Board may, if so requested by the owner, take charge of the goods for the purpose of performing the service or services and shall give a receipt in such form as the Board may specify.
(3) Notwithstanding anything contained in this section, the Board may, with the previous sanction of the Central Government, authorize any person to perform any of the services mentioned in Sub-section (1) on such terms and conditions as may be agreed upon.
(3A) Without prejudice to the provisions of Sub-section (3), a Board may, with the previous approval of the Central Government, enter into any agreement or other arrangement (whether by way of partnership, joint venture or in any other manner) with, any body corporate or any other person to perform any of the services and functions assigned to the Board under this Act on such terms and conditions as may be agreed upon.
(4) No person authorized under Sub-section (3) shall charge or recover for such service any sum in excess of the amount specified by the Authority, by notification in the Official Gazette.
(5) Any such person shall, if so required by the owner, perform in respect of goods any of the said services and for that purpose take charge of the goods and give a receipt in such form as the Board may specify.
(6) The responsibility of any such person for the loss, destruction or deterioration of goods of which he has taken charge shall, subject to the other provisions of this Act, be that of a bailee under Sections 151,152 and 161 of the Indian Contract Act, 1872.
(7) ...
6. It can be noticed from the above reproduced section that if a port has to render services of a port wherein there has to be a place for storage of goods and any facility for storing created by such port will be in furtherance of the intention or motto of such port. In this case it is undisputed that the appellant has always projected themselves as a provider of port services for the importers and exporters, which is evident from the agreement entered in to by the appellant with the Government of Gujarat and they have always represented themselves with all the government agencies as such. If that be so, it cannot be now said that during the relevant period the appellant was providing the services of storage and warehousing and from 1st July 2003 they are covered under the category of port services.
The definition of taxable services as provided under Section 65(105) of the Finance Act, 1994 would also throw some light on the issue. The rival taxable services have been defined as under:
65. (105) "taxable service" means any service provided,
(a) ...
(zn) to any person, by a port or any person authorized by the port, in relation to port, services, in any manner:
(zza) to any person, by a storage or wharehouse keeper in relation to storage and warehousing of goods;.
7. It can be noticed that for taxing the services under the storage and warehousing services the services must have been provided by a storage or warehouse keeper in that capacity. At the cost of repetition it may be observed that the appellant during the relevant period or prior or subsequently never projected themselves as storage or warehouse keepers, but have consistently been staking claim that they are minor port and provide services in connection with the port services. If the contention of the revenue is upheld it would mean the vivisection of the mandated composite services rendered by the appellant. Hon'ble Supreme Court in the case of Daelim Industrial Co Ltd. 2007 (5) S.T.R. J99 (S.C.) : 2004 (170) E.L.T. A181 (S.C.)] has upheld the judgment of the tribunal [2006 (3) S.T.R. 124 (T) : 2003 (155) E.L.T 457 (Tri.-Del.)] holding that for the sake of taxing an activity the contract cannot be vivisected. Though the issue in that case was regarding the taxability of the different activities in a works contract, the ratio that there cannot be a vivisection of a composite activity for the purpose of taxing will be applicable in this case, inasmuch, that in this case appellant has always projected themselves as provider of port services and the activity of the storage of the goods were in synchronization of the said port services and that cannot be vivisected for taxing under the category of storage and warehousing services also further on face of the fact that the services as provided by the appellant were covered subsequently from July 2003 under the category of port services. This view of ours is also fortified from the clarification issued by the Revenue vide its letter dated 1st August 2002 wherein it was clarified as under:
3. Storage and warehousing service for all kind of goods are provided by public warehouses, private warehouses, by agencies such as the Central Ware Housing Corporation, Air Port Authorities, Railways, Inland Container Depots, Container Freight Stations, storage godown and tankers operated by private individuals etc. The storage and warehousing service provider normally make arrangement for space to keep the goods, loading, unloading and stacking of goods in the storage area, keeps inventory of goods, makes security arrangements and provide insurance cover etc. Service provided in ports has already been covered under the category of port service.
