Custom, Excise & Service Tax Tribunal
Krishnaraj Shipping Co Ltd vs Rajkot on 12 September, 2023
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
REGIONAL BENCH-COURT NO. 3
Service Tax Appeal No. 12251 of 2013- DB
(Arising out of OIO-52-53-54-COMMR-2013 dated 29/03/2013 passed by Commissioner of
Central Excise, CUSTOMS (Adjudication)-RAJKO)
Krishnaraj Shipping Co Ltd ........Appellant
Shreeji House,
Town Hall Circle,
Jamnagar,Gujarat
VERSUS
C.C.E. & S.T.-Rajkot ......Respondent
Central Excise Bhavan, Race Course Ring Road...Income Tax Office, Rajkot, Gujarat-360001 APPEARANCE:
Shri P. D. Rachchh, Consultant for the Appellant Shri, Rajesh Nathan, Assistant Commissioner (AR) for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. C L MAHAR Final Order No. 12017/2023 DATE OF HEARING: 26.07.2023 DATE OF DECISION: 12.09.2023 RAMESH NAIR The present appeal is filed by the M/s. Krishnaraj Shipping Co. Ltd., Jamnagar against Order-In -Original No. 52,53 & 54 /COMMR/2013 dated 29,03.2013passed by the Commissioner, Customs & Central Excise, Rajkot.
1.1 Brief facts of the case are that during the course of audit of the records of the Appellant, the scrutiny of Balance Sheet for the period from 2007-08 to 2009-10, revealed that the Appellant had earned income under the category of barge and tug income. They have started to pay service tax in similar income after 16.05.2008 under the category of „Supply of Tangible goods‟. The Gujarat Maritime Board has granted harbour craft license to the appellant authorizing them to ply these tugs/ barges to carry out different activities within the port area. The said income mentioned above i.e. tug/barge income is for services rendered by the Appellant in the form of transportation of cargo form ship to shore and vice versa by the 2 ST/12251/2013-DB vessel/tug/barge owned by the Appellant, and the service rendered by the appellant is in relation to vessels and goods in the port area. Hence it appeared that the service of appellant are in the nature of service related to port and is classifiable under port service. On further scrutiny of the documents relating to availment of input Cenvat credit, it was found that appellant had wrongly availed input Cenvat credit of Rs. 3,54,592/- in various goods either as inputs or capital goods viz. steel, plates, H.R. Plates, angles etc. . On being asked by the audit team, it was revealed that the said goods were used in construction of barges by the appellant. The said barges were got constructed by employing fabricators who are engaged in such kind of business. The barges so constructed were used by the Appellant in providing taxable output service in the category of supply of tangible goods, transportation of goods by sea water, and port service. It was alleged that the goods on which appellant have availed credit as input appeared to be not covered under either as input or as capital goods. Further it was noticed that appellant had availed Cenvat credit of Rs. 5,18,524/- on duty paid steel plate used for repairing of barges which were further used in providing output services. The goods so used in the repairing do not fall under the category of Capital goods as provided in Rule 2(a) of the Cenvat Credit Rules 2004 and as per the departmental instruction issued vide F.No. 267/11/2010-CX8 dated 08.07.2010 wherein it was clarified that the credit of input used for repair and maintenance of capital goods are not admissible.
Accordingly, Appellant was issued show cause notice dated 19.04.2011 proposing service tax demand of Rs. 3,51,81,733/- and disallowance of Cenvat credit of Rs. 3,54,592/- and of Rs. 5,18,524/-. Following periodic Show Cause Notice dated 05.09.2011 and 06.12.2012 was also issued to the appellant. Appellant contested the show cause notices. In adjudication, Ld. Commissioner vide common impugned order rejected the contentions raised by the appellant and held that the services rendered by the appellant are classifiable under port services and are liable to pay the differential Service Tax and demanded interest; imposed equivalent penalties under various sections of the Finance Act, 1994. He also confirmed the demand for recovery of Cenvat credit of Rs. 80,62,532/-. Being aggrieved with the impugned order appellant filed the present appeal before this tribunal.
