Custom, Excise & Service Tax Tribunal
Jsw Jaigarh Port Ltd vs Commissioner,Central Goods And ... on 31 March, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH
Service Tax Appeal No. 86850 of 2018
(Arising out of Order-in-Original No. KLH-EXCUS-000-COM-0108-17-18 dated
14.02.2018 passed by the Commissioner of Central Excise, Kolhapur)
M/s. JSW Jaigarh Port Ltd. Appellant
24, Kunbiwadi,
At-Nandiwade,
Jaigad, Ratnagiri.
Vs.
Commissioner of CGST, Kolhapur Respondent
1079/2, KH Vasant Plaza, Commercial Complex, Rajaram Road, Bagal Chowk, Kolhapur 416 001.
Appearance:
Shri Vishal Agarwal with Shri Abhishek Deodhar, Advocates, for the Appellant Shri Nitin M. Tagade, Joint Commissioner, Authorised Representative for the Respondent CORAM:
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL) Date of Hearing: 31.03.2023 Date of Decision: 31.03.2023 FINAL ORDER NO. 85827/2023 PER: SANJIV SRIVASTAVA This appeal is directed against order in original No KLH- EXCUS-000-COM-108-17-18 dated 14.02.2018 of the Commissioner Central GST, Kolhapur. By the impugned order following has been:-
"ORDER
(i) I hereby disallow the Cenvat Credit of Rs. 26,19,63,369/-
(25,43,33,368/- Service Tax + Rs. 50,86,667/- Education Cess+ Rs. 25,43,334/- Higher Education Cess ) ( Total Rupees Twenty Six crore nineteen lakh sixty three thousand three hundred sixty nine only) wrongly availed during the period from January 2015 to March 2015 and order recovery of disallowed Cenvat Credit of Rs. 26,19,63,369 under the provisions of Rule 14 of the 2 E/86850/2018 Cenvat Credit Rules 2004 read with Section 73(2) of the Finance Act, 1994 from M/s JSW Jaigarh Port Limited, 24, Kunbiwadi, At - Nandiwade, Jaigad, Ratnagiri;
(ii) I order M/s JSW Jaigarh Port Limited to pay interest at appropriate rate on aforesaid disallowed Cenvat Credit amount mentioned at St. No. (i) above under the provisions of Section 75 of the Finance Act, 1994 read with Rule 14 of Cenvat Credit Rules, 2004.
(iii) I impose penalty of Rs. 26,19.63,369/- (Rupees Twenty Six crore nineteen lakh sixty three thousand three hundred sixty nine only) on M/s JSW Jaigarh Port Limited, 24, Kunbiwadi, At- Nandiwade, Jaigad, Ratnagiri under the provisions of Section 78 of the Finance Act, 1994 read with Rule 15(3) of the Cenvat Credit Rules, 2004. 1 further give option to JSW Jaigarh Port Limited, to pay the amount of wrongly availed Cenvat Credit along with interest plus 25% penalty within the period of thirty days from the receipt of this order, then penalty liable to be paid them shall be twenty five percent.
27. With this, the show cause notice issued under F. No. V(JSW)15-68/A-II/ Pune/Tech/2017 dated 14.02.2017 stands disposed off.
28. This order is passed without prejudice to any other action that may be initiated against M/s JSW Jaigarh Port Limited under the Finance Act, 1994 or Rules made there under or any other law for the time being in force within the Republic of India.
29. This order passed is protected vide Section 174 of the Central Goods and Services Act, 2017."
2.1 The Appellant is engaged in the business of rendering port services from the Jaigarh port at Dhamankhol Bay, Maharashtra. For this purpose, the Appellant had entered into a concession agreement dated 24.06.2008 in terms of which, the Appellant was granted a license by the Maharashtra Maritime Board ("MMB") for designing, financing, constructing, operating, maintaining and managing the port complex during the license period of 50 years. The Appellant (i.e. licensee) was entitled to render port services and recover charges from importers, 3 E/86850/2018 exporters and shipping lines. In lieu thereof, the Appellant was liable to discharge license fees to the MMB.
2.2 As per the above concession agreement, the Appellant constructed the port complex and began commercial operations on 20.01.2010. The Appellant was duly discharging service tax on the port services rendered by it from this date onwards.
2.3 During the period 2010-2015, the Jaigarh port was not capable of handling cape-size vessels (i.e. bigger vessels having greater size and capacity). The Appellant, with a view to be able to cater to cape-size vessels as well, initiated the process of dredging the navigation channel around the port to 18.5 meters. One of the Appellant's clients, JSW Steel Ltd. to whom they were rendering port services, entered into a contract with the Appellant obliging it to complete the dredging activity and further maintain the depth to 18.5 meters for a period of 15 years from 01.04.2015. JSW Steel Ltd. entered into this contract to ensure that it could bring in cargo on cape-size vessels as well and the Appellant also envisaged earning revenue by handling cape-size vessels at the existing berths at Jaigarh port.
2.4 For the above purpose appellant engaged M/s Boskalis Smit LLP for providing the dredging services and against the invoices raised by the service provider they availed the CENVAT credit of Rs 26,19,63,369/-. Revenue objected to the said credit and issued a SCN on the count that the dredging service is not required by the Appellant for providing the output service and consequently, there was no direct nexus between the dredging service and output port services. It was further alleged that the dredging services were carried out outside the limits of the Jaigarh port, Le outside the customs notified area and hence, the dredging service cannot be considered as "input service".
2.5 This show cause notice has been adjudicated as per the impugned order referred in para 1 above. Aggrieved appellant has filed this appeal.
3.1 We have heard Shri Vishal Agarwal with Shri Abhishek Deodhar, Advocates for the appellant and Shri Nitin M Tagade, Joint Commissioner, Authorized Representative for the revenue.
3.2 Arguing for the appellant learned counsel submits:
4 E/86850/2018 Issue is no longer res integra having been decided in the Appellant's favour in several decisions of this Hon'ble Tribunal o Essar Bulk Terminal Ltd. [2022 (57) GSTL 53 (Tri. - Ahmd.)];
o Essar Bulk Terminal Ltd. [E/12243/2019
(Ahmedabad Bench)];
o Adani Ports & SEZ Ltd. [2016 (42) STR 1010 (Tri.- Ahmd.)];
o Sanghi Industries [2020-TIOL-328-CESTAT-AHM]; o Ultratech Cement [2021-TIOL-161-CESTAT-AHM]; o Saurashtra Cement Ltd. [2018-TIOL-2749-CESTAT- AHM].
Services were not towards construction or development of port, but were in respect of a contractual obligation towards a service recipient, JSW Steel Ltd. Credit on goods and services procured prior to rendering of output service is also allowed Impugned Order traverses beyond the scope of the SCN , the finding that the services of construction or development of port was exempt, besides being absurd and inconsequential, was beyond the scope of the SCN and accordingly is completely untenable. The Appellant refers to the settled position in law that the Impugned Order cannot travel beyond the scope of the SCN [Ref: Toyo Engineering India Ltd. reported at 2006 (201) ELT 513 (SC)).
if an allegation to this effect was made in the SCN, it is submitted that the output service of the Appellant was port service as is acknowledged by the Respondent elsewhere in the Impugned Order and not construction of port service. Accordingly, the said finding is completely against the facts on record and the Impugned Order deserves to be set aside on this count alone.
