Custom, Excise & Service Tax Tribunal
Albatross Shipping Pvt Ltd vs Rajkot on 11 July, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
AHMEDABAD
REGIONAL BENCH, COURT NO. 2
SERVICE TAX APPEAL NO. 13182 OF 2013-DB
(Arising out of OIA-RJT-EXCUS-000-APP-279-13-14 dated 25/06/2013 passed by
Commissioner of Central Excise and Service Tax-Rajkot( Appeal))
Albatross Shipping Pvt Ltd ........Appellant
3rd Floor, Himalayas Geetmala Complex,
Off Deonar Village Road,
Govandi (E) Mumbai
Maharashtra
VERSUS
C.C.E. & S.T.-Rajkot ......Respondent
Central Excise Bhavan, Race Course Ring Road...Income Tax Office, Rajkot, Gujarat- 360001 Appearance:
Present for the Appellant : Shri Jigar Shah, Advocate and Shri Amber Kumsrawat, Advocate Present for the Respondent: Shri Satypal Singh Vikal , Additional Commissioner (AR) CORAM:
HON'BLE MR. RAMESH NAIR, MEMBER ( JUDICIAL ) HON'BLE MR. C. L. MAHAR, MEMBER ( TECHNICAL ) Final Order No. 11532/2024 DATE OF HEARING: 13.03.2024 DATE OF DECISION: 11.07.2024 C. L. MAHAR The brief facts of the matter are that the appellants are engaged in the business of providing steamer agent service, business support service, goods transport agency service and business auxiliary service, etc. and they are registered with the Service Tax Department for the same. During the departmental audit of financial records of the appellant and its principals namely M/s. Balaji Shipping UK Limited, it was noticed by the Department that the principal of the appellant namely M/s. Balaji Shipping (UK) Limited Gandhidham does not have its independent identity or branch office in the India. The appellant is handling all the business activities in the name of their principles namely M/s. Balaji Shipping (UK) Limited, Gandhidham.
1.1. The department during the preliminary inquiry at the time of the audit noticed that there was no separate account in the name of their principals namely M/s. Balaji Shipping (UK) Limited, Gandhidham and as per the agreement dated 19.02.2002, the appellant being the agent of the principal is maintaining all the books of account in its own name. The departmental audit has observed that the appellant had collected " Terminal Handling Charges"
from their clients, however, they have not discharged any Service Tax on such charges during the period from 01.10.2004 to 03.07.2006. The department has entertained a view that the services provided by them fall under the category of "Port Service". A Show cause notice dated 16.04.2010 came to be issued to the appellant asking them to pay Service Tax of Rs.14,50,862/-
under proviso to Section 73(1) of the Finance Act, 1994. The show cause notice has also invoked the provisions of demanding interest under Section 75 of the Finance Act and Penal provisions under Section 76, Section 77 and Section 78 of the Finance Act, 1994.
1.2. The original Adjudicating Authority by its order dated 28th September, 2011 has confirmed all the charges as invoked in the show cause notice. The appellant has approached Commissioner (Appeal), however they did not succeed and the appellant before us against the Order-In-Appeal dated 25.06.2013.
2. The learned Advocate appearing for the appellant submitted that the nature of business that undertaken by the appellant is not covered under sub-
clause of Section 65 (82) of the Finance Act, 1994 where the port service has been defined.
2.1. The learned Advocate has submitted that the port service definition at the relevant time provides the following essential elements for service to be classified as port service :-
(I) Service must be rendered by port or any other person authorized by the port (II) The services may be rendered in any manner.
(III) The service must be in relation to vessel or goods.
2.2. The learned Advocate has emphasized that the appellant are not authorized by port in any manner to carry out the duties and services provided in relation to vessel or goods but they are getting container loaded /unloaded from the vessels on behalf of their clients.
2.3. The learned Advocate has explained that the activities undertaken by the appellant is primarily of picking of containers from vessels or vehicles and placing the containers on vehicles or vessel and same is called as terminal handling charges. It is the matter of record that the terminal handling charges are paid by the appellant to the port authorities and appellant recovers charges from their respective clients after adding margin of profit on and above charges recovered from them by the port authorities.
The difference between the charges paid by the appellant to the port authorities and recovered by them from their clients is the margin of profit and this margin of profit goes to their principals namely M/s. Balaji Shipping (UK) Limited, Gandhidham.