2. Learned Counsel, Shri P.D. Rachchh, appearing on behalf of appellant as regard the service tax demand submits that disputed matter is fully covered by the decision of this tribunal in the case of M/s Shreeji Shipping 3 ST/12251/2013-DB passed vide final order No. A/10563/2014 dated 09.04.2014. He also placed reliance on the following decisions:
Commr. Of Service tax, Ahmedabad Vs. Nova Enterprises - 2015(38)STR 1012 (Tri. Ahmd.) Ashok International Vs. Commissioner of C.Ex., Visakhapatnam-II- 2016(43)STR 430 (Tri. Hyd.) HML Agencies (P) Ltd. Vs. Commissioner of C.Ex.& ST, Mangalore - 2018(12)GSTL 46 (Tri. Bang.) Airport Retail Pvt. Ltd. Vs. UOI -2014 (35)STR 659 (Dll.) 2.1 He further submits that appellant have own barges/tugs and obtained harbour craft license under Rule 7 of Licensing of Harbour Craft Rules, 1986 from Gujarat Maritime Board (GMB). The said licenses were issued for specific barges for plying within the limit of ports being controlled, managed and administered by GMB for transportation of cargo. Mostly, appellant used barges for transportation of imported cargo from ship to shore or vice versa in sub-contract with M/s Shreeji Shipping. Appellant are not providing any port service but their barges were allowed to be utilized by M/s Shreeji Shipping, Jamnagar and others for transporting imported cargo from ship to shore by charging an amount per MT for specific period or on time chartered basis i.e. fixed amount for specified duration say month etc. Thus, the appellant was not providing any port services as defined under Section 65(105) of the Finance Act, 1994 till 16.05.2008.
2.2 He also argued that the impugned show cause notices did not propose that why its activities should not be classified as "Other Port Service" under Section 65(105)(zzl) of the Finance Act, 1994 as it stood at material time.
The show cause notice simply discusses provisions of finance Act 1994 viz., Section 65(105)(zn) read with Section 65(81) for „Port Services‟ and provisions of Section 65(105)(zzl) of the Finance Act, 1994 and straight way jumped to the conclusion that barge and tug income is a Port Service rendered by it in relation to vessels and goods within the port area and thus, it appears taxable under the category of „Port Service". Though, taxable services provided at "Port" and "Other Port" are classifiable under two different clauses of Section 65(105) viz. (zn) and (zzl) respectively as it stood at the material time, show cause notice nowhere classified the services under any specific clause under Section 65(105) of the Finance Act, 1994.
4ST/12251/2013-DB Thus, the appellant was not put to the proper notice and it is settled law that such show cause notice is liable to be set aside only on this ground.
2.3 He also submits that in the present matter it was alleged that appellant was authorized by Gujarat Maritime Board to perform services in relation to vessels within port area, thus services provided by the appellant to the vessels will fall under port services. Further department rely upon the Circular F.No. B11/1/2002-TRU - dated 01.08.2022. Under Section 6 of the Indian Port Act, 1908 the Government of Gujarat is empowered to make Port Rules, inter alia, covering Rules for granting license for the purpose of loading/ unloading etc. and granting license for plying barges within the port limit (Harbor Craft License). The aforesaid license is given by the Gujarat Maritime Board. What was given to appellant was a license for the above purpose and not authorization by the port. It was only licensed and not authorized by the ports. In the present matter Ld. Commissioner misinterpreted the definition by holding that licence is also authorization. The licence and authorization both are different. In support, he placed reliance on following judgments.
Velji P & Sons (Agency) Pvt. Ltd. Vs. C.C.Ex., Bhavnagar - 2007(8) STR 236.
Western India Shipyard Ltd. Vs. CCE& ST Goa - 2008(87)RLT 887 (CESTAT -Mum.) Commissioner of C.Ex., Mangalore Vs. Konkan Marine Agencies - 2009(13)STR 7 (Kar.) 2.4 He further submits that statutory provisions stipulate that taxable services under the category of port services means, any services rendered by a port or any person authorized by such port. Appellant are not authorized to offer services on behalf of the port. Appellant is not rendering services as authorized persons by the Port. It is independent entity. Thus, the services provided by appellant are not covered by the Port Services.
2.5 Without prejudice, he also submits that though it was not authorized by GMB to perform services in relation to vessels within port area but even if for the sake of argument it is assumed that license and authorization is same then also it has to be provided any service in relation to vessels or goods within port area. Appellant had supplied barge to its clients by charging amount for certain period on time chartered basis and the clients 5 ST/12251/2013-DB had used such barges for providing services in relation to vessel and goods by transporting cargo from ship to shore within port area to their clients. Thus, supply of barge to clients by any means cannot be considered as provision of service in relation to vessel and goods that too within port area.