Settled law that suppression cannot be alleged merely on the count that facts came to light during audit Gannon Dunkerley & Co. Ltd. [2021 (47) GSTL 35 (Tri.- Del.)];
Savira Industries [2016 (331) ELT 0504 (Cestat)];
5 E/86850/2018 Bemutha Industries [2019-TIOL-445- Cestat-Mum] P Siva Prasad [2019 (27) GSTL 233 (Tri-Hyd)].
3.3 Learned authorized representative reiterates the findings recorded in the impugned order.
4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments.
4.2 Impugned order records the following findings for denying the credit to the appellant:
"Now, I take up the main issue - Whether the cenvat credit availed of input services - 'Capital dredging services on the basis of invoices issued by M/s Boskalis Smit India LLP are eligible as 'input service' to M/s JSWJPL or otherwise?
18. I find that in the show cause notice it is clearly mentioned that basis for the subject show cause notice is the agreement dated 24.06.2008 entered between Maharashtra Maritime Board, Mumbai (hereinafter referred to as "MMB") and M/s JSWJPL and the invoices of capital dredging service received by M/s JSWJPL from M/s Boskalis. The cenvat credit availed of the Capital dredging services appears to be inadmissible for the reason that these services received were of capital nature and therefore not eligible as input services.
18.1 M/s JSWJPL submitted that the dredging service received is used to provide output services. There is a direct nexus between the dredging services received and the port services provided by them. M/s JSWJPL submitted that dredging is one of the notified services defined under Section 65 (36a) of the Finance Act, 1994 and the word "Capital Dredging" is used for deepening of the channel for the first time. Thereafter to maintain depth of such channel, regular maintenance is required to be carried out. This is referred to as "Maintenance Dredging" in normal parlance and in accounting terms. In the instant case, they had procured the service of Capital Dredging from M/s. Boskalis Smit India LLP to deepen the navigation channel, berth pocket and turning circle for movement of arriving vessel to dock at the port (jetty/berth). It is submitted that as per the definition of 'input service' any service which is used by service provider for providing an Output 6 E/86850/2018 service is an input service and eligible for cenvat credit. In the instant case, the service of capital dredging procured by them was very much required for the purpose of providing its taxable output service i.e. port service and therefore the service of capital dredging procured by them not only has a direct nexus with the output service but a sine It is qua non for providing the output services of port and hence is eligible for cenvat credit. also argued that there is a direct nexus between the dredging services received and the port services provided by them. M/s JSWJPL submitted that capital dredging is a prime activity which is needed to be carried out for deepening the navigation channel, berth pocket and turning circle.
18.2 In this case, I find that the basis for receiving the Capital dredging services by M/s. JSWJPL from M/s Boskalis is the agreement entered between JSWJPL and Maharashtra Maritime Board (MMB), Therefore to decide the admissibility of Cenvat credit of the Capital dredging services availed by M/s JSWJPL, the terms and conditions of the agreement entered between M/s JSWJPL and MMB, tax paid invoices issued by service providers and other documents relied upon in the case and statutory provisions relating to Cenvat Credit are to be looked into. Accordingly, the terms and conditions of the agreement and the services received by M/s JSWJPL are taken up and discussed as under.
18.3 An agreement dated 24.06.2008 was entered between M/s JSWJPL and MMB for design, finance, construct, operate, maintain and manage multipurpose common-user port at Jaigad in Ratnagiri District. This agreement is one of the documents relied upon in this case. Therefore it is relevant to see the provisions of agreement to understand the issue. The agreement is exhaustive and runs into chapters I to XI and clauses 1 to 84 and amended clauses pages 1 to 20. Therefore, some of the provisions relevant to the case are reproduced as under.
AGREEMENT FOR CONSTURCTION, OPERATION AND TRANSFER OF MULTIPURPOSE COMMON-USER PART AT DHAMANKHOL BAY, JAIGAD 7 E/86850/2018 This agreement made and entered into at Mumbai on 24TH June 2008 between the Maharashtra Maritime Board, represented by the Chief Executive Officer, Maharashtra Maritime Board, Indian Mercantile chambers, 3rd Floor, 14, Ramjibhai Kamani Marg, Ballard Estate, Mumbai- 400 038 (hereinafter called "THE LICENSOR '----) as the First part and M/s JSW Jaigarh Port Limited, a company incorporated under the Companies Act, 1956 and having its Registered Office at Jindal Masion, 5A, Dr. G. Deshmukh Marg, Mumbai 400 026 (hereinafter referred as the "Licensee", ---) as party of the Second part.
1. PREAMBLE Whereas 1.5 The Licensor has agreed to grant license for 50 years to the Licensee under this Agreement to build a Multipurpose, common- user port at Dhamnakhol Port, Jaigad, Dist- Ratnagiri on Build, Own, Operate, Share and Transfer (BOOST) basis on the terms and conditions contained hereinafter.
1.7 The Licensee has agreed to design, finance, construct, operate, maintain and manage the Port Complex and the Licensor has agreed to grant License to the Licensee to do so on the terms and conditions set forth below.
I. LICENSING AND REGULATORY FRAMEWORK I. GRANT OF LICENSE 3.1 In consideration of the Licensee agreeing to pay one time license fee of Rs. 10 lakhs and in consideration of the Licensee agreeing to pay a monthly Charges and lease rent and other payments under this Agreement and subject to the provisions of this Agreement, the Licensor grants to the Licensee, an exclusive license for designing, financing, constructing. operating, maintaining and managing the port complex during the license period as specified in the agreement.
3.2 The Licensor grants the Licensee the right to design, collect and retain user charges during the License period.
8 E/86850/2018 3.3 At the end of licence period the Port complex well maintained good condition shall stand transferred to the Licensor free from any encumbrances and the Licensee shall have no right, title, interest etc. in the same other than as provided in Section 59.
3.5.7. The ownership of the land provided by the Licensor and/or the reclaimed area and the water area shall remain with the Licensor and shall vest in the Licensor at all times.
III. CONSTRUCTION PHASE
16. CONSTRUCTION PERIOD.
16.1 The construction shall begin 90 days after the Zero date.
16.2 The scheduled Construction period shall be a period of 3 years starting from the effective date or such period indicated in the detailed Engineering Design, whichever is earlier. (as amended)
17. LICENSEEE OBLIGATIONS The Licensee agrees and undertakes at its cost, charges and expenses to:
17.1 Commence and complete construction of the Port Complex as per the schedule set out in Detailed Engineering Design.
17.2 Build the port complex in accordance with the design, performance standards and specifications checked by an independent proof consultant and approved by the Licensor.