2.4. The learned Advocate has further submitted that port authorities collects charges from shipping lines for 'terminal handling work' and therefore, it is the port authority which charges for terminal handling service and they also pay Service Tax on the same.
2.5. The learned Advocate has further mentioned that the taxable services of port service have been defined in Section 65 (105) (zn) as under :-
" Service to any person by other port or any person authorized by that port in relation to port services in any manner."
2.6. It has further been mentioned by the learned Advocate that above definition of port services was amended subsequently by the Finance Act, 2010 where under the condition that service provider should be authorized by the port has been dispensed with. He has pointed out that since the disputed demand period is prior to Finance Act, 2010. The definition as existing before amendment has to be adhere to.
2.7. The learned Advocate has relied upon this Tribunal decision in case of Velaji P & Sons reported under 2007 (8) STR 236 (Tribunal- Ahmedabad).
Wherein it has been held for a service to fall under the category of port service the person who is rendering the service in port area has to be port itself or any other person authorized by the port. The learned Advocate has submitted that the above decision of the Tribunal in case of u/s Velaji P & Sons (Supra) has been confirmed by Hon'ble Apex Court as reported in 2009 (13) STR J 31 (SC).
2.8. The learned Advocate has also cited Supreme Court decision in case of Konkan Marine Agencies reported 2023 (69 )GSTL 114 (SC).
2.9. The learned Advocate has vehemently contended that the appellant was never authorized by the port to render any service within port area and, therefore the demand of Service Tax under the taxable category of port service as it existed in Section 65 (82) of the Finance Act, 1994 is legally not sustainable.
2.10. The Advocate has further submitted that the activity of terminal handling charges is specifically covered under the taxable category of " Cargo Handling Service" as defined in Section 65 (23) of the Finance Act, 1994. The definition of cargo handling service as provided is as follows:-
"(23) "cargo handling service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-
containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport and cargo handling service incidental to freight, but does not include handling of export cargo or passenger baggage or mere transportation of goods;"
At the same time the Central Board of indirect taxes in its Circular No. B11/1/2002 -TRU dated 01.08.2002 has clarified the scope of cargo handling services agenda:-
"2. As per clause (21), the term "cargo handling service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special special containers or for non-containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and any other service incidental to freight, but does not include handling of export cargo or passenger baggage or mere transportation of cargo. The taxable service, as per sub-clause (zr) of clause (90), is any service provided, to any person, by a cargo handling agency in relation to cargo handling services.
3. The services which are liable to tax under this category are the services provided by cargo handling agencies who undertake the activity of packing, unpacking, loading and unloading of goods meant to be transported by any means of transportation namely truck, rail, ship or aircraft. Well known examples of cargo handling service are services provided in relation to cargo handling by the Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations. This is only an illustrative list. There are several other firms that are engaged in the business of cargo handling services."
2.11. The learned Advocate has submitted that from the definition of cargo handling services as define under Section 65 (23) of the Finance Act, 1994 and the clarification issued by the CBIC. It is clear that the terminal handling charges are nothing but container handling and specifically covered under the category of cargo handling services and therefore, same is not classifiable under category of port service.
2.12. The learned Advocate has further stated that after 04.07.2006. The appellant has been discharging the service tax liability on the same charges under taxable category of business support services and revenue authorities has accepted the same and therefore, it is presumed that activities before 04.07.2006 was not falling under any taxable category of the service.
2.13. It has further been stated by the learned Advocate that since no element of fraud, mis-statement or mis-representation within intend to evade Service Tax is present in this case and therefore, confirmation of Service Tax by invoking extended time proviso under Section 73 (1) of the Finance Act, 1994 is legally not sustainable.
3. We have also heard the learned departmental representative who has reiterated the finding as given in the impugned Order-In-Appeal.
4. We have heard the rival submissions and have considered the arguments advanced during the course of hearing. The facts of the matter is that the appellant is working as steamer agent and they are paying to the Port Authorities the charges for container handling for import and export cargo of the appellant's customers. The Ports like Kandala Port Trust, Mundra International Terminal, etc. are charging for terminal handling charges for the container import /export cargo handled by them on behalf of the appellant.