2.6 He also submits that appellant rendered services of sea transportation viz. from Ship to shore or vice versa with the help of barges which cannot be classified under the category of „Port Service‟ defined under clause (zn) or (zzl) of clause (105) of Section 66 read with clause (82) of Section 65 of the Finance Act, 1994 as amended. Appellant has paid service tax under the appropriate category i.e. Supply of tangible goods w.e.f. 16.05.2008 for the service provided when barge were given on time chartered basis. Appellant has also paid service tax under the category of „Cargo Handling Service‟ on loading and unloading of cargo but not paid service tax on sea transportation viz. transportation of cargo from ship to shore or vice versa. Income under head of Barge Tug Working on which service tax amounting to Rs. 3,51,81,733/- not paid during the year 2005-06 to 2009-10 is due to main reason that it had not provided services in relation to goods or vessel but it had provided service of sea transportation mostly to M/s Shreeji Shipping, Jamnagar and sometimes to other by charging amount per MT for providing service of lighterage i.e. bringing cargo from ship to shore by it for its client. Actually, at many time ports ships/ vessel cannot come to jetty and have to park at Anchorage for loading /unloading of cargo. Transportation of cargo after such loading/ unloading from mother vessel at anchorage is done with the help of barge (daughter vessel) It has charged per MT during specific period for transportation of cargo from ship to shore, from specific mother vessel for the quantity etc. as per detail mentioned in invoice. Thus, it has provided services of sea transportation which cannot be considered as provided in relation to vessel or goods. Therefore, services provided by the appellant cannot be classified under „Port Service‟.
2.7 As regard the Cenvat credit demand he submits that department failed the understand the difference between inputs for manufacture and input for providing services. It is admitted facts that appellant is service provider and Cenvat credit Rules, 2004 allow any service provider to avail Cenvat credit on input services as well as input. Steel Plates, HR Plates, angle etc. purchased by the appellant were used for manufacturing and repairing of barges and vessels which in turn were used for providing output services i.e 6 ST/12251/2013-DB supply of tangible goods services etc. The inputs are required to manufacture barges/ vessels and also to keep the barges/ vessels in running condition and without repairing the same cannot be utilized for providing output service. The said materials are nothing but goods which were used for providing output services within the meaning of definition of „Input‟ under Rule 2(k)(ii) of the Cenvat Credit Rules, 2004. The above submission also gets weightage from the clarification issued by the CBEC vide letter F.No. 137/120/2008-CX 4 dated 23.10.2008 2.8 He also submits that Ld. Commissioner while passing Order-In-Original No. 60/Commr/2012 dated 16.10.2012 in the case of M/s Shree ji Shipping Service (India) Ltd., had deliberated the issue, which is identical to the present case, in detailed and held that assessee was entitled for Cenvat credit on such input utilized in repairing of barges. The Ld. Commissioner without assigning any reason for departing from his earlier stand taken while passing impugned order as well as clarification issued by the board vide circular dated 23.12.2008 tired to justify with mis-directing himself by relying upon totally different decision of Tribunal in the case of M/s Mundra Port and SEZ Ltd. Vs. CCE, Rajkot - 2009 (13)STR 178 and found that in the present case the goods used by the appellant is not directly used for providing output services .
2.9 He further argued that impugned show cause notice is time barred. The impugned notice is issued on 19.04.2011 covering period from 2005 -06 to 2009-10 under proviso to section 73(1) of the Finance Act, 1994. It is not the case of department that appellant has suppressed anything from the department or has appellant mis-declared anything. Nonpayment of service tax, if any, is only on account of difference in bonafide interpretation and classification of service without any intention to evade tax payment. He placed reliance on following decisions:
Aditya College of Competitive Exam Vs. CCE, Visakhapatnam. - 2009 (16)STR 154 (Tri. Bang.) Homa Engineering Works Vs. Commissioner of C.Ex., Mumbai -
2007(7)STR 546 (Tri. Mumbai) South India Corporation (Agencies) Ltd. Vs. CCE, Visakhapatnam-I - 2010(17)STR 170 (Tri-Bang.) 7 ST/12251/2013-DB T.P. Roy Choudhary& Co. P. Ltd. Vs. C.Ex., Visakhapatnam -2010 (19)STR 539 (Tri. Bang.) Kalpana Lamps & Components Ltd. Vs. Commr. Of C.EX., Chennai - 2008(232)ELT 163 (Tri.- Chennai)
3. Shri Rajesh Nathan, Assistant Commissioner(Authorized Representative) appearing on behalf of revenue opposed the contention of the Learned Counsel and reiterated the findings of impugned orders. He also placed reliance on the decision 2019 (27) G.S.T.L. 363 (Tri. - Hyd.) - Cairn Energy India Pvt. Ltd. v. CCE, Visakhapatnam-II.
4. We have carefully gone through the facts on records as well as the submission of the Appellant and the Revenue in details alongwith the case law cited. The issue to be decided in the present appeals is whether the barge activity carried out by the Appellant are taxable under port services or otherwise and whether there is wrong availment of Cenvat Credit by the Appellant or otherwise.
