Custom, Excise & Service Tax Tribunal
Dahej Harbour And Infrastructure Ltd vs Bharuch on 1 July, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
AHMEDABAD
REGIONAL BENCH, COURT NO. 2
SERVICE TAX APPEAL NO. 11309 OF 2016 -DB
(Arising out of OIO-BHR-EXCUS-000-COM-086-087-15-16 dated 31/03/2016 passed by
Commissioner of Central Excise, Customs and Service Tax-Bharuch)
Dahej Harbour And Infrastructure Ltd ........Appellant
Po-dahej, Lakhigam,
Bharuch, Gujarat
VERSUS
C.C.E-Bharuch ......Respondent
Vadodara-II,GST Bhavan, Subhanpura, Vadodara Vadodara, Gujarat-390023 Appearance:
Shri Jigar Shah, Advocate & Ms. Raksha Bhandari, Advocate for the Appellant Shri Anoop Kumar Mudvel, Superintendent (AR) for the Respondent With SERVICE TAX APPEAL NO. 10540 OF 2019-DB (Arising out of OIA-VAD-EXCUS-001-APP-495-2018-19 dated 30/11/2018 passed by Commissioner ( Appeals ) Commissioner of Central Excise, Customs and Service Tax- VADODARA-I) Dahej Harbour And Infrastructure Ltd ........Appellant Po-dahej, Lakhigam, Bharuch, Gujarat VERSUS C.C.E. & S.T.-Vadodara-i ......Respondent 1ST Floor...Central Excise Building, Race Course Circle, Vadodara, Gujarat-390007 Appearance:
Shri Jigar Shah, Advocate & Ms. Raksha Bhandari, Advocate for the Appellant Shri Anoop Kumar Mudvel, Superintendent (AR) for the Respondent CORAM:
HON'BLE MR. RAMESH NAIR, MEMBER ( JUDICIAL ) HON'BLE MR. C. L. MAHAR, MEMBER ( TECHNICAL ) Final Order No. 11472-11473/2024 DATE OF HEARING: 04.03.2024 DATE OF DECISION: 01.07.2024 RAMESH NAIR The brief facts of the case have that appellant is inter alia engaged in providing port services, cargo handling services, storage & warehousing services etc. The appellant provides port services at a jetty owned by M/s. Hidalco Industries Ltd.- Unit Birla Copper, to M/s. Hindalco industires limited (for brevity "HIL") in relation to import of goods like Copper Concentrates, Rock Phosphate, Steam Coal etc. and export of goods like Copper Cathodes, Sulphuric Acid etc. etc. Due to limited storage capacity for products like Sulphuric Acid at the factory of HIL, the commodity had to be sold at throw away prices. Resultantly, HIL was not able to fetch prices of the commodities like Sulphuric Acid, therefore a meeting was held on 01.03.2006 wherein parties mutually decided that the Cargo Handling Service charges of Rs. 50 per MT will not be levied by the appellant for the purpose of export of Sulphuric Acid. Accordingly, the reason behind providing services to HIL at discounted price was that HIL had made substantial investment in laying pipeline from their manufacturing facility to the DHIL jetty wherein the technical staff for HIL provided the meagre service of connecting the storage tank with the jetty pipeline for export of Sulphuric Acid. Since, the entire process was made automated, the activity on the part of the appellant was very minimal. In absence of any service being provided by the Appellant, the appellant stopped charging 'Cargo Handling Charges' from M/s. HIL. Audits were carried out by the officers of Central Excise Department during the course of which, it was observed that the Appellant was not collecting cargo handling charges from M/s. HIL for the export of Sulphuric Acid. On the basis of the aforesaid fact, a view was formed by the Audit Officers that the appellant's failure to collect 'Cargo Handling Charges' post 01.03.2006 has resulted in additional consideration in the hands of the Appellant.
Accordingly, the above audit objection and subsequent investigation by the central excise department culminated into issuance of three show cause notice by the department wherein the department made similar allegations against the appellant. The appellant was liable to pay service tax of 50 PMT on the handling of Sulphuric Acid as Cargo Handling Charges. The show cause notice have been adjudicated vide 2 years in original dated 31.03.2016 and 28.03.2018. Being aggrieved by the said Orders-In-Original appellant preferred appeal before the learned Commissioner (Appeals ) who upheld the Orders In Original. Therefore, the appellant being aggrieved by the said Orders-In-Original as preferred the present appeal.
