Custom, Excise & Service Tax Tribunal
M/S Essar Logistics Ltd vs Commissioner Of Central Excise & ... on 4 February, 2016
. In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad Appeal No.ST/10892/2013-DB; Application No.ST/EXTN/14742/2014 [Arising out of OIO No.16/Service Tax/2012, dt.08.01.2013, passed by Commissioner of Central Excise & Service Tax, Surat] M/s Essar Logistics Ltd Appellant Vs Commissioner of Central Excise & Service Tax. Rajkot Respondent
Represented by:
For Appellant: Shri V.K. Jain, Shri Vishal Agarwal,
Ms.Dimple Gohil Advocates
For Respondent: Dr. J. Nagori, A.R.
For approval and signature:
Honble Mr. P.K. Das, Member (Judicial)
Honble Mr. P.M. Saleem, Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
CORAM:
HONBLE MR. P.K DAS, MEMBER (JUDICIAL)
HONBLE MR. P.M. SALEEM, MEMBER (TECHNICAL)
Date of Hearing:19.08.2015
Date of Pronouncement: 04.02.2016
Order No. A/10080/2016, dt.04.02.2016
Per: P.K. Das
The Appellant filed this appeal against the Order-in-Original No.16/Service Tax/2012, dt.08.01.2013, passed by Commissioner of Central Excise & Service Tax, Surat.
2. The relevant facts of the case, in brief, are that M/s Essar Steel Ltd (in short M/s Essar Steel), has set up a captive jetty at Magdalla/ Hazira Port allotted by Gujarat Maritime Board (GMB). M/s Essar Steel is authorized by GMB to perform services in the port under Section 32(3) of Gujarat Maritime Board Act, 1981. The Appellant entered into a contract dt.01.04.2006 known as Stevedoring, Lighterage & Transshipment Agreement with M/s Essar Steel and rendering services for stevedoring and transshipment of finished steel goods. The Central Excise officers of Directorate General of Central Excise Intelligence (DGCEI) conducted search operation on 13.04.2007 at the premises of M/s Essar Steel. They seized various documents of M/s Essar Steel and other documents relating to the Appellant Company. In the follow up action, the Central Excise officers recorded statements of the employee of the Appellant Company, M/s Essar Steel and GMB on different dates. A show cause notice dt.07.01.2011 was issued to the Appellant, proposing demand of Service Tax of Rs. 49,57,70,669.00 alongwith interest and to impose penalty under the various provisions of Finance Act, 1994 for the period from 01.10.2005 to 30.09.2010. It has been alleged that the Appellant had been providing the Port services to M/s Essar Steel. The Lighterage and Stevedoring services rendered by the Appellant in relation to the vessel or goods at the port would be classified as Port service as defined under Section 65(82) of the Finance Act, 1994, as amended and covered as taxable service under Section 65 (105)(zzi) of the said Act, 1994. By the impugned order, the Adjudicating authority confirmed the demand of Service Tax alongwith interest and imposed penalty under the various provisions of Act, 1994.
3. The learned Advocate on behalf of the Appellant submits that the demand of tax was confirmed on two counts, namely (a) Stevedoring charges i.e. loading and unloading of cargo from ships/vessels and, (b) Lighterage charges Transportation of cargo in barges from the mother vessel anchored at the anchorage of the port to the barge/jetty and vice versa.
4. On the first issue (i.e. Stevedoring charges), it is submitted that the Stevedoring services rendered to Domestic Tariff Area (DTA) unit of M/s Essar Steel, they were discharging Service Tax under the category of Cargo Handling Services. The definition of Cargo Handling Services specifically excluded the handling of export cargo and therefore, they were not paying Service Tax on Stevedoring services in respect of loading, unloading and handling of export cargo.