4.1 In this regard, it is necessary to go through the definition of "Port Service" provided in Finance Act. We find that, the definition of „port services‟ before the amendment made by the Finance Act, 2010 (14 of 2010), dated 8-5-2010 (made effective from 1-7-2010) as given in the Section 65(82) was as under:
'"Port Service" means any service rendered by a port or other port or any person authorised by such port or other port, in any manner, in relation to a vessel or goods'.
After the said amendment made by the Finance Act, 2010, dated 8-5-2010 (made effective from 1-7-2010), the definition of „port service‟ in Section 65(82) is :
'"Port Service" means any service rendered within a port or other port, in any manner.' From above definitions of „Port Service‟ before the amendment of 1-7-2010 and after the said amendment of 1-7-2010, We find that prior to 1-7-2010 focus/emphasis was on any service rendered by a port or other port or any person authorised by said port or other port. But in the definition of „Port Service‟ after the amendment of 1-7-2010, the focus/emphasis is on any 8 ST/12251/2013-DB service rendered within a port or other port. Thus prior to the amendment of 1-7-2010 each and every service rendered within a port or other port cannot be covered by the category of „Port Service‟ unless it was specially rendered by such Port (a port or other port) or by a person „authorised by such Port or other Port.
4.2 In this context, reference is made to CESTAT, Ahmedabad‟s decision in the case of Shreeji Shipping v. CCE, Rajkot :2014 (36) S.T.R. 569 (Tri. -
Ahmd.). In the said decision it was held that the services rendered by anyone within the port would be taxed under the head of „port services‟ only w.e.f. 1-7-2010, when there was amendment to the „port services‟.
In CESTAT, Bangalore‟s decision in case of Aspinwall & Co. Ltd. - 2011 (21) S.T.R. 257 (supra). CESTAT, Bangalore also quoted the decision of Velji P. & Sons (Agencies) P. Ltd. (supra). The relevant Paras from the said decision are reproduced below:
"16.1 In the case of Velji P. & Sons, the facts were: the assessee therein was rendering the services of hiring of the barges, cranes, forklifts and they were licenced by Gujarat Pipavav Port Limited to carry out such activities. Revenue was of the view that the services rendered by the appellant would relate to goods hiring vessel and hence would fall under the category of port services as defined under Section 65(42) of the Finance Act, 1994. While allowing the appeal filed by the assessee against an order holding that the services rendered by the assessee would fall under 'Port services', the Tribunal held as under :-
"6. After carefully considering the submissions made by both the sides, we find that the issue as to what service would get covered by the port services, scope of the "port service" was examined at length by the Tribunal in the case of Homa Engineering Works : 2006 (1) S.T.R. 19 (Tribunal) (citation supplied) referred supra. In para 8 of the said judgment, it has been observed that taxable services under the net of "Port Service" means any service rendered by a port or any person authorized by such port. The services being provided by the appellant are handling, stevedoring, loading, unloading, tug hire and labour arrangement. Admittedly, such services are not required to be provided by the Port under the Major Port Trusts Act, 1963. A perusal of the Section 35 of the said Act, as reproduced in the case of Homa Engineering Works, clearly shows that power of the Board to execute the works and provide appliances do not include the above activities being undertaken by the appellant. As such, it cannot be said that the services being provided by the appellant were covered by the Port Services.9
ST/12251/2013-DB Further, the Tribunal in the above case has observed that the authorization from the Port must be in respect of the services which the port itself is required to provide as such authorization would make an assessee step into shoes of the Port. Having already observed that such services were not required by the port, any authorization by the Port cannot convert the services into port services (emphasis supplied). In any case, we find that there is no authorization by the Port to the appellant to conduct the services on his behalf. Licenses issued by the Port authorities cannot be considered as authorization. Such licenses are issued by the Port authorities to all the persons working in the Port to ensure the safety and security of the Port Area and does not confer any power or authority of the Port on the person so issued with the licence. If the licences issued by the Port are taken as authorization, then such licences issued to Stevedores, ship chandlers, labourers, repairers of the vessels etc. would also become authorized persons by the Port to render services as Port services.
7. We further note that Section 42 of the Major Port Trusts Act provides for authorization by the Board for various services specified by that Port in the Official Gazette. For such authorization if effective, the same should have prior approval of the Central Government and the person so authorized cannot charge any excess payments than the amount specified in the tariff authority for Major Ports, by Notification in the Official Gazette. The licenses issued to the appellant are not governed by the statutory requirement of Section 42 inasmuch as the appellant is free to charge any amount from its customers for the services being provided by it and such collections are not regulated by the Port. In this view of the matter, the licence given to the appellant cannot be held to an authorization (emphasis supplied).