18. LANDING AND SHIPPING DECLARATION 18.1 During the period of Phase - Construction, the Licensee may inform the Licensor on completion of any material part of the Phase I Contracted Assests, that the facilities are ready for declaration of the Part as a Landing and Shipping place for cargo.
18.2 On receipt of such communication, the Licensor shall be entitled to verify that the Licensee has constructed the facilities in accordance with this Agreement and applicable laws.
18.3 The Licensor shall, if satisfied that the Licesee has constructed the facilities in accordance with this Agreement and JSWJPLicable law, submit an JSWJPLication, within four weeks of the date of completion of the inspection, to the Customs 9 E/86850/2018 Department for the declaration of the area as a Landing and Shipping place.
22. COMMENCEMENT OF OPERATIONS 22.1 Date of Commencement of Operations 22.1.1 The date of Commencement of Operations of the Port shall be the date of issue of Landing and Shipping Declaration by the Customs or the date of expiry of the Scheduled Construction Period whichever is earlier.
40. PAYMENT AND PAYMENT TERMS 40.1 One time License fee.
In consideration of the grant of this License, the Licensee has pay to the Licensor one time license fee for an amount of Rs. 10 lakhs simultaneously on the Date of signing of this Agreement.
40.2 Monthly payment Monthly charges shall be paid every month on the basis of valume of cargo handled in the previous month and shall be paid latest by the 7th Day of the subsequent Month.
18.4 From the above terms and conditions of the Agreement, it is noticed that by this agreement, MMB has granted License to M/s JSWJPL to build a Multipurpose, common-user port at Jaigad Dist- Ratnagiri on Build, Own, Operate, Share and Transfer (BOOST) basis. The agreement was signed on 24.06.2008 and as per clause 16.2, the scheduled Construction period shall be a period of 3 years starting from the effective date.
18.5 In the present case, by issuing the subject show cause notice, the Cenvat credit availed on the invoices issued by M/s Boskalis Smith India LLP as detailed below of the Capital dredging services mentioned therein is proposed to be denied.
S Invoice No. & Details of service provided as per Total
No date invoice Cenvat
credit
1 35610185- Capital Dredging Phase-II at 9269039
LLP/2014/ Jaigarh,Ratnagiri, India as per contract
JSWJPL/003 dtd dated 14/11/14 between Boskalis Smt
23.12.14 India LLP and JSW Jaigarh Port Ltd,
India
2 35610185- Capital Dredging Phase-II at 40382428
LLP/2014/ Jaigarh,Ratnagiri,India as per contract
JSWJPL/004 dtd dated 14/11/14 between Boskalis Smt
10 E/86850/2018
1.01.15 India LLP and JSW Jaigarh Port Ltd,
India
3 35610185- Capital Dredging Phase-II at 38890842
LLP/2015/ Jaigarh,Ratnagiri,India as per contract
JSWJPL/005 dtd dated 14/11/14 between Boskalis Smt 16.01.15 India LLP and JSW Jaigarh Port Ltd, India 4 35610185- Capital Dredging Phase-II at 72173862 LLP/2015/ Jaigarh,Ratnagiri,India as per contract JSWJPL/006 dtd dated 14/11/14 between Boskalis Smt 02.02.15 India LLP and JSW Jaigarh Port Ltd, India 5 35610185- Capital Dredging Phase-II at 46271672 LLP/2015/ Jaigarh,Ratnagiri,India as per contract JSWJPL/007 dtd dated 14/11/14 between Boskalis Smt 16.02.15 India LLP and JSW Jaigarh Port Ltd, India 6 35610185- Capital Dredging Phase-II at Jaigarh, 11124000 LLP/2014/ Ratnagiri, India Ref Contract # C6 JSWJPL/002 dtd 27.11.14 7 35610185- Capital Dredging Phase-II at 31352841 LLP/2015/ Jaigarh,Ratnagiri,Incia as per contract JSWJPL/008 dtd dated 14/11/14 between Boskalis Smt 02.03.15 India LLP and JSW Jaigarh Port Ltd, India 8 35610185- Capital Dredging Phase-II at Jaigarh, 12498685 LLP/2015/ Ratnagiri,India as per contract dated JSWJPL/009 dtd 14/11/14 between Boskalis St India 16.03.15 LLP and JSW Jaigarh Port Ltd, India 261963369 18.6 It is proposed to deny the above cenvat credit of the above services they are being Capital dredging services. Therefore it is to be understood what capital dredging service is. There are two types of dredging services.
Capital dredging: Capital dredging are primarily port creation and expansion projects, while also involve the deepening and/or widening of channels to allow access by larger and deeper draught ships and also the provision of land fill for building additional port facilities, thereby enhancing port capability Because capital works usually involve hard material or high- volume works, the work is usually done using a cutter suction dredge or large trailing suction hopper dredge; but for rock works, drilling and blasting along with mechanical excavation may be used.
Maintenance dredging: Maintenance dredging consists of the restoration of designed depths of waterways and harbours by 11 E/86850/2018 removing silt, sand and other accumulated sediments. Due to natural sedimentation, active channels generally require periodic maintenance dredging if the navigability of the channels is to be maintained.
Thus, the capital dredging is mainly carried out for development and construction of new ports and expansion projects. In the reply, M/s JSWJPL also stated that "Capital Dredging" is used for deepening of the channel for the first time. Thereafter to maintain depth of such channel, regular maintenance is required to carried out.
On going through the above invoices, it is noticed that these were issued for the capital dredging services provided. As mentioned earlier, as per the agreement MMB- the Licensor grants to M/S JSWJPL-the Licensee, a licence for designing, financing, constructing, operating, maintaining and managing the port complex during the license period as specified in the Agreement. Accordingly, the above services of capital dredging were obtained and utilised by M/s JSWJPL in connection with the development and construction of port at Dhamankhol Bay, Dist- Ratnagiri. Accordingly, it is to be verified whether the Cenvat credit on these services are admissible as input service.
19. The statutory provisions applicable relating to credit on Input services case are as under.
Rule 2(1) of Cenvat Credit Rules (w. e. f. 1.7.2012), defines 'input service' as follows. 'Input service' means any service,-
(ii) used by a provider of output service for providing an output service; or used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security. business 12 E/86850/2018 exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up-to the place of removal;
but excludes.
[[A] service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for
(a) construction or execution of works contract of a building or a civil structure or a part thereof: or
(b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services:
or [B] ....
[C]....
19.1 As per the above definition to qualify any service as 'input service' it should be used by a provider of taxable service for providing an output service or should be used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products. But, some of the services have been specifically excluded from definition of 'input service' and those would not be eligible to the credit even if these would be eligible as per inclusive part of the definition of 'input service'.
Following services have been specifically excluded from definition of 'Input services".
From 1.07.2012, the service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act, 1994have been excluded from definition of 'Input services.".