4.1 On the other issue (i.e. Lighterage charges), the transportation of goods through barges (sea), till 31.08.2009, there was no taxable head of services on lighterage charges. It is submitted that the Superintendent of Central Excise, by letter dt.23.09.2009, directed the Appellant to pay Service Tax on lighterage charges under the head of Transport of Coastal Goods and Goods Transport Through National Waterways and Inland Water Services (in short Transport of Coastal Goods) and they started discharging Service Tax as per the direction of the Department under the new head w.e.f. 01.09.2009. The learned Advocate referred Para 132 of the speech of Finance Minister in Budget 2009-2010. Further, this is supported by the decision of the Tribunal in the case of United Shippers Ltd Vs CCE 2015 (37) STR 1043 (Tri-Mum), upheld by the Hon'ble Supreme Court as reported in 2015-TIOL-173-SC-ST-LB. The Adjudicating authority, relying upon the decision of the Tribunal in the case of Reliance Industries Ltd Vs Commissioner of Customs 2004 (174) ELT 344 (T), observed that the Lighterage charges would be covered under the head of loading and unloading service and covered under Port service. It is submitted that this view is contrary to the decision of the Hon'ble Supreme Court in the case of Ispat Industries Ltd Vs Commissioner of Customs, Mumbai 2006 (202) ELT 561 (S.C.)
5. The learned Advocate fairly submits that w.e.f. 01.07.2010, both the issues, Stevedoring and Lighterage charges, are covered under the definition of Port services as amended by Finance Bill of 2010. In this context, he referred to Board Circular F.No.354/1/2010-TRU, dt.26.02.2010. He drew the attention of the Bench to the letter dt.24.08.2009 of the Chartered Accountant of GMB that they have not issued any authorization to the appellant and therefore, the Appellant is not covered within the definition of Port service prior to 01.07.2010. He referred to various decision on this issue before the Bench. He further submits that decision of the Hon'ble Gujarat High Court in the case of Kandla Shipchandlers & Ship Repairers Association Vs UoI 2013 (29) STR 233 (Guj.) is not applicable in the present case, as, in that case, the petitioners were authorized by the Port. On the other hand, the present case is squarely covered by the decision of the Tribunal in the case of M/s Shreeji Shipping Vs CCE & ST 2014 (36) STR 569 (Tri-Ahmd). Apart from that the Stevedoring & Lighterage services rendered into the SEZ unit of M/s Essar Steel is exempted from Service Tax by virtue of Section 26(i) (e) of the said SEZ Act, 2005 read with Rule 31 of the said Rules. He referred to various decisions of the Tribunal on this issue. The demand of Service Tax is also barred by limitation. It is a case of revenue neutrality. If the Service Tax was paid by the Appellant would be available as credit to M/s Essar Steel and therefore, there is no revenue loss. It is submitted that Honble Supreme Court and the Tribunal in various cases, held that in this situation, the demand of Service Tax for the extended period of limitation cannot be sustained. The learned Advocate submitted the written submissions in detail alongwith the compilation of case laws and the various provisions of the Finance Act, 1994.
6. On the other hand, the learned Authorised Representative for the Revenue reiterates the findings of the Adjudicating authority. He submits that the Stevedoring & Lighterage services are covered under the Port services since 2001. He submits that M/s Essar Steel was authorised by the Port to render the services in the port. On perusal of the various provisions of GMB Act and the agreement between M/s Essar Steel and the Appellant, would clearly show that the Appellant is authorised by the Board for rendering the services. He particularly drew the attention of the Bench that the Appellants raised charges for Stevedoring & Lighterage services to M/s. Essar Steel are in conformity with the schedule of Board. It is submitted that the issue is squarely covered in favour of the Revenue by the decision of Hon'ble Gujarat High Court in the case of Kandla Shipchandlers & Ship Repairers Association Vs UoI - 2013 (29) STR 233 (Guj). It is submitted that the Tribunal in the case of M/s Shreeji Shipping (supra) had not considered the decision of Hon'ble Gujarat High Court in the case of Kandla Shipchandlers & Ship Repairers Association (supra). Hence, the decision of the Tribunal in the case of M/s Shreeji Shipping is per incuriam. The Hon'ble Supreme Court, in the case of Commissioner of Central Excise Vs United Shippers Ltd (supra), has not given any finding and the said decision would not be helpful to the Appellant. He submits that the Lighterage charges are not cost of transport as held by the Tribunal in the case of Reliance Industries Ltd (supra). The claim of the Appellant is that some of the services of SEZ unit is exempted from Service Tax, cannot be accepted, as there was no exemption notification under the Finance Act, 1994. He relied upon the decision of the Hon'ble Gujarat High Court in the case of Essar Steel Ltd Vs UoI 2010(249) ELT 3 (Guj.)