8. Licence means "a permission given for specific purpose; the licence holder cannot be interpreted as having the powers or authority of the person issuing the licence, unless the licence specifically mentions about it. To take a simple analogy the person issued with driving licence, under no stretch of imagination, can be said to be functioning as Road Transport Authority. Authorization may be issued by way of licence, but not all licences are authorizations. Hence, the licences issued by Ports to various agencies (under Sec. 123 of MPTA) should not be confused with the authorization (may be by way of licence) issued under Section 42 of MPTA". The difference between authorization under Section 42 of MPTA and a licence issued under Sec. 123 is clearly understood if the functioning of private container terminals (e.g. P & O) terminal in Navaseva in Mumbai, Visakha Container Terminal at Visakhapatnam etc.) operating in various major ports and 10 ST/12251/2013-DB some of the berths operated by private persons on BOT basis, is examined. In all these cases where private parties are operating container terminals of berths, the functioning is independent of the ports which has given such authorization and in all such cases they are governed by the scale of rates fixed by TAMP (refer above) under Sec. 48 by way of notifications published in the Official Gazette. Take for instance in Visakhapatnam Port, the Visakha Container Terminal Pvt. Ltd. has been authorized by Visakhapatnam Port Trust to handle the container cargo that is coming to Visakhapatnam Port. Here the TAMP has fixed the scale of rates, under Sec. 48 of MPTA, by way of Notification published in the Gazettes of India (which is mandatory requirement under Sec. 42 of MPTA). The Stevedores and other port service providers, issued with licences by Ports, have not conferred with functional authority as seen in the case of private agencies maintaining container terminal or berths. This difference in functional freedom will bring out clearly the difference between an authorization given under Sec. 42 of MPTA and a licence given under regulations under Sec. 123 of MPTA.
9. In the light of the foregoing discussions and applying the ratio of law declared by the Tribunal in the case of Homa Engineering Works (supra), we are of firm view that activities undertaken by the appellant does not fall under the category of Port Services."
16.2 Revenue, aggrieved by such an order, preferred Civil Appeal Nos. 2429-2430 of 2008 along with an application for condonation of delay before the Hon'ble Supreme Court. Their lordships on 24-3-2008 passed the following order.
"Delay condoned.
The Tribunal, relying upon its own decision in the case of M/s. Homa Engineering Works v. CCE, Mumbai, has allowed the present appeal filed by the assessee. Against the aforesaid case in M/s. Homa Engineering Works v. CCE, Mumbai, Revenue has not filed any appeal in this Court.
In view of this, this appeal is dismissed. No costs".
17. It can be seen from the above reproduced ratio of the judgment of the Tribunal in the case of Velji P. & Sons (Agencies) (P.) Ltd. that the facts, of that case and the facts in these cases before us are identical wherein various services were rendered by the appellants herein within the port area. Since the ratio of the judgment of the Velji P. & Sons is squarely applicable in this case, the judgment had also having been upheld by the Hon'ble Apex Court, the ratio is binding on us. It is also to be noted that the judgment of the Hon'ble Supreme Court in the case of Velji P. & Sons (supra) seems to have been accepted by the Government of India, which can be ascertained from the fact that the 11 ST/12251/2013-DB Government of India in Finance Act, 2010 expanded the scope of many existing services and one of them being 'Port services'. The expansion of definition of 'Port services', which has been brought into play by the Finance Act, 2010, would seek to include all services provided entirely within airport/port premises would fall under these services i.e. 'Port services' and there is no pre-condition of any authorisation from the port authority for taxing the services. It is also seen from the Circulars issued by the Government of India, more specifically, Circular dated 26th February, 2010, the scope of modifications or expansion of definition of 'Port services' would come into effect from notified date i.e. after the enactment of the Finance Bill, 2010. The said Finance Bill was passed by the Parliament and the President gave assent to it on 8-5-2010. It would imply that the modified/altered or expanded definition of 'Port services' would definitely encompass the services rendered by the appellants herein, but from 8-5-2010. It is an admitted fact that the relevant period in all these cases is prior to 8-5-2010. Hence, the contentions raised by the counsels for all the appellants that the Finance Act, 2010, has removed the lacuna in the earlier port services, is correct.
18. Hence, in view of the foregoing reasonings, on the merits of the case whether all the services rendered by the appellants would fall under the category of 'Port services' or not, we hold that the services rendered by the appellants would not fall under the category of 'Port services' (emphasis supplied). As the impugned orders are set aside on merits, there can be no case of penalty or interest in respect of this issue.' 4.3 The Hon‟ble Delhi High Court‟s decision in the case of Airport Retail Pvt. Ltd. - 2014 (35) S.T.R. 659 (Del.) (supra) wherein it was held that the respective services rendered within airport premises could not be charged service tax as 'airport services' because the amendment made by the Finance Act, 2010 is prospective and is effective after 1-7-2010 only. The services rendered within the „Port area‟, which is subject matter of the present appeal and services rendered within 'airport premises' are comparable. Therefore, findings and the conclusion made by Hon‟ble Delhi High Court in the said case are relevant and applicable mutatis mutandis to the present facts and subject matter of this appeal.