2. Shri Jigar Shah learned Counsel appearing on behalf of the appellant along with Miss Raksha Bhandari at the outset submits that from the minutes of the meeting between the appellant and Ms. Hindalco Limited, it is clear that the appellant having stop charges 50 MPT for the Cargo Handling Charges as Sulphuric Acid from the factory of HIL. Therefore, neither service involved nor any consideration. Accordingly, in absence of any consideration no services can be demanded. He placed reliance on the following Judgments:-
Commissioner of CGST and central excise VS. Edelweiss Financial Services Ltd., 2023-VIL-SC-ST, wherein the Hon'ble Supreme Court upheld the Mumbai Tribunal decision reported at 2022- VIL-
998- CESTATE-MUM-ST.
2.1. He further submit that even as per the provision of Section 67 of the Finance Act, 1994 the service tax is charged on "Gross Amount" charged for the service. Accordingly, the appellant has correctly discharged their Service Tax liability. Hence, an amount which was not charged by the service provider, it should not form part of the value of taxable service. He placed reliance on the following Judgments:-
UOI Vs. Intercontinental Consultants And Technocrats Pvt Ltd., 2018 (10) GSTL 401- SC Commissioner of Service Tax Vs. Bhayana Builders P Ltd., 2018 (10) GSTL 118 (SC) Murli Realtors Pvt Ltd V. CCE, PUNE-II, 2015-VIL-28-CESTAT-MUM-ST Associate Soapstone Distributinf Company V. CCE, Udaipur, 2023 (1) TMI 250-CESTAT New Delhi.
Dynasty Oil and Gas Pvt Ltd V Commissioner, CGST, Mumbai, 2022 (9) TMI 1061 CESTAT Mumbai SBI Life Insurance Co. Ltd. Vs. Pr. Commissioner, CGST, Mumbai, 2022(7) TMI 457- CESTAT- Mumbai 2.2. He further submit that the valuation adopted by the Department is incorrect. Rule 3 of Service Tax (Determination of Value ) Rules, 2006 is not invokable in the present case. He placed reliance on the judgment of this Hon'ble Tribunal in the case of CCE Vs. Essar Bulk Terminal Ltd., 2022 (1) TMI 317- CESTATE, Ahmedabad. Without prejudice to the above submission, he further submits that demand under the category of 'Cargo Handling Services' is not sustainable when the service under consideration is appropriately classifiable under the category of 'Port Services'. He placed reliance on the following Judgments:-
Prime Deelopers V. CCE & ST, 2023-TIOL-884-CESTAT-AHM M/s. Shanti Builders V. CST, 2023-TIOL-730-CESTAT-AHD Real Value Promoters Pvt. Ltd. V. CGST 7 CE, Chennai, 2018-TIOL-
2876-CESTAT-MAD Kalptaru Power Transmission Ltd Vs. CGST & CEX- Gandhinagar 2.3. He also submits that the demand is time barred as the first audit was conducted by the department in the year 2011. However, the show cause notice has been issued on 20.03.2015, 15.02.2016 and 12.01.2018 invoking extended period.
3. Shri Anoop Kumar Mudvel, Superintendent (AR) appearing on behalf of the revenue reiterates the finding of the impugned order.
4. We have carefully considered the submission made by both the sides and perused the record. We find that to know exact fact about the impugned judgments between the appellant HIL to minutes of the meeting dated 01.03.2006 is very fact. Hence, the same is stand below :-
From the above minutes of meeting held between the appellant and Ms. Hidalco Industries Ltd.- Unit Birla Copper. It is found that prior to 01.03.2006 the appellant charging 50 PMT for handling of Sulphuric Acid but due to the reason that the Ms. HIL has installed pipeline for handling of Sulphuric Acid it was mutually decided to stop the charges of 50 PMT by the appellant Hindustan Hindalco Industries Limited. With this minutes of the meeting it is clearly revealed that the appellant has stopped providing service of handling Sulphuric Acid and for the same reason they also stopped charging to the Ms. HIM therefore, neither any service involved nor any transaction considering against such service. In this regard it is relevant to read the various provisions of the Finance Act, 1994.
According to which an activity to come under the ambit of service, one of the necessary condition required to be fulfilled is that there should be flow of consideration from the service recipient to the service provider. This position was settled after the introduction of the negative list regime on 01.07.2012 when the definition of 'Service' was incorporated in the Act vide Section 65 B (44) of the Finance Act, 1994 is reproduced below :-
"(44) "service" means any activity carried out by a person for another for consideration, and includes a declared service ......"