7. The learned Authorised Representative also submits that the employee of the Appellant Company in his statement dt.26.08.2009 admitted the tax liability. The Appellant had not disclosed the details of the said services in their return, which amounts to suppression of facts to evade payment of tax and extended period of limitation would be invoked. He strongly relied upon the decision of Tribunal in the case of Lakhan Singh & Co and Anr Vs CCE Jaipur Final Order No.ST/A/58310-58311/2013-CU(DB), dt.15.10.2013. The learned Authorised Representative submitted Written Submissions with compilation of case laws.
8. Heard both the sides and perused the records.
9. The issue involved in this appeal to be decided, is whether the Appellant is liable to pay the Service Tax on Lighterage & Stevedoring services rendered by them in relation to vessel or goods at the Magdalla/Hazira port under Port Services as defined under Section 65(82) of the Finance Act, 1994 as amended and covered as taxable service under Section 65(102)(zzl) of the said Act, 1994 as amended, during the period from 01.10.2005 to 30.09.2010. Magdalla Port is a minor port under the control of Govt. of Gujarat under the Indian Port Act, 1908. The Government of Gujarat has vested the administrative control and the management of all the minor ports within the State of Gujarat with the Gujarat Maritime Board (GMB) in terms of GMB Act, 1981. M/s Essar Steel had been licenced to set up a captive jetty at Hazira within the Magdalla Port in terms of the concession agreement entered between GMB (licensor) constituted by the Government of Gujarat under GMB Act, 1981 and M/s Essar Steel (licencee). M/s Essar Steel had two manufacturing facilities at Hazira at Domestic Tariff Area (DTA) and others and Special Economic Zone (SEZ). M/s Essar Steels (Hazira) Ltd got approval as SEZ unit vide letter dt.26.10.2006 issued by the Office of Development Commissioner, Kandla Special Economic Zone, Ministry of Commerce & Industry, Gandhidham. By letter dt.24.08.2009, the Chartered Accountant on behalf of GMB informed the Superintendent of DGCEI that authorization was only issued to M/s Essar Steel at Magdalla to perform services in the Port under Section 32(3) of the Gujarat Maritime Board Act, 1981.
10. On 01.04.2006, the Appellants had entered into Stevedoring, Lighterage and Transshipment Contract with M/s Essar Steel for the Lighterage and transshipment of finished steel goods from the Cargo Handling Terminal of the M/s Essar Steel, Hazira and the mother vessel for both inward and outward cargos at Hazira anchorage. The relevant portion of the said contract is reproduced below:-
Stevedoring, Lighterage & Transshipment Contract This contract is being made this 01st day of April, 2006, between Essar Steel Limited, 27 KM, Surat Hazira Road, Hazira, Surat as Manufacturers and Essar Logistics Limited, 27 KM, Surat Hazira Road, Surat as Logistics Operators, for the lighterage and transshipment of Bulk Raw Materials and to and from the cargo handling of Terminal of Essar Steel, Hazira and the mother vessel for both inward and outward cargos at Hazira anchorage/Bhavnagar/Dahej/Pipavav/Mumbai ports for the period upto 31st March, 2007 commencing from 01st April 2006.
(1) The Manufacturers are desirous of moving cargo comprising of Iron Ores and Pellets, Limestone and coal between their terminal at Hazira and mother vessels at Hazira anchorage/ Bhavnagar/Dahej/Pipavav/Mumbai, and the Logistics Operators agree to carry out the lighterage and transshipment of the above mentioned cargos, on their own or chartered vessels.
(2) The Logistics Operators guarantee that sufficient lighterage craft and other equipment will be provided by them, including licencesed Stevedores for carrying out the lighterage/transshipment operations at Hazira.
(3) Manufacturers to provide all fuel required for all Operating vessels at Hazira on actual expenses to Operators. In case Manufacturers are unable to provide replenishment of bunkers at outports, Operators shall arrange for the same.
(4) All dues payable towards vessels berthing, Pilotage, berth hire, employment of Tugs, watchmen and any other vessel related dues as levied by the port authorities and any taxes on the vessel will be to the Operators account.