4.4 In view of above, in respect of the services thru Barges rendered by the appellant during the relevant period, they cannot be made liable to pay service tax under the category of 'port services'.
4.5 Further under the "Port Service", service provided by a Port, other port or any person authorised by such port is taxable. The Appellant liable to pay 12 ST/12251/2013-DB tax under above entry only if they had been authorized by the Port to render services in relation to vessels or goods. In the present case department failed to produce any evidence by which it can be proved that the Appellant were authorized by the port for providing services at port. There is no authorization by the Port to the appellant to render the said services. Further, permissions issued by the Port authorities to the appellant cannot be considered as authorization inasmuch as the said permission was issued is basically to enter into the Port area. The appellant has merely arranged the facility on behalf of the clients and importer or exporter and not on behalf of the Port. Therefore, in the present matter conclusion of Ld. Commissioner that Appellant have been authorised by the port Authorities for carrying lighterage of the cargo from the quay to the mother vessel by using barges and collect charges from customers, the said activity falls within the ambit of „Port Service‟ is legally not correct and not sustainable.
4.6 We also find that the issue as to what service would get covered by the port services, scope of the "port service" was examined at length by the Tribunal in the case of Homa Engineering Works referred 2007 (7) S.T.R. 546 (Tri. - Mumbai), (supra). The extract of said judgment is as below :
7. After considering the submissions by both the sides, we find that the disputed issue revolves around the interpretation of "Port Services" as appearing in Section 65(67) of the Finance Act and the various provisions of The Major Port Trust Act, 1963 (38 of 1963), to which our attention has been drawn to by both the sides. As such, for ready reference, we would like to reproduce the relevant Section of both the Acts :-
'Finance Act, 1994 Section 5 - In this Chapter, unless the context otherwise requires, -
(66) "port" has the meaning assigned to it clause (q) of Section 2 of the Major Port Trust Act, 1963 (38 of 1963);
(67) "port service" means any service rendered by a port or any person authorized by such port, in any manner, in relation to a vessel or goods;
(81) "ship" means a sea-going vessel and includes a sailing vessel;
(90) "taxable service" means any service provided, -13
ST/12251/2013-DB (zn) to any person, by a port or any person authorized by the port, in relation to port services, in any manner;
(99) "vessel" has the meanings assigned to it in Clause (z) of Section 2 of the Major Port Trust Act, 1963 (38 of 1963).
The Major Port Trusts Act, 1963 (38 of 1963) Section 2. Definitions. - In this Act, unless the context otherwise requires, -
(q) "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;
(z) "vessel" includes anything made for the conveyance, mainly by water, of human beings or of goods and a caisson;
Section 35. - Power of Board to execute works and provide appliances.
(1) A Board may execute such works within or without the limits of the port and provide such appliances as it may deem necessary or expedient.
(2) Such works and appliances may include -
(a) wharves, quays, docks, stages, jetties, piers and other works within the port or port approaches or on the foreshore of the port or port approaches, with all such convenient arches, drains, landing places, stairs, fences, roads, railways, bridges, tunnels and approaches and buildings required for the residence of the employees of the Board as the Board may consider necessary;
(b) buses, railways, locomotives, rolling stock, sheds, hotels, warehouses and other accommodation for passengers air goods and other appliances for carrying passengers and for conveying, receiving and storing goods landed, or to be shipped or otherwise;
(c) moorings and cranes, scales and all other necessary means and appliances for loading and unloading vessels;
(d) reclaiming, excavating, enclosing and raising any part of the foreshore of the port or port approaches which may be necessary for the execution of the works authorized by this Act, or otherwise for the purposes of this Act;
14ST/12251/2013-DB
(e) such breakwaters and other works as may be expedient for the protection of the port;
(f) dredgers and other machines for cleaning, deepening and improving any portion of the port or port approaches or of the foreshore of the port or port approaches;
(g) lighthouses, lightships, beacons, buoys, pilot boats and other appliances necessary for the safe navigation of the port and of the port approaches;
(h) vessels, tags or other boats for use within the limits of the port or beyond those limits, whether in territorial waters or otherwise, for the purpose of towing and rendering assistance to any vessel, whether entering or leaving the port or bound elsewhere, and for the purpose of saving or protecting life or property and for the purpose of landing, shipping or transshipping passengers or goods under Section 42;
(i) sinking of tube-wells, and equipment, maintenance and use of boats, barges and other appliances for the purpose of the supply of water at the port;
(j) engines and other appliances necessary for the extinguishing of fires;
(k) construction of models and plans for carrying out hydraulic studies;
(l) dry docks, slipways, boat basins and workshops to carry out repairs or overhauling of vessels, tugs, boats, machinery or other appliances.