Further, notification no. 25/12- S. T. dated 20.6.2012 (effective 1.7.2012) services provided to construction of Port are exempted.
13 E/86850/2018 Serial no.14 of Notification no. 25/2012-ST dated 20.06.2012 which grants exemption to construction, erection, commissioning or installation of original work for specified structure. Serial no. 14 of Notification no. 25/2012-ST reads as follows.
"81. Services by way of "construction, erection, commissioning and installation" of original works pertaining to,
(a) An airport, port or railways inciuding mono rail or metro,
(b) a single residential unit otherwise that as a part of a residential complex. (c) ----, (d)----, (e).....
(the exemption granted to airport, port is withdrawn from 1.04.2015, as such from 1.4.2015, these also become taxable service) Further, Rule 2(e) of Cenvat credit Rules, 2004 defines the 'exempted service' as "exempted service" means taxable services which are exempt from the whole of the service tax leviable thereon, and includes services on which no service tax is leviable under section 66 of the Finance Act, and taxable services whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable service, shall be taken. (upto 30.06.2012) From 1.07.2012, the definition reads as under, 'exempted service' means a (1) taxable services which are exempt from the whole of the service tax leviable thereon, or, (2) service on which no service tax is leviable under section 66B of the Finance Act, or (3) taxable services whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable service, shall be taken. (upto 30.06.2012) 19.2 M/s JSWJPL is providing output 'port services'. The legal provisions thereof are as under.
As per Section 65(82) of the Finance Act, "Port service" means any service rendered within a port or other port, in any manner.
14 E/86850/2018 Provided that the provisions of section 65A shall not apply to any service when the same is rendered wholly within the port"
Thus, all services provided entirely within the port area would fall under this service category. Further, port is defined under Section (81) of the Act as "Port" has the meaning assigned to it in clause (q) of the Major Port Trusts Act, 1963 (38 of 1963) (As per Clause (q) of Section 2 of Major Port Trusts Act, 1963- "port" means any major port to which this Act applies within such limits as may, from time to time, be defined by the Central Govt. 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 Govt. under the provisions of the Indian Ports Act. "
and "other port" has been defined under Section 76 of the Act as "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 not include the port defined in clause 80." (Clause (4) of section 3 of the Indian Ports Act, 1908 provides that ports include any part of river or channel in which this Act is, for the time being in force.") The CBEC, vide letter F. No. B-II/1/2000-TGRU dated 9.07.2001 issued clarification regarding the Port services. The relevant paras are reproduced below.
"2. Port services generally consist of port and dock services (there are for services rendered in relation to vessels), cargo handling and storage services, railway haulage services, and container handling services (these are for services rendered in relation to goods). The Dock Labour Board of the Port provides service of labour for handling of goods. The port or the person authorised by the port rendering these services is the service provider.
2.1 Some of the specific charges for the services rendered in respect of port services are as fallows.
(i) Port and dock charges consisting of berthing and mooring charges, port dues, pilotage and towage, water supply charges, salvage and diver charges, anchorage fee.
15 E/86850/2018
(ii) Cargo handling and storage charges consisting of wharfage for general cargo, warehousing charges, carnage charges, ore handling charges, wharfage on petroleum products, weighment charges for lorries, traffic appliance charges, weighment charges for goods.
(iii) Railway haulage charges for rail-borne goods, local haulage and storage;
(iv) Container handling charges consisting of import, export and transshipment wharfage on containers, equipment charges for handling of containers, container storage charges;
(v) Labour charges.
19.3 From the nature of services covered under 'port services' narrated above, it could be gathered that these services will be provided only after commissioning the port operations. The capital dredging services on which the cenvat credit has been taken is used for developing and constructing new navigational channel and construction of new port. 19.4 In view of the legal provisions discussed above, the services which are used for development and construction of Port are not input services used for providing taxable Port service by M/s JSWJPL. These services are input services received and utilized by M/s JSWJPL for developing and construction of the port and therefore these cannot be held as input services for the port services provided by M/s JSWJPL. This is a capital investment. Only after completion of construction of port, M/s JSWJPL could provide the port services. In view of above statutory provisions, these capital dredging services which are used in relation to development and construction of port facility, they cannot be held as input services for providing port services.
19.5 M/s JSWJPL stated that they are providing taxable services of Cargo Handling services, Berth hire charges, Pilotage and Tub hire, Storage charges, Wharfage and capital dredging services availed by them are input services for these services. As per the agreement with the MMB, M/s JSWJPL have obtained capital dredging services for developing/ construction of the navigational channel as an activity of port development. As these services were used in relation to development and construction 16 E/86850/2018 of port, these services cannot be held to be used in providing taxable port services. Providing taxable"port service' will commence only after completion of construction of port and declaring the port fit for operation. Therefore, the services which are utilised for construction of port are not eligible as input service tax credit for port services.
19.6 M/s JSWJPL placed reliance on the decision of the Hon'ble Tribunal in the case of Adani Port & Special Economic Zone Ltd V/s CST Ahmedabad (2015-TIOL-288-CESTAT-AHM)/ (2016(42)STR(1010)(Tri-Ahmd). On going through the case law it is observed that in this case the service of dredging is held to be an input service, but the decision does not differentiate whether these are capital dredging or maintenance dredging. Therefore the ratio of this decision is not applicable to the present case.
19.7 In view of above discussion, I hold that M/s JSWJPL is not eligible to the Cenvat credit on capital dredging service and they had availed the credit wrongly with is recoverable from them under the provisions of Rule 14 of Cenvat Credit Rules, 2004 read with Section 73(1) of the Finance Act, 1944.
Whether the dredging services were rendered to MMB as alleged in the notice?
20. The show cause notice also alleges that the dredging was undertaken in navigation channel belonging to Maharashtra Maritime Board therefore the services were actually rendered to MMB and not to M/s JSWJPL who had availed the Cenvat Credit. Therefore, the credit is not admissible on this count also.
20.1 M/s JSWJPL submitted that title and ownership is not relevant for availing credit under rule 3.1 of Cenvat Credit Rules 2004.The relevant ingredients for availing credit are the payment of duty/tax and receipt of services by service recipient for use in the output service which are not in dispute. Under the long term lease agreement with the MMB, they had acquired legal right to own, use and exploit the sea harbor for developing and providing the port services as it is expressly agreed to set up a modern multipurpose, common-user port at Dhamankhol Bay, Jaigad, Dist Ratnagiri on Build, Own, Operate, Share and 17 E/86850/2018 Transfer (BOOST) basis and the MMB in turn had agreed to grant license for 50 years to them to do so on the terms and conditions as mentioned in the said agreement. During this period they are free to avail and use the services which are required for the purpose of providing the port services. It was also the responsibility of the noticee to construct and develop the multipurpose and common-user port as per the Concession Agreement. It is also an admitted fact that the service of dredging provided by M/s. Boskalis Smit India LLP has been received by M/s JSWJPL as per the contract dated 14.11.2014 during this licensing period. Therefore, it is not correct to say that the dredging services were actually rendered to MMB and not to/M/s JSWJPL. Therefore, the ground of ownership taken in the SCN is contrary to the facts and SCN is liable to be set aside on this ground.