(emphasis supplied)
8. It can be noticed that the government was of the view that the service of storage and warehousing as provided by the ports were covered under the category of port services. If that be so, now it is not open to revenue to submit that for the period 16th August 2002 to 30th June 2003 the services were vivisectable and chargeable to the service tax as storage and warehousing servicesnd subsequently they would be covered under the category of port services. It is settled law that there has to be finality in taxation matters and the revenue cannot shift its stand.
In view of the facts and circumstances as mentioned above, we are of the view that the impugned order is liable to be set aside on merits itself and we do so. Since we have set aside the order on merits, we do not wish to go in to other points raised.
9. The appeal is allowed with consequential relief if any.
(Pronounced in the Court on....-1-2007)
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(M. Veeraiyan) (M.V. Ravindran)
Member (T) Member (J)
M. Veeraiyan, Member (T)
10. I have carefully gone through the order proposed by my learned brother Shri M.V. Ravindran, Member (Judicial). As I am not in a position to persuade myself to accept the same, I proceed to record separate order.
11. The ports were in existence and were rendering services before the service tax was introduced on various services. The port services whether rendered by "a major port or minor port" fall under two broad categories, namely, services to the vessels and services to others like the importer/exporter or a coastal trader. Under each of the above broad category several identifiable services such as cargo handling and storage services, Railway haulage services, container handling services are being rendered and some of the services may be rendered directly by the port themselves by employing their own work force or by assigning such services to approved agencies.
12. In 2001 levy was imposed on port services rendered by major ports. In that context, CBEC has issued clarification dated 1-8-2002 indicating that the storage and warehousing facility of the port will be covered in the category of port services. It is not as if from 1-7-2001 service tax was levied on services rendered by all ports and exemption was granted to services rendered by minor ports. As per the prerogative, the government chose to levy tax on port services rendered by major ports from 1-7-2001 and accordingly defined the term Port. As per the definition 'Port' has the meaning assigned to it is in clause 'g' of Section (2) of the Major Port Trust Act, 1963. From 1-7-2003 they chose to levy service tax on port services rendered by other ports (minor ports) also. Accordingly the term "Other port" was defined which is as follows:
"other port" has the meaning assigned to "port" in clause (4) of Section 3 of the Indian Ports Act, 1908 (15 of 1908), but does riot include the port defined in clause (80).
Definition of port services as on 1-7-2001 and as on 1-7-2003 were thus different. Prior to 1-7-2003 if any of the services rendered by any minor port was liable for tax in their own right, the same can be taxed and there is no illegality about the same. Warehousing and storage as a service was taxable w.e.f. 16-8-2002. The appellant who are a minor port and who undertook storage operation from January, 2001 were held to be liable to pay service tax for storing and warehousing from July, 2001 and thereafter from July, 2003 all services including the storage and warehousing services were taxed as port services.
13. By nature, port services are a combination of several services. Some meant for the vessels and some for several port users like importers/exporters or coastal traders. The charges levied by them are also under various heads like Birthlire, Anchorage, Pilotage, Mooring etc. in respect of vessels. Storage rentals are charged based on quantity and duration of storage.
14. The storage capacity of the appellant is to the tune of about 2.5 cub. Meters. The capacity is much more than what is required for the purpose of transit storage. In fact it has been admitted that the imported goods are stored some time for several months before eventually cleared to the domestic market. Storing for such a long time cannot be treated as for incidental purposes. The charges are collected based on the actual duration for which the goods are stored. In the charges collected for the services rendered to an importer it is the storage rental which accounts for bulk of the amounts.
This not a case where an individual contract for a composite service is sought to be broken by the Revenue authorities for the purpose of taxing certain component of the said composite service. The storage rental has been correctly identified by the port themselves and they are collecting based on the number of days months during which the goods were stored/warehoused.