From the cogent reading of the meaning of the service pre post of 01.07.2012 important ingredients is that if any activity provided by one person to another but only for the considering the said activity will amount to service and then only service tax can be charged on such consideration. In absence of any consideration, fact in the present case, in our view no service tax can be charged on a national value assumption by the Department. 4.1. This issue has been considered by this Tribunal in the case of Commissioner of CGST and Central Excise VS. Edelweiss Financial Services Ltd., 2023-VIL-SC-ST (Supra) which was upheld by the Apex Court the relevant order of the Tribunal is reproduced below :-
"Revenue is aggrieved by the dropping of proceedings, initiated against M/s Edelweiss Financial Services Ltd for having provided 'corporate guarantee' on behalf its subsidiaries located within and outside India and not discharging tax liability thereto as provider of 'banking and other financial services' for the period prior to, and after, 30th June 2012, in order-in-original no. ME/COMM/KCG/13/2017-18 dated 27th October 2017 of Principal Commissioner of GST & Central Excise, Mumbai East. The show cause notice had proposed recovery of Rs. 97,95,62,947/-, comprising Rs. 3,22,01,255/- towards provision of guarantee to overseas companies for which consideration had been received and of Rs. 94,73,61,692/- towards guarantees provided free of charge to their Indian subsidiaries, for rendering taxable service under section 65(105)(zm) of Finance Act, 1994 till 30th June 2012 and 'service' defined in section 65B(44) for the period thereafter till March 2015. The adjudicating authority had concluded that receipt of commission from overseas companies, being consideration for export of services, was not taxable and that, insofar as domestic facilitation was concerned, the definition in section 65(12) of Finance Act, 1994 did not extend to 'corporate guarantee' which, unlike 'bank guarantee', finds no specific enumeration as 'other financial services' therein, till 20th June 2012 and that for the period thereafter, absence of 'consideration' for facilitating 'corporate guarantee' excluded such activity from coverage within the definition of 'service' in section 65B(44) of Finance Act, 1994. The respondent, M/s Edelweiss Financial Services Ltd, has filed a memorandum of cross-objections which is also taken up for disposal in the present proceedings.
2. Learned Authorised Representative, relying upon the grounds of appeal, submits that the characteristics of 'corporate guarantee' is not dissimilar to 'bank guarantee' and, thereby, liable to tax in like manner. He further contends that the as 'corporate guarantee' is very much within the reporting system established by the Reserve Bank of India in master circular dated 1st July 2013 (at paragraph 2.3.8.6), it is nothing but 'financial services' for the purpose of Finance Act, 1994. It was also contended that the discarding of the decision of the Tribunal in Kaveri Agri Care Pvt. Ltd. v. Commissioner of Service Tax, Mysore [2011 (22) S.T.R. 220 (Tri. - Bang.)] is inappropriate as the observations therein on taxability of the service should not have been ignored by the adjudicating authority. He also contends that the scope of 'guarantees', examined by the Tribunal in Commissioner of Central Excise & Service Tax (LTU), Chennai v. Neyveli Lignite Corporation Ltd. [2017 (4) G.S.T.L. 145 (Tri.- Chennai)], reinforces the contention of Revenue that the 'taxable service' does encompass the activity.
3. Insofar as period after 1st July 2012 is concerned, it is contended by the Learned Authorised Representative that the emphasis placed by the adjudicating authority on 'consideration', which lacks definition in Finance Act, 1994, is not correct inasmuch as the respondent herein, even if not benefitted monetarily, was recompensed by the improved credit rating of its subsidiary companies.
4. According to Learned Counsel for the respondent, the issue stands decided by the decision of the Tribunal in DLF Cyber City Developers Ltd. v. Commissioner of Service Tax, Delhi-V [2019 (28) G.S.T.L. 478 (Tri. - Chan.)] holding that '3. It is an admitted fact that the appellant-assessee has not received any consideration from either from the financial institutions or from their associates for providing corporate guarantee, in that circumstances, no service tax is payable by the appellant-assessee. Moreover, the demand raised in the show cause notices are on the basis of assumption and presumption presuming that their associates have received the loan facilities from the financial institution at lower rate, therefore, the differential amount of interest is consideration, but there is no such evidence produced by the revenue on that behalf. In that circumstances, we hold that the appellant-assessee are not liable to pay any service tax on corporate guarantee provided by the appellant-assessee to various banks/financial institutions on behalf of their holding company/associate enterprises for their loan or over draft facility under Banking and Financial Institutions after or before 1-7-2012.'
5. It is also further contended that, in Asmitha Microfin Ltd. v. Commissioner of Customs, Central Excise & Service Tax, Hyderabad-III [2020 (33) G.S.T.L. 250 (Tri. - Hyd.), the Tribunal did observe that '5. ..........Learned Counsel argued that these are corporate guarantees and we are not convinced. These are not the guarantees provided by a corporation for it's subsidiaries but are pure bank guarantees provided through banks by the service providers. Therefore, on merits, we find that the appellant received banking and financial services from abroad and is liable to discharge service tax under reverse charge mechanism.' which runs counter to the proposition put forth on behalf of Revenue.