20.2 To understand the correct position of allegations made in the SCN and the defence put forth by M/s JSWJPL, I have gone through the provisions of the agreement entered between M's JSWJPL and MMB, The provisions relating to grant of Licence are as under.
I. LICENSING AND REGULATORY FRAMEWORK
3. GRANT OF LICENSE 3.1 In consideration of the Licensee agreeing to pay one time license fee of Rs. 10 lakhs and in consideration of the Licensee agreeing to pay a monthly Charges and lease rent and other payments under this Agreement and subject to the provisions of this Agreement, the Licensor grants to the Licensee, an exclusive license for designing, financing, constructing, operating, maintaining and managing the port complex during the license period as specified in the agreement.
3.2 ....
3.3 ....
3.5.7. Subject to the proviso to clause 3.4(d) of this Agreement the ownership of the land provided by the Licensor and/or the reclaimed area and the water area shall remain with the Licensor and shall vest in the Licensor at all times.
18 E/86850/2018 From the above, I find that this is a Licence agreement under which M/s JSWJPL has been granted exclusive license for designing, financing, constructing, operating, maintaining and managing the port complex during the license period as specified in the agreement, but the ownership of the land provided by the Licensor and/or the reclaimed area and the water area shall remain with the Licensor and shall vest in the Licensor at all times. As per clause 1.6, the Licensor (MMB) has agreed to grant license for 50 years to Licensee which means they had given mere permission for construction and development of port on their property without any transfer of interest. This is not a lease agreement under which for the agreed period property remains in the possession of the Lessee. Therefore, it is necessary to understand the difference between a Lease and License agreement The terms 'lease' and 'license' are defined under Section 105 of the Transfer of Property Act and Section 52 of the Indian Easements Act respectively as under.
Section 105 of Transfer of Property Act: "Lease" - A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or way other thing of value to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.
Section 52 of the Easements Act, 1882; "License". Defined Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest hi the property, the right is called, a license. "
The Primary distinctions between Lease and Licence is that i. A lease is a transfer of an interest in a specific immovable property, while licence is a bare permission, without any transfer of an interest.
19 E/86850/2018 ii. A lease creates an interest in favour of the leassee with respect of the property, but a licence does not create such an interest.
iii. A lease is both transferable and heritable, a sub tenancy can be created by the tenant and on the death of the tenant, the tenancy can be inherited by his/her legal heir, whereas, licence is neither transferable nor heritable. iv. A licence can be withdrawn at any tune at the pleasure of the grantor but the lease can come to an end only in accordance with the terms and condition stipulated in the contract of tenancy agreement v. A lessee has a right to protect the possession in his own right. Whereas, a licensee cannot defend his possession in his own name as he does not have any proprietary right in the property.
vi. A lessee in possession of the property is entitled to any improvements or accessions made to the property, while a licensee is no authority for any improvement or change without the sanction from Licensor.
20.3 Further, Clause 39 of the Agreement prescribes monetary charges and payment terms which reads as under.
"39. MONTHLY CHARGES The Licensee shall pay to the Licensor a portion (hereinafter called "Monthly charges") of an amount collected by him for the cargo handled at port as per the scale of rules for providing services, starting from the Date of commencement of Commercial Operations. The rate at which the portion of such payments to be made from the charges collected by the Licensee shall be as follows.
i) a sum of Rs. 3/- (Rupees Three only) per Tonne of cargo (or)
1) Rs. 36/-(Rupees Thirty six only) per loaded TEU (Twenty Foot Equivalent Unit) in the case of containers The Monthly charges will be subject to revision by Licensor at the compounded rate of 20% p.a. for the first fifteen years from the date of Commencement of Commercial Operations Subsequent revisions till expiry of the Term shall be decided in 20 E/86850/2018 consultation with Licensee by the Licensor Government taking into account the situation prevailing at that time, Provided .....
Provided further ...
40. PAYMENT AND PAYMENT TERMS 40.1 One time Licensee Fee In consideration of the grant of this License, the Licensee shall pay to the licensor one time license fee for an amount of Rs. 10 lakhs simultaneously on the Date of signing of this Agreement.
40.2 Monthly payment Monthly charges shall be paid every month on the basis of volume of cargo handled in the previous month and shall be paid latest by the 7 Day of the subsequent Month."
20.4 From the above terms and conditions mentioned in the agreement towards monthly charges and payment thereof it is noticed that as per the above clause 39, M/s JSWJPL has to pay certain portion of charges collected to MMB which are revisable at intervals. This proves that whatever receipts are made by M/s JSWJPL by providing port services, there is a share of MMB in such receipts. If there is no connection of MMB in the charges collected by M/s JSWJPL, then it could be said that M/S JSWJPL is solely responsible for the activities of port services. Which alternatively means, M/s JSWJPL is providing these services on behalf of MMB also. Thus, it proves that the benefit of credit of capital dredging services is also available to M/s MMB.
20.5 Further, as per Clause 12 of the agreement, within 14 months from signing the agreement, the licensee has to submit the detailed Project report for development and construction of port facilities and Licensor would review the suitability, adequacy and sufficiency of the DPR and would communicate modification. The licensee has to re-submit fresh DPR incorporating such modifications for approval of Licensor. The licensee cannot change the design and drawing once approved by the Licensor without prior consent of MMB. This clearly shows the indirect activities/ services rendered to M/s JSWJPL on the development 21 E/86850/2018 of the above port project are provided to MMB. The agreement entered on 28.03.2008 is a Licence agreement for development of Port which gives every details of the project. It casts certain principal obligations and operational obligations on M/s JSWJPL.
20.6 M/s JSWJPL in their reply submitted that "Capital Dredging"
is undertaken for deepening of the channel for the first time. Thereafter to maintain depth, regular maintenance is required to be carried out, which is referred as 'maintenance dredging'. Thus, the capital dredging is carried out only for first time. Which means, the capital dredging undertaken will remain for forever and only maintenance dredging is required in future. Thus, the deepening of channel undertaken by capital dredging will remain for future use by M/s MMB even after completion of licence period. Thus, the capital dredging undertaken is ultimately will be for MMB only.
20.6 It is noticed that the capital dredging services have been availed for developing and construction of the navigational channel which does not belong to M/s JSWJPL. As per clause 3.5.7 referred above, the ownership of the land, reclaimed area and the water area remains with the Licensor (MMB). In this case, M/s JSWJPL had made contracts with M/s Boskalis Smit India LLP, Mumbai for providing capital dredging services and they had provided services for development and construction of port, which does not belong to M/S JSWJPL, but for which they have received license. Though the expenditure on capital dredging has been made by M/s JSWJPL and the invoices were raised on M/s JSWJPL, the ultimate ownership of channel remains with MMB. Even though the services are received by M/s JSWJPL, these are in relation to development and construction of port which is an exempted service and therefore cannot be held to be received as input services for port services.