15. Regarding the submissions that the appellants have not projected themselves as storage or warehouse keeper, the same may not be relevant as they have maintained storage tanks and warehoused goods and thus they have acted as a storage and warehouse keeper. Of course, they have many more roles as a port. Therefore, the ratio of the judgment of the Hon'ble Supreme Court in the case of Daelim Industrial Co. Ltd. (supra) may not be applicable to the present case. The judgment relates to the taxability of the different activities in a works contract. There is no such composite contract with the importers. The storage and warehousing has been identified separately by the Port Management and charged separately. If there is any vivisection, it is not an artificial vivisection by taxing authorities but by the Port Management themselves for their own administrative and operational convenience.
16. As regards the submissions that in some cases the appellant have issued invoices to the promoters of appellant port for non-fulfillment of committed tonnage and did not receive the amounts so billed and hence the tax liability on such amounts is not sustainable. This an acceptable proposition and the order requires to be remanded for the purpose of ascertaining the factual position and giving abatement.
16.2 Regarding their submission that the service tax liability should have been determined taking the entire amount of the bill as cum-duty price the same is also acceptable and the order deserves to be remanded for re-quantifying.
16.3 Regarding their submission that Commissioner (Appeals) has not dealt with the various submissions made by them regarding invocation of extended time limit, it is noticed that the same is factually correct.
17. In view of the above the appeal deserves to be rejected on merits and deserves to be remanded for re-quantifying the duty taking into account the above aspects and reconsider whether penalty requires to be imposed and if so the quantum of penalty to be imposed.
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(M. Veeraiyan) Member (T)
18. Since there is difference of opinion on the issue, Registry is directed to refer the following difference of opinion to the Hon'ble President to nominate 3rd Member to resolve the difference of opinion:
DIFFERENCE OF OPINION
19. Whether the appeal is to be allowed as ordered by the Hon'ble Member (Judicial) or, whether appeal is to be dismissed on merit and remand the matter for re-quantification of the demand as ordered by the Hon'ble Member (Technical).
(Pronounced on 16-3-07)
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(M. Veeraiyan) (M.V. Ravindran)
Member (T) Member (J)
Archana Wadhwa, Member (J)
20. I have heard Shri B.L. Narasimhan, learned advocate and Shri Sandeep Sachdeva, C.A. appearing for the appellant and Shri Sameer Chitkara, learned SDR appearing for the Revenue, on the Difference of Opinion between Hon'ble Member (Judicial) and Hon'ble Member (Technical), on the point as to whether the appellant is liable to pay the service tax as "Storage and Warehousing Service Provider" for the period 16-8-02 to 30-6-03. The details of the facts have already been recorded in the order proposed by the learned Member (Judicial). As such, the same are not being repeated to avoid redundancy. However, the learned advocate appearing for the appellant has drawn my attention to certain observations made by the learned Member (Technical), on the basis of which he has held that the appellant is a storage and warehousing service provider, which according to the appellant is factually incorrect. The same stands enumerated in the written submission filed by the appellant which is reproduced for better appreciation.
A. 1 In the Order No. M/346/WZB/Ahd/07, the Hon'ble Member (Technical) has made the following observations:
(i) The appellants have set up the excess facility in order to provide storage services to the various parties.
(ii) The appellants were charging storage rental in accordance with the duration of the quantity stored and not in accordance with the quantity handled irrespective of the period of duration.
(iii) The appellants has acted as storage and warehousing keeper.
(iv) The appellants are charging as separate amount for providing the storage and warehousing service.
A.2 The appellants submit that the above said finding of Hon'ble Member (Technical) is factually incorrect. It is submitted appellants set up the port in accordance with the policy frame of Gujarat and Gujarat Maritime Board. The port was set up to cater the needs of the promoter companies. In this regard, a detailed feasibility study has been undertaken by the Engineers India Limited wherein it was directed that the port should have the storage facility for handling 1.8 million metric ton quantity of goods in a year. (As per Detailed Project Report prepared by Engineers India Limited) and accordingly the port was set up to handle 1.75 Million metric ton per annum quantity of the goods (As per Agreement for Storage, Handling & Evacuation of Liquid Chemical Products with Promoter Users). Hence, the finding of the Hon'ble Member (Technical) that the appellants have set up excess capacity in order to provide storage service to the outsiders is incorrect.