(5) All dues payable towards wharfage, loading charges and any other cargo related dues at levied by the port or other authorities to be to Manufacturers account. According to the Appellant, Stevedoring Services rendered to DTA unit of M/s Essar Steel, they were discharging Service Tax under the head of Cargo Handling Service. As the definition of Cargo Handling Service excluded export cargo, they were not liable to pay Service Tax in respect of loading and unloading and handling of export cargo. Lighterage Service is transportation of cargo in Barges from the mother vessel to jetty and vice versa. They are liable to pay Service Tax from 01.09.2009 under the head of Transport of Coastal Goods and Goods Transport through National Waterways and Inland Water Service. Further, Stevedoring and Lighterage services to the said SEZ unit of M/s Essar Steel, no Service Tax was paid, which was exempted by virtue of Section 26(1)(e) of the said Act, 2005 read with Rule 36 of the said Rules.
11. The relevant definition of the Finance Act, 1994, Board Circular etc as referred by both sides are reproduced below:-
(A) The definition of Port Service before its amendment on 01.07.2010 under Section 65(82) of the Act, 1994:
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.
Taxable service under Section 65(105)(zn) of the Act, 1994 means any service provided or to be provided, to any person, by a port or any person authorised by the port, in relation to port services, in any manner. (B) The Port Service has been amended w.e.f. 01.07.2010 as under:-
Port Service means any service rendered within a port or other port, in any manner. Taxable service means any service provided or to be provided to any person by any person, in relation to port services on a port, in any manner. (C) CBEC vide Circular No.334/1/2010-TRU, dt.26.02.2010, clarified the changes and the clarifications on Service Tax in respect of Union Budget 2010-11. The relevant portion of the said circular is reproduced below:-
Alteration and expansion in the scope of existing services and other significant changes in the Finance Act, 1994
1.?Services provided in an airport or port 1.1?Two services, namely port services and the airport services were introduced in Budgets 2001 and 2004 respectively. The services provided by minor ports covered under other ports became taxable from 2003. The purpose behind creating these services was that since a number of activities are undertaken within the premises of ports and airports, it would be easier to consolidate all such services under one head.
1.2?It was reported that divergent practices are being followed regarding classification of services being performed within port/airport area. In some places, all services performed in these areas [even those falling within the definition of other taxable services] are being classified under the port/airport services. Elsewhere, individual services are classified according to their individual description on the grounds that the provisions Section 65A of Finance Act, 1994 prescribes adoption of a specific description over a general one.
1.3?Further, both the definitions use the phrase any person authorised by port/airport. In many ports/airports there is no procedure of specifically authorizing a service provider to undertake a particular activity. While there may be restriction on entry into such areas and the authorities often issue entry-passes or identity cards, airport/port authorities seldom issue authority/permission letters to a service provider authorising him to undertake a particular task. Many taxpayers have claimed waiver of tax under these services on the ground that the port/airport authority has not specifically authorised them to provide a particular service.
1.4?In order to remove these difficulties, the definitions of the relevant taxable services are being amended to clarify that all services provided entirely within the port/airport premises would fall under these services. Further, specific authorisation from the port/airport authority would now not be a pre-condition for the levy. (D)`Cargo Handling Service means loading, unloading, packing or unpacking of cargo and includes
(a) cargo handling services provided for freight in special containers or for non-containerized 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 and
(b) service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking, but does not include handling of export cargo or passenger baggage or mere transportation of goods. (E) Definition of Service Tax under the category of Transport of Coastal Goods and Goods Through National Waterways and Inland Water Services leviable from 01.09.2009:-
(zzzzl) to any person, by any other person, in relation to transport of-
(i) coastal goods;
(ii) goods through national waterway; or
(iii) goods through inland water Explanation For the purposes this sub-clause,-
(a) coastal goods has the meaning assigned to it in Clause (7) of Section 2 of the Customs Act, 1962 (52 of 1962);
(b) national waterway has the meaning assigned to it in Clause (h) of Section 2 of the Inland Waterways Authority of India Act, 1985 (82 of 1985);
(c) inland water has the meaning assigned to it in Clause (b) of Section 2 of the Inland Vessels Act, 1917 (1 of 1917) (F) Finance Ministers Speech Budget 2009-2010 on 06.07.2009:
132. In the goods transport sector, Service Tax is currently levied on transport of goods by road, by air, through pipelines and in containers. However, goods carried by Indian Railways to those carried as coastal cargo or through inland waterways are not charged to Service Tax. In order to provide a level playing field in the goods transport sector, I propose to extend the levy of Service Tax to these modes of goods transport. The new levy is not likely to impact the prices of essential commodities or goods for mass consumption, as suitable exemptions would be provided.