20.7 M/s JSWJPL placed reliance on the decision of the Hon'ble Tribunal in the case of Adani Port & Special Economic Zone Ltd V/s CST Ahmedabad (2016 (42) STR 1010 (Tri-Ahmd). On going through the case law it is observed that in this case the services were received by Adani Port themselves and not by other party to whom they entrusted the work of port services. In the present case, MMB has entrusted the work of construction and providing 22 E/86850/2018 port services to M/s JSWJPL and therefore the ratio of this decision is not applicable to the present case.
In view of the above discussion, I find that the allegation in the show cause notice that the capital dredging services were actually rendered to MMB and not to M/s JSWJPL stands proved and accordingly, the cenvat credit availed on Capital dredging services are found not admissible.
21. Now I take up the issue "Whether the Credit availed is also deniable on the ground the services were received outside the Customs area of Jaigad port?
21.1 In the subject show cause notice one of the ground for denying the cenvat credit is that the Capital dredging service were carried out, outside the limits of the Jaigad port i.e. outside the customs area specified in the notifications issued by Commissioner of Customs approving the landing places for unloading of imported goods and loading of export goods and notifying the Customs area with boundaries.
21.2 M/s JSWJPL submitted that unlike the definition of inputs and capital goods, there was no condition under the definition of input services that the services should be used within the factory of production or within the customs area of the port in question.
21.3 On going through the definition of 'input service' under Rule 2(1) of Cenvat Credit Rules I find that there is no condition under the definition of input services that the services should be within factory of production or within the area from which outward service operations carried out. Therefore, I find that the denial of Cenvat credit on this ground is not sustainable, however the Cenvat credit on the services capital dredging services are not eligible for reasons discussed in the paras mentioned above."
4.3 From the impugned order it is evident that it seeks to deny the credit in respect of the dredging service on the following grounds:
The dredging services were used in relation to development and construction of port and hence cannot be 23 E/86850/2018 said to be used for the providing the taxable services under the category of port services;
Dredding services are in relation to development and construction of port, which is an exempt service. Dredging work is for the benefit of MMB 4.3 In case of Adani Port & SEZ Ltd. [2016 (42) STYR (T- Ahmd)] following has been held:
"19. The third issue is denial of Cenvat credit on input services. It has been alleged that the input services have no nexus with output service. It may be referred to show cause notice dated 23-4-2012 issued by the Commissioner of Service Tax, Ahmedabad to the appellant M/s. Adani Port & Special Economic Zone Ltd. In that show cause notice, it has been alleged that M/s. APSEZ has availed Cenvat credit on services Goods Transport Agency, Cargo Handling Services, Clearing & Forwarding Agent Services, Manpower Recruitment & Supply Agency Service, Steamer Agent Services, etc. These services have no relationship/nexus with the provisions of output service of Port service inasmuch as the said services had been directly provided to the cargo imported by others. Hence, it does not appear to be an "input service" within the meaning of Rule (l) of Cenvat Credit Rules, 2004.
20. The adjudicating authority had denied Cenvat credit on input service on the ground that the appellant had not submitted any evidence for use of input service in the output service. In this context, the finding of the adjudicating authority vide Order- in-Original Nos. STC/41 to 43/Commr./AHD/2011, dated 11-11- 2011, may be referred. It has been observed that during the course of scrutiny of the records, it is noticed that the appellant had availed Cenvat credit of duty of Central Excise and Service Tax on Capital Goods, Input/Input Services. The details of the Cenvat credits with the particular heading have been mentioned in the said order. It has been further observed that as per Rule 3 of the said Rules, 2004, the Cenvat credit is available only on the inputs, capital goods, input services as defined under Rule 2 of the Rules, 2004 and the credit availed by the appellants on the said goods and services are not admissible to them, as it is not covered with the definition under Rule 2 of the said Rules. The 24 E/86850/2018 adjudicating authority observed that the appellant had not submitted any evidences, which proves that these services were used for business and providing output service. It is further observed that the appellants had not submitted any details of bank charges and in absence of which the nexus of such bank charges to the output services cannot be established.
21. It is observed that what constitutes the "Input Service" has been considered by various Courts and this Tribunal in number of cases, by way of interpreting the definition of input services. The definition of input service has already been reproduced in Para 10 in this order. As per Clause (i) of Rule 2(l) of Cenvat Credit Rules, 2004, "input service" means any service used by a provider of taxable service for providing output service. The words "any service" and "used for providing an output service" in the "input service" definition, make it clear that the use of input service is depending on the scope of "an output service". So, it is required to examine the scope of an output service for deciding the input service. In the present case, the main output service is "Port service". The term 'Port Service' has been defined to mean, any service rendered by a Port or other Port or any person authorized by such Port or other Port in any manner, in relation to a vessel or goods. In the case of Kandla Shipchandlers and Ship Repairers Association v. UOI - 2013 (29) S.T.R. 233 (Guj.), the Hon'ble Gujarat High Court observed that the term "Port"
has been defined in an extensive manner. It includes within its sweep any service rendered in any manner in relation to a vessel or goods. The expressions "in any manner" and "in relation to"
both tend to expand the scope of such service. The words "in any manner" would further go to show that the legislature intended to make the definition wide and inclusive and to include range of services which may be provided in relation to a vessel or goods.
22. The Hon'ble Supreme Court in the case of State of Punjab v. Paper Mills Limited (supra), while dealing with the words "used for the purpose of factory" in Rule 18 of the Punjab Urban Immovable Property Tax Rules, 1941, observed that the use of buildings for providing such facilities and amenities which are necessary for maintaining a proper standard of efficiency of 25 E/86850/2018 factory workers must also to be used for the purpose of factory. The allotment of the buildings for the use of the workers was made for the purpose, which was necessary for the efficiency of workmen. All such quarters is clearly necessary to the efficiency of the workmen and it must be held that the buildings were used for the purpose of factory. The Hon'ble Supreme Court dismissed the appeal filed by the appellant. In the present case, considering the scope of an output service (i.e. Port Service), it may be construed that any service used in relation to Port service in any manner would cover under the definition of "input service".
In the case of Sai Samhita Storages (P) Ltd. (supra), the Hon'ble Andhra Pradesh High Court observed that the definitions of inputs and input services 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 services for providing an output service are eligible for Cenvat credit. The Tribunal held in the case of Navratna S.G. Highways Prop. Pvt. Ltd. (supra) that the definition of input and input services are pari materia as far as the service providers are concerned. In the case of Reliance Infratel Ltd. (supra), the Tribunal held that the Cenvat credit is eligible on goods viz. Brackets, Mounting Pole, Mount Clamps, Cable, Pre-fabricated Buildings/Shelters/Panels, etc. used in erection/fabrication of telecommunication tower fixed to earth, used for providing Business Support Service. In the case of the present appellants themselves (supra), the Hon'ble Gujarat High Court has held that credit of duty paid on cement and steel used for construction of Jetty used for providing Port services are eligible for credit. In another case of the present appellant - 2011 (21) S.T.R. 361 (Guj.), the Hon'ble High Court of Gujarat upheld the decision of the Tribunal holding that they are entitled for Cenvat credit of Service Tax paid on various services namely Mobile Phones, CHA Services, Rent-a- Cab Service, Surveyor Charges, Other input services (such as profession fees, construction, soil testing, labour charges, etc.), and duty paid on Air Conditioners.