A.3 The Hon'ble Member (Technical) found that the appellants were charging rental in accordance with the duration and not in accordance with the quantity handled. This is not true. Appellants submit that they were charging storage rental in accordance with the quantity handled and not in accordance with the duration of storage. This position has been clarified in Schedule 4 of the Agreement for Storage, Handling and Evacuation of Liquid Chemicals Products entered into with Promoter Users. Further, the appellants also placed on record various invoices raised for providing the storage services, in order to demonstrate the fact that the storage rentals were collected in accordance with the quantity of the goods handled and not in accordance with the duration. If appellants were indeed acting as a storage and warehouse keeper, the charges that they had recovered from the importers/exporters would have been based on the duration of storage. This one fact itself proves that the charges recovered by the port were not storage and warehouse charges but were port charges levied for storing of goods in the port before their export or clearance. The appellants therefore submit that the finding of the Hon'ble Member (Technical) in this regard is factually incorrect.
A.4 The appellants submit that the finding of the Hon'ble Member (Technical) that the appellants was acting as storage and warehousing keeper is also factually incorrect since the appellants was set up as a port. Various approvals were given by Govt., of Gujarat and Gujarat Maritime Board for acting as a port. Notification No. 1/2001 dt. 9-1-01 was issued by the Commissioner of Customs, Ahmedabad wherein the appellants were notified as a port. Hence, the finding of Hon'ble Member (Technical) that the appellants were projecting themselves as storage and warehousing keeper, is factually incorrect. The appellants were always projecting themselves as a port and were engaged in providing the port service.
A.5 The appellants submit that the appellants were charging various amounts in various categories only for the sake of convenience and accounting purpose and not with the intention to provide the various different services. In fact, the customer was receiving only the port service and not various services. Such services were provided in order to provide the port service. Merely because separate amount was charged, it does not mean independent services were provided to the customers.
Before going to the merits of the case, I have examined the above grievance of the appellant vis-a-vis relevant record. It is on record that as per the project report prepared by the Engineers (India) Ltd. and the agreement for storage handling and evacuation liquid chemical products with promoters, the total capacity in Phase-I was for handling 1.8 million tonne per annum of liquid chemical. Similarly, I have examined the invoices raised by the appellant which are for the quantity of the goods and are not relatable to the period for which such goods are kept in the tank. It is also correct that the appellant was rendering such services only to port users in respect of imported and exported goods and such services were not available to any other person with the sole purpose of 'storage and warehousing'. I agree with the learned advocate that the observations made by the learned Member (Technical) that the capacity for storage was much more than what is required for transit, storage and charges are collected based on the actual duration for which the goods are charged are contrary to the factual position on record.
Coming to the merits of the case, it is seen that the appellant is admittedly a minor port, set up to handle the liquid and gaseous chemicals at the time of importation as well as exportation and promoted by a group of undertakings viz. IPCL, GSFC, GNFC, GACL, GMB, GIDC & GIIC. The appellant is mainly providing its services to different trade promoter companies as per agreement dt. 12-9-00 entered with the promoter user. However, occasionally, such services are also being provided to non-promoters. The said port has been set up under the policy framed by Govt, of Gujarat and Gujarat Maritime Board. Various permissions have been granted to the appellant for acting as a port. The appellant are raising separate bill to their user for the services provided in relation to vessel, warfage charges, storage charges and charges for other utilities provided by the appellant. Bill of storage rental charges for providing storage facilities are being raised separately.