6. The exclusion of 'corporate guarantee' extended by a holding company for the business activities of its subsidiary companies from the ambit of levy stands decided by the Tribunal In re DLF Cyber City Developers Ltd.. It is also clear that, even if 'corporate guarantee' is, in practice, akin to 'bank guarantee', the definition of 'banking and other financial services', viz.
'(a) the following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or [commercial concern]*, namely :-
xxxxx
(ix) other financial services, namely, lending, issue of pay order, demand draft, cheque, letter of credit and bill of exchange, transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults, operation of bank accounts;";' in section 65(12) of Finance Act, 1994 amplifies 'other financial services' with specific enumeration without including 'corporate guarantee' therein. The legislative intent to exclude 'corporate guarantees' is, thus, unarguable. The monitorial engagement of Reserve Bank of India arises from its own statutory empowerment and to graft that supervision on a tax statute for determining tax liability is not tenable.
7. The adjudicating authority has, rightly, declined to be guided by the decision of the Tribunal in re Kaveri Agri Care Pvt. Ltd. as it is settled law that interim orders do not offer themselves as binding precedent and the lack of elaboration of the observation therein detracts from its employability to advance the case of Revenue. The decision of the Tribunal in re Neyveli Lignite Corporation Ltd deals with an entirely different set of facts and the explanation therein of 'guarantee', as commonly understood, for placing that dispute in a context is of no assistance here.
8. The criticality of 'consideration' for determination of service, as defined in section 65B(44) of Finance Act, 1994, for the disputed period after introduction of 'negative list' regime of taxation has been rightly construed by the adjudicating authority. Any activity must, for the purpose of taxability under Finance Act, 1994, not only, in relation to another, reveal a 'provider', but also the flow of 'consideration' for rendering of the service. In the absence of any of these two elements, taxability under section 66B of Finance Act, 1994 will not arise. It is clear that there is no consideration insofar as 'corporate guarantee' issued by respondent on behalf of their subsidiary companies is concerned.
9. The reliance placed by Learned Authorised Representative on the 'non-monetary benefits' which may, if at all, be of relevance for determination of assessable value under section 67 of Finance Act, 1994 does not extend to ascertainment of 'service' as defined in section 65B(44) of Finance Act, 1994. 'Consideration' is the recompense for the 'contractual' undertaking that authorizes levy while 'assessable value' is a determination for computing the measure of the levy and the latter must follow the former.
10. In view of the settled law as enumerated supra and the inevitability of consideration as manifesting 'taxable service', we find no merit in the appeal of Revenue which is dismissed. Cross-objection is also disposed off."
In view of the above judgment this settled by the Hon'ble High Court that if there is no consideration no service tax can be charged on that. We further observed that Section 66 of the Finance Act is the charging Section and it provides that - " there shall be levied a tax at the rate of .... on the value of taxable services referred in-sub clauses .... of clause 105 of section 65 and collected in such manner as may be prescribed." Thus, the tax shall be levied on the 'value of taxable service'. Further, 'value of taxable service' is defined as per Section 67 of 1994 which is reproduced herein below :-
"67. Valuation of taxable services for charging service tax (1) Subject to the provisions of this Chapter, service tax chargeable on any taxable service with reference to its value shall, -
(i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or 10 be provided by him: (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service fax charged, is equivalent 10 the consideration;
(iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner.
(2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged.
(3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such (4) Subject to the provisions of sub-sections (1), (2) and (3). the value shall be determined in such manner as may be prescribed.
Explanation. - For the purposes of this section- (a) "consideration" includes any amount that is payable for the taxable services provided or to be provided.
(b) [*]
(c) "gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called "Suspense account" or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.]"
4.2. From the above Section the value to service is for a consideration in money, be the gross amount charged by the service provider for such service.
In the present case admittedly neither any service was provided by the appellant to the HIL nor any consideration was received. Therefore accordingly the ingredients of Section 66 and 67 of the Finance Act, 1994 are not available for charging service tax. The appellant has also relied upon on larger bench judgment of this tribunal as in the case of Commissioner of Service Tax Vs. Bhayana Builders P Ltd. (Supra) as per which was upheld by the Supreme Court wherein the relevant para of the said decision from the above judgment also settled that when involvement of any considering the service tax cannot be charged. Similarly, view was taken in the case of Murli Realtors Pvt Ltd V. CCE, PUNE-II (Supra) wherein the Tribunal had held that Section 67 provides that only the consideration received in money for service rendered is leviable to Service Tax. As per the above settled legal position and the findings given by us, we are of the view that since no consideration is involved in the present case, the Service Tax demand on the notional will not sustain.
5. Accordingly, the impugned orders are set aside appeal are allowed with consequential relief.
(Pronounced in the open court on 01.07.2024 ) (RAMESH NAIR) MEMBER (JUDICIAL) (C L MAHAR) MEMBER (TECHNICAL) AD