From an analysis of the statutory provisions, definitions, and the decisions of the Hon'ble High Courts and the Tribunal, it is 26 E/86850/2018 evident that "any" service used by a service provider "for providing" Port Service in any manner, is eligible for credit. The definition of input service by way of "means" and "includes" also amplify the scope of the same. Further, the definition also mentions certain specific services. The definition also includes services used in relation to "activities relating to business". These further enlarge the scope of the input services. The net result of such a wide definition as rightly held by the High Courts and Tribunal, is that any input service which has any nexus or is in relation to the output services in any manner whatsoever, or is in relation to the activities relating to business would be eligible for credit. Therefore, the appellants would be eligible to take credit on the input services where they are able to satisfy the above criteria."
4.4 In case of Essar Bulk Terminal Ltd. [2022 (57) GSTL 53 (T- Ahmd)] following has been held:
"4.3 As regard the ground for denial of Cenvat that the Navigation channel for which dredging was availed is not a private property of the appellant but it was done on behalf of GMB, We find that the entire coastline is a sovereign property of Government of India through various Port Trust, Maritime Board etc. In none of the case of constructing the port the ownership belongs to the operator of the port. The sea coast parcel on which construction of the port is allowed is always on lease basis and not on the ownership basis however, the operation of port is carried out by the port operator. It is also undisputed position that the entire port operation on the port including the Port service and cargo handling service are liable to payment of service tax on the said output service. Therefore, any service is availed in relation to the operation of port or construction of port is indeed the input service. Accordingly, the assessee is entitled for Cenvat credit in respect of such input service i.e. dredging service used for providing output service i.e. Port Service.
4.4 In the present case also even though the appellant was allowed to construct the port/jetty in particular navigation channel by GMB but the fact remains that the operation of the port is solely carried out by the appellant. It is a settled position that for availing the Cenvat credit it is not necessary that the 27 E/86850/2018 location from where the output service is provided should be owned by the service provider. As long the service is provided by the service provider for which any input service is received and used for providing output service, the Cenvat credit on such input services shall be available for utilizing the said Cenvat credit for payment of service tax on the output service. Therefore, the ownership of the location from where the service is provided is immaterial for availing the Cenvat credit on input services as well as for payment of service tax on the output services. If the contention of the revenue is accepted that the appellant is not entitled for the Cenvat credit on the ground that the jetty is not owned by them in such case even the service tax liability will also not cast on appellant but on the so called owner of the jetty as per the department, which is not provided under the Finance Act, 1994. Therefore, on the ground of ownership of jetty belongs to GMB the Cenvat credit cannot be denied. The issue whether the ownership of the location is relevant for availment of Cenvat credit or otherwise the courts has passed various judgments. Some of the judgments are reproduced below :
• CCE v. JSW Ispat Steel Ltd. - 2015 (327) E.L.T. 549 (Tribunal)
"5.2 In the decisions relied upon by the appellant, the issues contested by the Revenue have been adequately addressed. For example, in the case of Pepsi Foods (supra), it has been held that ownership of goods is not a criterion for denial of credit on capital goods and even if it is leased for a particular period, the assessee is eligible to take Cenvat credit. In the present case, merely because M/s. Inox Air Products Ltd. has leased out the plant to the appellant, that does not disentitle the appellant from availing Cenvat credit of the excise duty paid on capital goods. Similarly, in the case of Gujarat Ambuja Cement Ltd. (supra), Rajarambapu Patil SSK Ltd. (supra) and KCP Ltd. (supra), this Tribunal and the Hon'ble High Court of Himachal Pradesh held that Cenvat credit of excise duty paid on parts, components and accessories would be admissible under the Capital Goods Credit scheme even if they are assembled into goods which are immovable or exempted. Similarly, in the ICL Sugars Ltd.
28 E/86850/2018 (supra), it was held that immovability has no bearing on eligibility for availment of Cenvat credit on capital goods. In the light of these decisions, the interpretation of law undertaken in the impugned order does not appeal to any common sense or logic. So long as the individual machinery, equipment or appliance or parts and components thereof fall within the definition of capital goods under Rule 2(A) of the Cenvat Credit Rules, 2004 and so long as they are used within the factory of production for the manufacture of excisable goods which are chargeable to duty, the benefit of capital goods credit cannot be denied and we hold accordingly."
• Pepsi Foods Ltd. - 2010 (254) E.L.T. 284 (P & H) "5. Counsel for the respondent has submitted that Modvat credit cannot be denied to the respondent in view of the law laid down in Sharda Motors Industries Ltd. v. CCE, Chennai, reported as 2002 (150) E.L.T. 759 and HIS Automotives Ltd. v. CCE, Chennai, reported as 2004 (163) E.L.T. 116, wherein it has been held that ownership of goods is no criteria for denying Modvat credit in view of the Circular of the Board dated 1-3-1999. Counsel for the respondent has also placed reliance on Union of India v. Marmagoa Steel Ltd., reported as 2008 (229) E.L.T. 481 (S.C.).
6. We have gone through the order passed by the Tribunal as well as the case law cited by the counsel for the parties. In the present case, although the capital goods were imported by M/s. Frito Lay India, but the endorsement in the Bill of Entry was made in favour of the respondent. In Sharda Motors' case (supra) it has clearly been held that ownership of goods is no criteria for denying Modvat credit, specially in view of the Circular dated 1-3-1999. Since in the present case, the Bill of Entry was made by M/s. Frito Lay India in favour of the respondent, thus, Modvat credit could not be denied to the respondent.
7. In view of the above, we are of the considered opinion that the Tribunal was correct in allowing the Modvat credit on the capital goods received by the respondent particularly when the endorsement in the Bill of Entry was made in its favour by M/s. Frito Lay India. Accordingly, both the questions of law are 29 E/86850/2018 answered in favour of the assessee and against the Revenue. The order of the Tribunal is upheld."