21. It is not disputed that the appellant is a minor port which was made leviable to service tax w.e.f. 1-7-03 under the category of port services. Port services stands defined under Section 65 of the Finance Act, 1994 and mean services rendered by a port or other port or any person authorized by such port or other port in any manner. The term "port" has been defined in Section 65(76) & 81 and has a meaning assigned to port in Clause (Q) of Section 2 of the Major Port Trust Act. The services rendered by port in relation to imported and exported goods stand enumerated in Section 42 of Major Port Trust Act, 1963, which already stand reproduced in the order of the Member (Judicial). Such services include, inter alia, services relating to "storage of imported/exported goods". As such, Tribunal in the case of Homa Engineering Works v. CCE as reported in 2007 (7) S.T.R. 546 (Tribunal) : 2007 (81) R.L.T. 313, has held that the provisions in the Section 42 of the Major Port Trust Act are relevant for the purpose of determining scope and coverage of the expression "Port services" as defined in the Finance Act, 1994. As such, storage being an integral part of port service, being a legal obligation in terms of Section 42 of Major Port Trust Act, cannot be separately taxed.
22. I agree with the learned advocate that no port can practically operate as a port without having the storage facility. In as much as the port in question was a specialized port, set up with the stated objective of handling the bulk liquid cargo, the same cannot be imagined without having storage facility. The storage tank were an essential, integral and, in fact, the core of the port and it is in-conceivable for port of such a nature to exist and operate without having these tanks, which are located within the area notified as a port. As I have already observed that such storage facilities were part of the project report and was a basic requirement of the same. It cannot be said that such storing and warehousing was an additional job being done by the appellant. The same was an integral part of the port service and cannot be held separately liable to tax as storing and warehousing service.
23. I may here examine the scope of storage and warehousing services. The relevant sections are reproduced below for better appreciation.
(102) "Storage and warehousing" includes storage and warehousing services for goods including liquids and gases but does not include any service provided for storage or agricultural produce or any service provided by a cold storage.
65(105) "taxable service" means any service provided, -
(zza) to any person, by a storage and warehouse keeper in relation to storage and warehousing service.
A plain reading of the above definition shows that the storage and warehousing services must be provided by the storage and warehousing keeper in relation to the storage and warehousing of the goods. The person should be known as storage and warehousing keeper in the common parlance and anybody would be free to engage such provider for the services of storage and warehousing. In other sense, it should be open to any person to approach the keeper for the purposes of storage and warehousing. In the present case, no storage and warehousing services are provided to the public at large and the same are exclusively meant for exporters and importers who use the port facilities. Taking an example from common life, if a person is rendering a paying guest accommodation and also provides food to the resident, can that person be held to be providing the services of Restaurant, when such food providing is only restricted to the paying guest and not to any independent person, who can come at any point of time and enjoy the food facility. Similarly, if a hotel provides services of washing and ironing of clothes to its resident guests, can it be called as a laundry or a dry-cleaning service provider? The answer to both the above propositions would be an emphatic 'NO'. Applying the above analogy to the fact of the present case, it has to be held that the appellant is a minor port which was leviable to tax w.e.f. 1-7-03 and any incidental services of storing the goods in terms of legal obligations of Rule 42 of the Major Port Trust Act, cannot be separately made liable to tax as storing and warehousing services.
24. In the case of BCCI 2007 (7) S.T.R. 384, Tribunal has held that BCCI is not an advertising agency since it is an ordinarily known as organization for controlling and promoting the Cricket in India and not as an advertising agency. For better appreciation, extract from Para 8 of the Judgment is reproduced below.
The definition of advertising agency cannot be read in isolation and out of context. Even if the services provided by the appellant (the scope of individual services being provided by them would be dealt with separately) is broadly covered by the expression "exhibiting" or "displaying" of advertisement, but when viewed in the context, would not convert BCCI into an advertising agency. If literal meaning is applied to the definition, the same may lead to absurd results in as much as the cinema hall flashing an advertisement or the newspaper/magazine publishing an advertisement will become an advertising agency on account of display or exhibiting the advertisement.