12. The Adjudicating authority classified the Lighterage and Stevedoring services rendered by the appellant under Port Service for the period 1.10.2005 to 30.09.2010. On plain reading of the definition of Port service prior to the amendment as on 01.07.2010, it is clear that any service rendered by a port or other port, or any person authorised by the said port, in any manner, in relation to vessel and goods, would come within the definition of Port service. The Appellants contended that the services rendered by them were not authorised by port to them and it would not come within the purview of definition of port service prior to 1.07.2010. The power of GMB to authorize any person to perform any service in the Port is provided under Section 32(3) of GMB Act, 1981 as under:-
(1) The Board shall have the powers to undertake the following services:-
(a) Stevedoring, landing, shipping or trans shipping passengers and goods between vessels in port and the wharves, piers, quays, or docks belonging to or in the possession of the Board.
(b) Receiving, removing, shifting, transporting, storing or delivering goods brought within the Boards premises.
(c) Carrying passengers within the limits of the Port or Port approaches, by such means and subject to such restrictions and conditions as the State Government may think fit to impose and
(d) Piloting, hauling, mooring, re-mooring, hooking or measuring of vessels or any other service in respect of vessels.
(2) The Board may, if so requested by the owner, take charge of the goods for the purpose performing the service or services and shall give a receipt in such form as Board may specify.
(3) Notwithstanding anything contained in this section, the Board may authorise any person to perform any of the services mentioned in sub-section (1) on such terms and conditions as may be agreed upon.
(4) No person authorised under sub-section (3) shall charge or recover for such service any sum in access of the amount leviable according to the scale framed under Section 37, 38 or 40.
(5) Any such person shall, if so required by the owner perform in respect of the goods any of the services and for that purpose take charge of the goods and give a receipt in such form as the Board may specify.
(6) The responsibility of any such person for the loss, destruction or deterioration of goods of which he has taken charge shall, subject to the other provisions of this Act, be that of the bailee under sections 151, 152, and 161 of the Indian Contract Act, 1872.
(7) After any goods have been taken charge of and a receipt given for them under this section, on liability for any loss or damage which may occur to them shall attach to any person to whom a receipt has been given or to, the master or owner of the vessel from which the goods have been landed or transshipped.
13. The Learned Advocate on behalf of the appellant referred to Section 42 of Major Port Trust Act, 1963, and submits that Board may with the previous sanction of the Central Government authorise any persons to perform any service in the Port. Section 42 of Major Port Trust Act, 1963 is reproduced below:-
Section 42 - Performance of services by Board or other person.
(1) 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 wharves, piers, quays or docks belonging to or in the possession of the Board;
(b) receiving, removing, shifting, transporting, storing or delivering goods brought within the Boards 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 despatching 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.] 4[(f) developing and providing, subject to the previous approval of the Central Government, infrastructure facilities for ports.]"
(2) A Board may, if so requested by the owner, take charge of the goods for the purpose of performing the service or services and shall give a receipt in such form as the Board may specify.
(3) Notwithstanding anything contained in this section, the Board may, with the previous sanction of the Central Government, authorise any person to perform any of the services mentioned in sub-section (1) on such terms and conditions as may be agreed upon.
(3A) Without prejudice to the provisions of sub-section (3), a Board may, with the previous approval of the Central Government, enter into any agreement or other arrangement, (whether by way of partnership, joint venture or in any other manner) with, any body corporate or any other person to perform any of the services and functions assigned to the Board under this Act on such terms and conditions as may be agreed upon.] (4) No person authorised under sub-section (3) shall charge or recover for such service any sum in excess of the amount 6[specified by the Authority, by notification in the Official Gazette.
(5) Any such person shall, if so required by the owner, perform in respect of goods any of the said services and for that purpose take charge of the goods and give a receipt in such form as the Board may specify.