Section 46. - Power of Board to undertake certain works.
(1) A Board may undertake to carry out on behalf of any person any works or services or any class of works or services, on such terms and conditions as may be agreed upon between the Board and the person concerned.
(2) A Board may, if it considers it necessary or expedient in the public interest so to do, lend any of its vessels or appliances or the services of any of its employees to any person for such period not exceeding three months and on such terms and conditions as may be agreed upon between the Board and the person concerned.
Section 42. - Performance of service by Board or other person.
(1) A Board shall have power to undertake the following services -
15ST/12251/2013-DB
(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 (9 of 1890);
(e) piloting, hauling, mooring, remooring, hooking, or measuring of vessels or any other service in respect of vessels; and
(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.
16ST/12251/2013-DB (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) After any goods have been taken charge of and a receipt given for them under this section, no liability for any loss or damage which may occur to them shall attach to any person to whom a receipt has been given or to the master or owner of the vessel from which the goods have been landed or transshipped.
Section 48. - Scales of rates for services performed by Board or other person. -
(1) The Authority shall from time to time, by notification in the Official Gazette, frame a scale of rates at which, and a statement of conditions under which, any of the services specified hereunder shall be performed by a Board or any other person authorized under section 42 at or in relation to the port or port approaches -
(a) transshipping of passengers or goods between vessels in the port or port approaches;
(b) landing and shipping of passengers or goods from or to such vessels to or from any wharf, quay, jetty, pier, dock, berth, mooring, stage or erection, land or building in the possession or occupation of the Board or at any place within the limits of the port or port approaches,
(c) carnage or porterage of goods on any such place;
(d) wharfage, storage or demurrage of goods on any such place;
(e) any other service in respect of vessels, passengers or goods, (2) Different scales and conditions may be framed for different classes of goods and vessels.
Section 49A. - Fees for pilotage and certain other services.
(1) Within any port, fees may be charged for pilotage, hauling, mooring, remooring, hooking, measuring and other services rendered to vessels, at such rates as the Authority may fix.
17ST/12251/2013-DB (2) The fees now chargeable for such services shall continue to be chargeable unless and until they are altered in exercise of the power conferred by sub-section (1).
(3) The Central Government may, in special cases, remit the whole or any portion of the fees chargeable under sub-section (1) or sub-section (2)'.
8. After carefully going through the submissions made by both the sides and after going through the relevant provisions of law, as extracted above, we find that taxable services under the net of "Port Service" means any service rendered by a port or any person authorized by such port. As such, the services which can be taxed under the said category have to be either services rendered by port itself or any person authorized by such port. Admittedly, repair of the vessel is not being done by the port. The lower authority has held the appellant to be a person authorized by such port to undertake the activity of repairing of vessel."
4.7 We find that the decision cited by the revenue in the matter of Cairn Energy India Pvt. Ltd. (supra) is not applicable in the present matter. In the said case the assessee rendered pilotage service in a minor port based on the authorization granted by the Port Authority. Here Appellant was not authorized by the port for rendering the activity on behalf of port. In the present matter the case of Shreeji Shipping (supra) relied upon by Ld. Counsel is squarely applicable to the facts of the case in hand. In the said matter Tribunal held that:
"in the absence of an authorization having been issued in favour of the Appellant under Section 32(3), they cannot be said to be rendering any service which has been authorized by the port".
4.8 Therefore, the respective services in question rendered during the relevant period by the present appellant within the port area cannot be charged service tax under the category of „port service‟. We take support again additionally from the following decisions:
In the case of S.S. Maritime :2010 (7) S.T.R. 346 (Tri.-Bang.) and Hon‟ble Karnataka High Court‟s decision in the case of CCE, Mangalore v. S.S. Maritime : 2011 (23) S.T.R. 114 (Kar.) South India Corporation (Agencies) Ltd. v. CCE, Visakahaptnam-I :2010 (17) S.T.R. 170 (Tri.-Bang.);
CCE, Visakhapatnam v. Chowgule Brothers Pvt. Ltd. :2010 (18) S.T.R. 164 (Tri.-Bang.); and 18 ST/12251/2013-DB Kin-Ship Services (India) Pvt. Ltd. v. CCE, Cochin :2008 (10) S.T.R. 331 (Tri.-Bang.).