The appellants are admittedly known as port, are registered as ports and were floated by its promoter as ports, they cannot be held to be storage and warehousing keeper.
25. I may here refer to the various circulars of Board relied upon by the appellant which are relevant for the purposes of understanding the dispute.
CBEC vide Circular No. B/II/I/2002-TRU (sic)(B11/1/2002-TRU) dt. 1-8-2002 has clarified that the storage and warehousing facility provided in the port premises will be covered under the port service and not under storage and warehousing service. The relevant extract is as under:
3. Storage and warehousing service for all kinds of goods are provided by public warehouses, private warehouses, by agencies such as the Central Warehousing Corporation, Air Port Authorities, Railways, Inland Container Depots, Container Freight Stations, storage godown and tankers operated by private individuals etc. The storage and warehousing service provider normally make arrangement for space to keep the goods, loading, unloading and stacking of goods in the storage area, keeps inventory of goods, makes security arrangements and provide insurance cover etc. Service provided in ports has already been covered under the category of port service.
Similar clarification has also been provided in respect of cargo handling services in the said circular as under:
5. Cargo handling services are provided in the port also. Whether 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 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 goods would be appropriately covered under port service and no separate levy will be attracted under 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.
Department Circular F.No.B/II/I/2002-TRU (sic)(B11/1/2002-TRU) dt. 1-8-02 has clarified that in order to be covered under the category of storage and warehousing service, the service must be provided by a storage and warehousing keeper. Security of the goods stored is an integral part of the storage service. The relevant extract of the Circular is as under:
5. It has been stated that in some case a storage owner only rents the storage premises. He does not provide any service such as loading/unloading, stacking, security etc. A point has been raised as to whether service tax would be leviable in such cases. It is clarified that mere renting of space cannot be said to be in the nature of service provided for storage or warehousing of goods. Essential test is whether the storage keeper provides for security of goods, stacking, loading/unloading of goods in the storage area.
26. The above clarifications issued by the Board leads to inevitable conclusion that incidental storage facility provided by the port would be covered by the definition of port service and not by storage and warehousing service. The circular dt. 1-8-02 also provides that the essential test for taxing the service under storage and warehousing is as to whether the premises are given simply on rent or security of the goods is also provided. The terms of agreement entered by the appellant with its promoter clearly laid down that user shall use facility at users own risk and shall take proper insurance cover for the product brought for storage. As such, it comes out clearly from the record that the appellant is not providing any security cover to the stored goods. The security of the goods has been made an integral part of the storage service as clarified by the Board in the above referred circular. Tribunal in the case of Finolex Industries Ltd. 2007 (7) S.T.R. 408, has held that mere renting of storage tanker is not covered under the storage and warehousing services.
27. I also agree with the learned Member (Judicial) that as held by the Tribunal in the case of Daelim Industrial Co. Ltd. 2006 (3) S.T.R. 124 (Tribunal) 2003 (155) E.L.T. 457 (Tri), which stands approved by the Hon'ble Supreme Court when the appeal filed by the Revenue was dismissed as reported in 2004 (170) E.L.T. A181 (S.C.), the services provided by the appellant as port services cannot be vivisected for the purposes of taxing. The learned DR has referred to the Tribunal's decision in the case of BSBK (P) Ltd., laying down that once the contract is divisible, the taxable portion of the contract will attract the service tax. Apart from the fact that composite port service being provided by the appellant are not divisible, I find that the above judgment was delivered in the context of consulting engineering services wherein the agreement itself provided that it is a divisible turn-key contract. As such, I am of the view that the said decision is not applicable to the facts of the present case.