In view of the above judgments it is settled that ownership has no criteria either for allowing the Cenvat or for charging service tax on the output services. For Cenvat credit as well as for charging service tax the only criteria is that there should be service provider and service recipient irrespective of ownership of the premises from where the service is provided. It is very common in commercial parlance that the service provider takes the premises on lease which is owned by the leasor. However, irrespective of services received related to such premises or not but the credit cannot be denied on the service received by the service provider in respect of the leased premises for a simple reason such that such leased premises is used by the service provider for providing the output service. The only condition is that in respect of input service the relationship between the service provider and input service recipient is that of service provider and the service recipient. The payment of any service including the service tax is charged by the service provider and the same is borne by the input service recipient. In the present case also as regard the service provision of dredging service there is a direct contract between the service provider viz M/s. Van Oard Dredging and Marine Contractor and M/s. Van Oard India Pvt. Ltd. and the appellant. The said service providers rendered the service to the appellant only and not to the Gujarat Maritime Board. Therefore, the appellant being the sole recipient of the service entitled for the Cenvat credit. It also not disputed that the entire service charges along with service tax there on for dredging of navigation channel was paid by the appellant to the aforesaid contractors who carried out the dredging services. In this undisputed fact the appellant is the service recipient for dredging service which is undisputedly used for providing Port Services and cargo handling services, hence, the appellant is entitled for taking Cenvat credit on dredging services.
4.5 As regard the allegation of the department that the navigation channel is meant for other users also therefore, credit is not admissible to the appellant, We find that firstly, the entire 30 E/86850/2018 contract of dredging of navigation channel is between the service provider i.e. M/s. Van Oard Dredging and Marine Contractor and M/s. Van Oard India Pvt. Ltd. and the appellant. The entire service charge along with service tax was borne by the appellant no other persons are involved in the transaction of said services. Therefore, the appellant only is the sole recipient of the services. Accordingly, the appellant is entitled for the entire Cenvat credit. Without prejudice to our above finding we further find that, it is the theoretical terms in the agreement with Gujarat Maritime Board that the said navigation channel can be used by other users also. However, as submitted by the appellant and the fact on record the navigation channel was dredged only upto the location of the appellant's jetty. Therefore, looking to the factual location of the jetty no other users can pass through that channel because the channel has no free through way, for this reason the said navigation channel has the dead end at one side of the jetty. In this position even though there is a condition in the agreement with GMB to allow the navigation channel to others but practically the said channel cannot be used by others. Moreover, the revenue has not adduced a single incident of the said navigation channel being used by any other persons. Therefore, even though the condition for allowing the navigation channel to other as per the agreement but in fact there is no user of said navigation channel except the appellant. Accordingly, the case of the revenue is not sustained on this count also.
4.6 The very same issue has been considered by this Tribunal in the case of Saurashtra Cement Ltd. 2018-TIOL-2749 CESTAT- AHD wherein the Cenvat credit was allowed even though the private jetty does not belong to the assessee and consequently it was used by other jetty owners also. The Tribunal after considering various judgments given the following order :
"On careful consideration of the submissions made by both the sides and perusal of the records, I find that the Jetty is a captive active jetty of the appellant, which is exclusively used by the appellant only. At time, the appellant have to get the dredging done at the jetty for proper function of jetty to improve the draft. Since jetty is used primarily for import of coal which is 31 E/86850/2018 used in the manufacture of final product, Dredging Service is qualified as input service. It is also a fact that dredging service is nothing to do with the customer to whom final product is sold. The service charge of dredging service is borne by the appellant only which stands absorbed in the overall cost of manufacturing of cement. Therefore, it cannot be said that the Dredging service is used for the removal of final product from place of removal. Also as per Hon'ble Bombay High Court judgment in the case of CC Ex., Nagpur v. Ultratech Cement Ltd. 2010 (20) S.T.R. 577 (Bom.) = 2010-TIOL-745-HC-MUM-ST it was held that if the cost of input service borne by the assessee and the same stand absorbed in the cost of final product, such services are qualified as input services and accordingly Cenvat credit is admissible. Considering the ratio laid down by the Hon'ble High Court and the facts of the present case, I am of the considered view that the Dredging services used by the appellant is an input services, hence, Cenvat credit is admissible. I also observed that merely because the service was availed outside the factory of the appellant the credit cannot be denied. Whether the service is availed in the factory or outside the factory, only requirement is that it should be in relation to the manufacture of final product, therefore, the Cenvat Credit is admissible. Accordingly, I set aside the impugned order and allow the appeal."
4.7 The Similar issue once again considered by this Tribunal in the case of Ultra Tech Cement Ltd. - 2021 TIOL 161 CESTAT- AHD wherein the following the orders in the case of Saurashtra Cement (Supra) and Sanghi Industries (Supra) the Cenvat credit on dredging service for jetty was allowed.
4.8 In view of the above judgments which are on identical issue and the fact which is in the present case the issue is no longer res integra.
4.9 The appellant have also raised the issue on limitation that the demand for the extended period is not sustainable as there is no suppression of fact. On the careful scrutiny of the records and submission made by the appellant we find that the appellant have undisputedly intimated to the department regarding approval given by GMB for construction of the 550 meters deep water cargo handling terminal facility as well as permission for 32 E/86850/2018 approval of transfer from Essar steel to the appellant. It was also intimated to the department that the port is under construction and the GMB will give permission for commencement of the operation for which the agreement was signed on 25-3-2010. The availment of Cenvat credit on dredging service utilized for construction of port and the water channel was in the knowledge of the department as during the course of EA, 2000 audit conducted in March, 2011, June & July, 2012 for the period 2010-11 and 2011-12, several objections were raised regarding the availment of credit. The audit report No. FAR/190/ST/2012- 13, dated 7-9-2012 was conveyed to appellant by the Jurisdictional Superintendent vide its letter dated 1-2-2013 wherein it was specifically referred to condition No. 22 of the appellant's license agreement dated 25-3-2010 with GMB and has pointed out short payment of service tax on wharfage charges as the service tax was paid on the concessional rate granted to the appellant and not on the full rate. This makes it clear that copy of agreement dated 25-3-2010 entered into by the appellant with GMB along with its all enclosures including NOC dated 14-5-2007 was submitted to the department and it is on the basis of this agreement only the entire present case of Cenvat credit was made out therefore the details of the agreement was in the knowledge of the department.
4.10 In this fact all the information regarding dredging service availed by the appellant, Cenvat credit availed there on etc. were in the knowledge of the department therefore there is no suppression of fact or mis-declaration with intent to evade duty on the part of the appellant. From the Show cause Notice it was observed that the appellant had availed Cenvat credit on dredging services from 19-4-2010 to 1-12-2012 whereas the Show Cause Notice denying the said Cenvat credit was issued on 13-4-2015. Therefore, the entire demand is under the extended period, hence in view of the above facts the demand is not sustainable on limitation also."
4.5 From the above the decisions it is evident that the dredging services have been held as input service for providing the output port services. It has been held in the case of Essar that it is the person namely the appellant who has received the 33 E/86850/2018 said services to provide the output service to his clients and not the Government under whose license/ lease agreement the service provider is from the port area. Since both the issues on which the credit has been sought to be denied have been decided in the favour of the appellant by the CESTAT we do not find any merits in the impugned order denying the credit.
5.1 Appeal is allowed.
(Order pronounced in the open court) (Sanjiv Srivastava) Member (Technical) (Dr. Suvendu Kumar Pati) Member (Judicial) tvu