4.9 The second issue to be decided is regarding availment of Cenvat credit on inputs/capital goods by the appellant. We find that the case of the department is that the appellant had wrongly availed the input Cenvat credit on various goods viz. steel plates, steel sheets, angle ,etc. on the ground that the goods i.e. various inputs , on which the service provider has availed the credit, were not inputs for the service provider. In facts the aforesaid goods were used for repairing the vessels/barges and therefore can be said that the said goods/inputs have directly been used for providing output service as provided in terms of Rule 2(k)(iii). The submission of appellant is that steel plates, HR pates, angle etc. purchased by them were used for repairing of barges and vessels. The inputs were required to keep the barges /vessels in running condition and without repairing the same could not be utilized for providing output service. The said materials was nothing but goods which were used for providing output service within the meaning of definition of „input‟ under Rule 2 (k)(ii) of the Cenvat Credit Rules, 2004. We reproduce below the definition of Input under Rule 2 of CENVAT Credit Rules, 2004:-
(k) "input" means -
(i) all goods, except light diesel oil, high speed diesel oil and motor spirit,
commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting-oils, coolants, accessories of the final products cleared along with the final product; goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;
(ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service;
Explanation 1. - The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
Explanation 2. - Input include goods used in the manufacture of capital goods which 19 ST/12251/2013-DB 4.10 On close reading of "input" definition under Rule 2(k) of the Rules as above, it is clear that Clause (i) covers all goods, except as specified, used in or in relation to the manufacture of final product. On the other hand, Clause
(ii) in Rule 2(k) covers all goods except specified therein, used for providing any output service. In short, Clauses (i) and (ii) are applicable for "manufacturer" and "output service provider" respectively. The present case relates to output service provider. There is no dispute that the appellants herein are not manufacturer and covered under Clause (ii) of "input" definition. The words "all goods", if read with "used for providing any outpu service" in Clause (ii) of Rule 2(k) of Rules, 2004, make it clear that any goods other than specified in the said clause, used for providing any output service, would be treated as "input" and covered under the said definition. Further, the particular expression "used for providing any output service" in the said Clause (ii) in Rule 2(k) have widened the scope of definition of "input" in respect of "output service". Further the above definitions have been examined by the Hon‟ble High Courts and the Tribunal in various decisions. The Andhra Pradesh High Court in the case of CCE, Vishakhapatnam v. SaiSamhita Storages (P) Limited - 2011 (270) E.L.T. 33 (A.P.) = 2011 (23) S.T.R. 341 (A.P.) allowed Cenvat credit on cement and steel for construction of warehouse. It has been observed that the assessee could not provide storage and warehousing services without constructing by cement and steel and the Central Excise duty was paid on these items. The Hon‟ble High Court, on plain reading of definition of input and input services under Rule 2(k) and 2(l) of the said Rules, observed that both the definitions would show that unless excluded all goods used in relation to manufacture of final products or for any other purpose used by a provider of taxable service for providing an output service are eligible for Cenvat credit. The present case relates to output service provider. The inputs on which appellant availed credit was used for the purpose of repairs of barges and vessles which in turn were used for providing output service of appellant. We are therefore of the view that appellant is entitled for Cenvat credit on such inputs utilized for repairing and manufacture of barges.
4.11 As regard the submission of the appellant regarding demand for the extended period being time barred, we find that the issue involve is pure interpretation of taxability of the service. On the very same issue in the appellant‟s own group company‟s matter in Shreeji Shipping - 2014 (36) STR 569 (Tri.- Ahmd.) similar demand was set aside by Tribunal. Therefore, in 20 ST/12251/2013-DB the present case the period is subsequent to the earlier one and in the light of Apex Court judgment in the case of Nizam Sugar Factory Vs. Collector of Central Excise, A.P. - 2006 (197) ELT 465 (SC) any subsequent show cause notice on the same issue, extended period cannot be invoked. Moreover, in the case of Shreeji Shipping (Supra) also the Tribunal had expressed the following view in the context of time bar:-
"21. We also find considerable force in the submission of the appellant that a substantial portion of the demand against them is barred by limitation as the dispute in hand is one of interpretation and high judicial forums have at different time taken a different view. The Apex Court has in the case of Jaipraksah Industries Ltd. V. CCE reported in 2002 (146) ELT 481 held that in such cases where different statutory authorities have taken divergent view extended period cannot be invoked."
Accordingly, in the present case also the demand for the extended period is not sustainable also on the ground of time bar.
5. As a result, the impugned order is set aside. Appeal is allowed with consequential relief.
(Pronounced in the open court on 12.09.2023) (RAMESH NAIR) MEMBER (JUDICIAL) (C L MAHAR) MEMBER (TECHNICAL) Raksha