28. Before parting, I may refer to certain decisions which have a bearing on the disputed issue. The reliance has been laced by the appellant on the House of Lords judgment in the case of Card Protection Plan Ltd. v. CCE reported in 2001 UKHL 4 wherein the House of Lord has to determine the taxability of the services provided along with the insurance service under the UK VAT Act. The Court has to determine as to whether the services provided along with the insurance service will be treated separately and would be liable to VAT or will it form a part of insurance service provided by the Card Protection Plan Ltd. The House of Lord held that the service which comprises a single service from an economic point of view should not be artificially split up. The Court held that services must be regarded as ancillary to the principle services if it does not constitute for customer an aim. in itself, but a mean of better enjoying the principle services provided. The extract of the relevant part of the judgment is as under:
18. The court further held that in deciding whether a transaction which comprises several elements is to be regarded as a single supply or as two or more distinct supplies to be assessed separately, regard must first be had to all the circumstances in which that transaction takes place, taking into account:
29. ...first, that it follows from Article 2(1) of the Sixth Directive that every supply of service must normally be regarded as distinct and independent and, secondly, that a supply which comprises a single service from an economic point of view should not be artificially split, so as not to distort the functioning of the VAT system, the essential features of the transaction must be ascertained in order to determine whether the taxable person is supplying the customer, being a typical consumer, with several distinct principal services or with a single service.
30. There is a single supply in particular in cases where one or more elements are to be regarded as constituting the principal service, whilst one or more elements are to be regarded, by contrast, as ancillary services which share the tax treatment of the principal service. A service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied.
The law laid down in this case was again followed by the House of Lords in case of College of Estate Management v. Her Majesty's Commissioners of Customs and Excise reported in 2005 UKHL 62, wherein House of Lords held that the supply of books is ancillary to the education services being provided to the students. Therefore, the supply of the books will not be treated as an independent activity rather it is ancillary to the principle service of education.
The principles laid down by the House of Lords in the above cases is equally applicable to the facts of the present case since the storage facility provided to the customer is for better enjoyment of the port service. Principally, the appellants were asked to provide the port service and not to provide storage service per se. Hence, the storage service so provided to the customer is for the better enjoyment of the port service. Hence, such services will not be liable to the service tax under storage and warehouse, however, it will form part of the port service as introduced in the service tax net w.e.f. 1-7-03.
29. The appellants have also contended that the services provided by " them were admittedly made liable to the service tax as port services w.e.f. 1-7-03. For the period prior to 1-7-03, the appellants cannot be made liable to pay the service tax under any other category since there is no change in the definition of storage and warehousing services on the introduction of service tax on port services w.e.f. 1-7-03. The reliance in this regard has been placed on various decisions of the Tribunal, as reproduced below.
Homa Engineering Works v. CCE 2007 (7) S.T.R. 546 (Tribunal) : 2007 (81) RLT 313:
16. We note that the category of maintenance and repaid services was made leviable to service tax w.e.f. 1-7-03. The appellant had taken registration for the said services and had started paying duty thereafter. Revenue has not raised any objection to the said registration of the appellant and payment of duty by them under the category of maintenance and repair service. If the services being rendered by them were already covered by the above services, there was no justification on the part of revenue to accept their registration under the category of maintenance and repair of services. The said category having been created w.e.f. 1-7-03, we agreed with the appellants that the said activity for the past period cannot be held to be covered under the category of port services.
BCCI v. CST 2007 (7) S.T.R. 384:
15. Our above view also gets support from the fact that another head of "sale of space or time for advertisement and sponsorship services" stands created for the purposes of service tax w.e.f. 1-5-06. However, the taxable services in relation to sponsorship services specifically excluded sponsorship of sport events. As such, we find that a subsequent entry having been enacted covering the activity without any change of the existing entry, has to be interpreted as if the earlier existing entry did not cover the subsequently created entry. If the subsequent entry was covered by the earlier entry, there was no reason or scope to create the present entry especially when the rate of tax in respect of both the entries remains unchanged. Certainly, creation of new entries was not by way of bifurcation of the earlier entry in as much as the earlier entry relating to advertisement remains unchanged without any change in the tax rate. As such, the introduction of new tariff entry do imply that the coverage in the new tariff for the purposes of tax was an area not covered by the earlier entry. It was so held in case of Glaxo Smithkline Pharmaceutical Ltd. as also in case of Zee Telefilms Ltd. & Star India (P) Ltd. v. CCE, Mumbai reported in 2006 (4) S.T.R. 349 (Tri. - Mumbai) : 2006-TIOL-945-CESTAT-Mum. If it is held that the activity of sponsorship and sale of space were covered under the earlier heading of advertising agency, the same would lead to the redundancy of new legislation and would defeat the legislative intent.