(6) The responsibility of any such person for the loss, destruction or deterioration of goods of which he has taken charge shall, subject to the other provisions of this Act, be that of a bailee under sections 151, 152 and 161 of the Indian Contract Act, 1872 (9 of 1872).
(7) After any goods have been taken charge of and a receipt given for them under this section, no liability for any loss or damage which may occur to them shall attach to any person to whom a receipt has been given or to the master or owner of the vessel from which the goods have been landed or transshipped.
14. The main contention of the learned Authorised Representative for the Revenue is that the GMB authorised M/s Essar Steel in terms of Section 32(3) of GMB Act, 1981 for carrying out the Lighterage operation of the cargo from anchorage to jetty. M/s Essar Steel entered into agreement with the Appellant to perform Lighterage operation on their behalf. The Appellant vide their letter dt.07.10.2005, informed the GMB Magdalla , Surat that the Lighterage activity will be carried out by them on behalf of the M/s Essar Steel. Thus, it may be concluded that the services rendered by the Appellant are authorized by the port, otherwise, they cannot perform the said service, which is within the ambit of the definition of port service. It is further contended that there is no need for specific authorisation from GMB. The expression in any manner, in relation to a vessel or goods in the definition of port service enlarged the scope of the definition which includes the sub-contractor, who are providing the specified port service within the port area of Gujarat, are liable to pay Service Tax.
15. We find that this issue has been discussed in various decisions by the Tribunal and the Hon'ble High Court as under:-
a) Homa Engineering Works Vs CCE Mumbai 2007 (7) STR 546 (Tri-Mum) In that case, the Appellants were engaged in the business of repairing, chipping, cleaning and painting of the vessels of Coast Guard, Naval Dock and ONGC at Mazagaon Docks Ltd. A Show Cause Notice was issued, alleging that the services undertaken by the Appellant are Port services which are liable to Service Tax. The Revenue contended that the Appellant has been authorized to do so, he steps into the shoes of the Board and as such, the services rendered by him has to be treated as port services rendered by any person authorized by the port and thus liable to service tax. The Tribunal held that the power of Board to execute works under Section 35(1) of the Major Port Trust Act are not to the effect as to carry out repairing activity themselves. In fact, under the said Section, the Port is required to provide facilities for repair and not to undertake the repair itself. Ship breaking activity and ship manufacturing activity may also be done in the port area, for which purposes, the facility may be provided by the port, but that will not make the same as port services. It has been held that the expression or any other services in respect of vessels has to be extended to the services which are connected with the movement of the vessels. It is nobodys case that the repairing of vessels in the dry dock is connected with the movement of the vessels. The Tribunal allowed the appeal of the Assessee.
(b) M/s Velji & Sons (Agencies) P. Ltd Vs CCE Bhavnagar 2007 (8) STR 236 (Tri-Ahmd) In that case, the Appellants were engaged in Customs House Agent service, which was within the service net w.e.f. 1997. The Appellant was paying the Service Tax under the category of Customs House Agents services. A Show Cause Notice dt.15.07.2005 was issued, proposing demand of Service Tax for the period July 2003 to January 2005 on the ground that the services provided by the Appellant would come under Port services w.e.f. 01.07.2003. The appellants were licensed by Gujarat Pipavav Port Limited for hiring of barges, cranes, fork lifts relating to goods or vessels. The Adjudicating authority confirmed the demand of Service Tax alongwith interest and imposed penalties under the various provisions of Finance Act, 1994. The Tribunal allowed the appeal of the Appellant on merit as well as barred by limitation. The Tribunal, following the earlier decision in the case of M/s Homa Engineering Works Vs Commissioner 2007 (7) STR 546 (Tri) observed that the authorisation from the port must in respect of the services, which the port itself is required to provide, and as such, authorisation would make an Assessee to step into the shoes of the Port. There is no authorisation by the port to the Appellant to conduct the services on their behalf. Licences issued by the port authorities cannot be considered as an authorisation. Section 42 of the Major Port Trust Act provides for authorisation by the Board for various services specified by that Board in official gazette. The said decision was upheld by the Hon'ble Supreme Court as reported in 2009 (13) STR J 31 (SC).