4.1. We also do not find any merit in the argument advance by the appellant that they are only the agent for their principals namely Balaji Shipping (UK) Limited Gandhidham who has obtained registration of the business support service. We find that all the activities of cargo handling including that of terminal handling of the containers are practically looked after by the appellant they are de facto service provider of these services in India. The only question which needs to be answered by us is whether the activity undertaken by the appellant of engaging port authorities for getting containers of import and export cargo handled by the port authorities fall under the category of port services . From the perusal of facts itself it appears that the terminal handling work of the containers was actually done by the port authorities such as Kandala Port Trust or Mundra International Terminal, etc. and for that they have raised invoice in the name of the appellant. The appellant has further raised invoice after adding margin of profit to their various clients scan copy of the sample invoice is reproduced here below:-
From a glance at the above mentioned invoice, it can be seen that container has been handled by M/s. Mundra International Cargo Terminal and the invoice has been raised on the appellant, in this invoice even Service Tax has been charged by the Port Authority namely M/s. Mundra International Cargo Terminal. This very fact makes it clear that actually the service of terminal handling has been provided by the port namely MICT and appellant is the service recipient in this case on behalf of his client.
4.3. Now, coming to whether the activity undertaken by the appellant falls under the category of Port Service or not. It is clear that the containers in the port area has been handled by the concerned port authority for example M/s.
Mundra International Cargo Terminal which itself prove that the appellant is not authorized person by the port to handle the cargo in the port area. The definition of the port service as provided before Finance Act, 2010 is reproduced here below :-
"Section 65(105)(zn) to any person , by a port or any person authorized by the port, in relation to port service in any manner"
As it can be seen from the above definition that it is imperative that port service has to be within port by port authorities or by any person authorized by the port. Since, it is very apparent from the record of the appeal that the appellant was not authorized person within port area, the activity undertaken by them does not fall under the category of port service.
4.4. We also rely on the decision of this Tribunal on this issue in case of M/s.
Velaji P & Sons Pvt Ltd V/s. CCE reported under 2007 (8) STR 236 (T) :-
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 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. 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. 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 vanous 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.
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 diving 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 (for eg P&O) terminal in Navaseva in Mumbai, Visakha Container Terminal at Visakhapatnam etc.) operating in various major ports and 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 licenses 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 license 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, we are of firm view that activities undertaken by the appellant does not fall under the category of Port Services."
The above decision of this Tribunal has also been affirmed by the Supreme Court as reported under 2009 (13) STR J 131 (SC).
4.5. Similarly, this Tribunal in case of Aspinwall and Company Limited Vs. Commissioner of Central Excise, Mangalore reported 2011 (21) STR 257 (Tribunal-Bang.) "11. The issue involved in all these cases mainly centres around the classification of the services rendered by the appellants herein. The appellants herein are claiming the classification of their services under the category of 'Custom House Agents' and other services while Revenue seeks to classify these services under 'Port services'.
12. The undisputed facts in all these cases are that the appellants herein were holders of Stevedoring Licence and in few cases were also rendering the activity of handling shipment of iron ore, granite blocks, aluminium, etc. within the port area of Mangalore Port and Karwar Port. It is also undisputed that the appellants herein had taken the Service Tax registration under the category of CHA or Steamer Agent or C&F Agents. It is also undisputed that the appellants are discharging their Service Tax liability under the category of CHA on 15% of the gross value of the bills raised by them for the services rendered to their customers. Revenue's contention is that the entire amount, which is collected by the appellants from their customers, should be taxed under 'Port Services'. The adjudicating authority, while coming to the conclusion that the appellants herein had rendered the 'Port services', as in almost all cases, recorded the following findings :
"27. The issue relates to classification of services rendered under 'port services' and demand of differential duty. The contention of the service provider is that they are rendering services as Custom House Agent (CHA) and paying service tax under the said category and that they are not authorized but only licensed by Port for providing services inside the Port. Port Services were brought under the Service Tax net with effect from 16- 7-2001 and has been defined in Section 65(82) of the Act.
As per the definition, port service means -
(i) any service in relation to a vessel or goods, and
(ii) provided by port, other port or a person authorised by port or other port.
The services rendered by the port or a person authorized by the port are not defined in the Act. Therefore, any service rendered within the port premises by the port or by any person authorized by the port is to be treated as 'Port Service'. The Service provider is issued with a Stevedoring Licence and Clearing & Forwarding Agency Licence by NMPT to perform stevedoring operation within port premises. No stevedore shall be allowed to work on board any vessel in the port except with stevedore licence issued by the port.