Glaxo Smithkline Pharm. Ltd. :
Would support the acceptance of the plea made by the learned advocate that the nature of the Executory Services provided by the Marketing Team Staff would more appropriately fall under "business auxiliary service" and not "Management Consultancy service" as the definition of Management Consultancy Service remains the same even after the levy of inclusion and of Service Tax on "business auxiliary service" in the year 2003. When an existing Tariff definition remains the same, then the introduction of new Tariff entry would imply that the coverage under the new Tariff for the purpose of Tax is an area not covered by the earlier entry. The new entry is extension of the scope of coverage if Service Tax and not carving out of a new entry, from the erstwhile entry of "Management Consultancy Service". Therefore, it has to be held, that in the facts of this case, the levy of Service Tax on Staff Costs defined by BWIL, under the heading 'Management Consultancy Service' cannot be upheld. Levy on such costs could be as on business auxiliary service, which was not a Taxable Service prior to 2003 and appellant is not a service provider as Management Consultant.
CCE v. Sundram Finance Ltd. 2007 (7) S.T.R. 55 (T) : 2007 TIOL 837:
4. We have already enumerated the services rendered by the respondents.... There is substance in the submission of learned Consultant that some of the services in question are covered by the definition of "Business Auxiliary Service", which came to be introduced for levy of Service Tax w.e.f 1-7-2003. The services in question were rendered in Oct. '99. The definition of "Management Consultancy" has continued to be same even after introduction of "Business Auxiliary Services" for levy of Service Tax. It would, therefore, mean that a service appropriately classifiable as "Business Auxiliary Services" cannot fall within the ambit of "Management Consultancy". On this point, the respondent can legitimately claim support from the Tribunal decision in Glaxo Smithkline Pharmaceuticals.
Zee Telefilm Ltd. v. CCE 2006 (4) S.T.R. 349:
(f) Finance Bill, 2006 has proposed to insert a new heading of taxable service 'sale of space or time for advertisement service, excluding sale of space for advertisement in print media and sale of time slots by a broadcasting agency or organization'. The new levy, clause, excludes broadcasting agency or organization, since it is already taxed separately. This demonstrates the activity of selling of space or time for advertisement service, was never considered as service included under 'advertising agency'.
30. All the above decisions, on which reliance is made by the appellant, clearly shows that if a particular service has been made liable to service tax with effect from a particular date, without any change in the definition of earlier categories, it cannot be held that the newly entered service was covered under any pre-existing service category. The appellants were registered w.e.f. 1-7-03 and they also started paying tax as minor port with effect from that date. The definition of storage and warehousing keeper did not underwent any change w.e.f. 1- 7-03, thus indicating that the two services were distinct and separate services and in as much as the appellants was accepted as port, when registration was granted without any objection by the Revenue authority, he cannot be held to be a storage and warehousing keeper for the period prior to 1-7-03.
31. In as much as the Difference of Opinion is only in respect of merits and limitation has not been dealt with by the Members, I do not pass any order in respect of the same, though contested.
In view of the above discussion, I agree with the learned Member (Judicial) that the impugned order is liable to be set aside and appeal allowed with consequential relief to the appellant. File be sent to original Bench for passing final order.
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(Archana Wadhwa) Member (J) FINAL ORDER In view of the majority decision, the impugned order is set aside and appeal allowed with consequential relief to the appellant.
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(M. Veeraiyan) (M.V. Ravindran)
Member (T) Member (J)