28. The issued to be decided here is whether the above services rendered within the port are to be treated as 'Port service'. The service provider's contention is that though the services are rendered within the port premises it cannot be treated as 'Port Services' as port has not authorized them to render such services. It is not disputed that the service provider is licensed and permitted to render stevedoring service. Port is a notified area and does not provide free access to general public. For entry into the port premises, Port Trust has specified certain restrictions. Rendering of any service within the port would be possible only with permission or authorization issued by the Port. The service provider has obtained a stevedore licence from the Port Trust, for rendering stevedore service. All the services within the port are either required to be done by port or by persons permitted/authorized by the port. A person who is licenced or authorized to render stevedore service is also authorized to render other allied and ancillary operations as evident from the nature of service rendered by the service provider. The statutory definition under Section 65(82) says that "port services" means any service rendered by a port or other port or any person authorized by such port or other port, in any manner, in relation to a vessel or goods". So the emphasis here is on the "person authorized" and not on the "service authorized".
30. In the above mentioned clarification even though Management Committee at Paradeep Port is not authorized by the port for rendering its services within the port, yet it was considered by the Board that as long as the contractors utilized by Management Committee for rendering their services are issued licenses or permits by the Paradeep port, it should be treated as authorized by the Port Trust for rendering services in relation to vessels and goods within the port area. On the same analogy, since the service provider are issued with stevedore licence by the NMPT to operate within the port area it cannot therefore be said that they are not authorized by the NMPT for rendering services in relation to vessels and goods within the port area. Port service is expected to be provided by the port or by person authorized by port in any manner. Instead of performing all the services by themselves, port has preferred to perform certain services and permitted/authorized to do the remaining services by stevedore. For example, Section 42 of the Major Port Trust Act, 1963 specify performance of service by Board or other person. Section 42(1) says that a Board shall have power to undertake the following services :-
(a) landing, shipping or transhipping passengers and goods between vessels in the port and the wharfs, piles, quays in docks belonging to or in the possession of the Board;
(b) receiving, removing, shifting, transporting, storing and 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
(f) developing and providing, subject to the previous approval of the Central Government, infrastructure facilities for ports.
31. Thus, removing, shifting, transporting, storing or delivering goods brought within the port premises are either to be done by Port or by any person authorized by the port. Since transporting, removing and shifting of goods are not done by NMPT, the service provider performs the above services on the strength of stevedore licence which is nothing but an authorization to enter the port premises and render services. If the service provider was not authorized by the Port to perform the above services, Port Trust would have raised objection or would not have allowed them to perform the services in the port premises other than simple stevedoring (loading & unloading) operation. Therefore, it should mean that the above services performed by the service provider are with the explicit approval of port authorities only".
13. As can be seen from the above reproduced findings of the adjudicating authority, which is more or less the same in all the orders, relies upon two propositions to classify the services rendered by the appellants under 'Port services' viz. (i) that the services are rendered by the appellants within the port area of the new Mangalore Port or Karwar Port and (ii) Section 42(1) of the Major Port Trust Act, 1963 indicates that a Board shall have power to undertake the services, which they can licence to somebody else. At the outset, we may record that an identical issue arose as regards the assessee having a stevedoring licence and his operations were sought to be brought under the category of 'Port services' by the revenue authorities in the case of Konkan Marine Agencies. Aggrieved by such an order, the appellants preferred an appeal before the Tribunal in appeal No. ST/75/2007, which was disposed of by Final Order No. 884/2007, dated 6-8-2007 as reported at 2007 (8) S.T.R. 472 (Tri.-Bang.). While allowing the appeal filed by the assessee therein, the Bench recorded findings, which, we may respectfully reproduce :
"6. We have gone through the records of the case carefully. The point at issue is whether the services rendered by the appellants amount to "Port Services" and whether they are liable to pay Service Tax in terms of the Finance Act, 1994. We find that the appellants obtained the stevedoring license from the Mangalore Port Trust for carrying out the stevedoring operations. The stevedoring operations actually mean loading and unloading of cargo within the port premises. The Commissioner has interpreted that the appellant is carrying out the services within the port and he has been authorized by the port to render such services in view of the licence given to him. Therefore, he would rightly fall within the ambit of the "Port Services". However, when we examined the issue in terms of Section 42 of the Major Port Trust Act, we find, that in terms of that Section, the major port is supposed to carry out a number of activities and there is provision in terms of the said section for the port to authorize any other person to render such services after taking prior approval of the Central Government. In the present case, the appellants strongly contend that the services rendered by them are not on behalf of the ports but on their own behalf. In other words, the appellants render directly the services and the licence is only a permission to undertake such services within the port premises. Therefore, it cannot be interpreted that the appellants are rendering any service on behalf of the port. We also find that the issue has been gone in depth in the cited decision of the Mumbai Tribunal wherein the Tribunal held that the port is supposed to give only facility for ship repairing and it is not expected of a port to directly render the services of ship repairing. Interpreting Section 42 and the provisions of the Service Tax in the Finance Act, the Mumbai Tribunal even held that the Board's circular issued on this behalf is not in accordance with law. Moreover, the appellants have produced a letter from the Mangalore Port Trust which clearly say that the appellants are rendering the services directly and not on behalf of the port. In these circumstances, there is much force in the 'appellant's contention that services rendered by them would not amount to "Port Services". In other words, it would only be "Cargo Handling Services". But, the appellants would not come within the ambit of taxation, because in respect of "Cargo Handling Services", the cargo in relation to exports are excluded from the purview. Since the appellant is only handling the export cargo, he would not be liable to Service Tax even under the category of "Cargo Handling Services'. In these circumstances, we do not find any merit in the order of the Commissioner and therefore, we set aside the same and allow the appeal of the appellants with consequential relief."
14. It can be seen from the above reproduced findings that the Bench had considered the provisions of Section 42 of the Major Port Trust Act and also the definition of the 'Port services' under Section 65 of the Finance Act, 1994 while allowing the appeal filed by asessee. Aggrieved by such an order, Revenue preferred an appeal to the Hon'ble High Court of Karnataka in C.E. Appeal No. 12 of 2008, which was decided by a judgment dated 13-3-2008, which is reported at 2009 (13) S.T.R. 7 (Kar.). In the said judgment, their lordships have recorded the following findings, from which we respectfully reproduce relevant paragraphs :
"15. We may further clarify that the definition of "port service" as found in Section 65(82) of the Finance Act would not be applicable to the facts of the present case. The definition of "port service" reads 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."
16. According to the learned Counsel for the appellant since the assessee is a licence holder, therefore he would be the person authorized within the definition of "port service"
as mentioned hereinabove.
17. We do not agree to the aforesaid contentions advanced by the learned Counsel for appellant for the simple reason that definition of "cargo handling service" as reproduced hereinabove and Section 65(23) clearly puts a bar with regard to the imposition of tax meant for export which also includes handling of the export cargo."
Revenue is aggrieved by this order of the Hon'ble High Court and has preferred an appeal before the Hon'ble Supreme Court.
15. It can be seen from the above reproduced findings of the Tribunal as upheld by the Hon'ble High Court, on the categorisation of the services rendered by the assessee in the case of Konkan Marine Agency as to the same will not fall under the category of 'Port services'. It can be seen that all along, the assessee therein was functioning under stevedoring licence issued by the Port Trust. In the cases before us today, it is a common trait which revolves around the fact that the appellants herein were having the stevedoring licence and were functioning under the said licence and are to be considered as providing services as authorised by the port. We are of the considered view that after the judgment of the Hon'ble High Court of Karnataka and the said judgment being not stayed by the Hon'ble Supreme Court, will squarely applies to the cases in hand.
16. The findings of the adjudicating authority in few of the cases before us is also on the ground that the assesses therein were providing services of loading, unloading of import or export of goods from the premises of exporter or importer, terminal handling, drawback processing, etc., within the port area under "Licence to function" as a Customs House Agent within the port area and hence these activities will fall under the category of 'Port services'. We find that the ratio of the decision of the Tribunal in the case of Velji P. & Sons (Agencies) P. Ltd. (supra) would cover the issue in favour of the assessee. With respect, we may reproduce the facts and the ratio therein.
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 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. 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. 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.
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 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, 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 seems to have been accepted by the Government of India, which can be ascertained from the fact that the 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 seeks 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'. As the impugned orders are set aside on merits, there can be no case of penalty or interest in respect of this issue."
Following the above decisions and as discussed in the proceeding paras we hold that the activities under taken by the appellant during the period of demand does not fall under the category of port service and therefore, we set aside the impugned Order-In-Appeal.
5. Accordingly, the appeal is allowed.
(Pronounced in the open court on 11.07.2024 )
(RAMESH NAIR)
MEMBER (JUDICIAL)
(C L MAHAR)
MEMBER (TECHNICAL)
AD