(c) M/s Konkan Marine Agencies Vs CCE Mangalore 2007 (8) STR 472 (Tri-Bang) In that case, the Appellants provided Cargo Handling Services to the various exporters in relation to export of iron ore fine from New Mangalore Port. They filed a refund claim for erroneous payment of Service Tax as the export cargo is excluded from levy of Service Tax under the cargo handling service. According to the Revenue, the Appellant correctly paid the Service Tax under the category of port service and rejected the refund claim. The Tribunal allowed the appeal of the Appellant. 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 Tribunal observed that in terms of Section 42 of the Major Port Trust Act, 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 contended that the services rendered by them are not on behalf of the ports but on their own behalf. The appellants directly rendered the services and the licence is only a permission to undertake services within the Port premises. This decision of the Tribunal was upheld by Hon'ble Karnataka High Court as reported in 2009 (13) STR 7 (Kar) (Commissioner of Central Excise, Mangalore vs. Konkan Marine Agencies). The Hon'ble High Court, after considering Section 42 of the Major Port Trust Act, 1963 and the definition of Cargo Handling Service, held as under:-
13.?Cargo handling service has been defined in Section 65(23) in the Finance Act, 1994. The said definition reads as under :
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.
14.?A bare reading of the aforesaid definition further makes it clear as day that in any case handling of export cargo would not attract service tax at all. After having gone through the aforesaid definition, it leaves no amount of doubt in our mind that such a service tax could not have been levied on the assessee which was handling loading of cargo, meant for export purpose.
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.
(d) M/s H.K. Dave Ltd Vs CCE Bhavnagar 2008 (12) STR 561 (Tri-Ahmd) The appellants are having annual licences as steamer/stevedores agent issued by Gujarat Maritime Board. They are authorized to provide services of cargo handling and other services; they hired barges to provide services at the port. The Appellants claimed that they are covered under the category of Cargo Handling Service and exempted from Service Tax. The Department demanded the Service Tax under the category of port service. The Tribunal, following the earlier decision in the case of Konkan Marine Agencies (supra) and in the case of Velji & Sons (Agencies) P. Ltd (supra), allowed the appeal filed by the Appellant.
(e) Commissioner of Customs & Central Excise, Visakhapatnam vs. Chowgule Brothers Pvt. Limited 2010 (18) STR 164 (Tri. Bang.) In that case the respondents were Custom House Agent (CHA). The adjudicating authority confirmed the demand of service tax for the period 01.07.2003 to 01.09.2006, on the ground that the Respondent was engaged in the Cargo Handling in the port premises and appropriately classifiable under Port Services. The Commissioner (Appeals) set-aside the Adjudication order. The Tribunal rejected the appeal of the Revenue. It has been observed that the Commissioner (Appeals) correctly held that cargo handling in relation to export goods undertaken by the respondent CHA in the port premises cannot be subjected to tax classifying the same as Port Services.
(f) M/s South India Corporation (Agencies) Ltd Vs CCE Visakhapatnam-I 2010 (17) STR 170 (Tri-Bang) The appellants were holders of a stevedoring licence issued by M/s Visakhapatnam Port Trust (VPT) and are not persons authorized by the Port. The appellants are basically Custom House Agent (CHA). They also undertake the loading and unloading of cargo. Stevedoring work inside port undertaken based on licence issued by port. The Tribunal, following the earlier decision in the case of Konkan Marine Agencies (supra) allowed the appeal of the Appellant on merit as well as on limitation.
16. The appellant strongly relied upon the decision of the Tribunal in the case of M/s Shreeji Shipping Vs CCE & ST, Rajkot 2014 (36) STR 569 (Tri-Ahmd). In that case, the appellant was registered with the Service Tax authorities on 23-1-2003 as a cargo handling agent and discharging the Service Tax on the value of stevedoring, unloading and loading charges. They have paid the Service Tax on the entire charges collected by them for various services like lighterage and local transportation within the port and they have not paid Service Tax on stevedoring, unloading/loading of cargo in relation to export cargo. The demand of Service Tax is on Stevedoring and Lighterage services provided at minor port in Gujarat. The Appellants contended that there was no authorisation by the Port or other ports for rendering services and therefore, it would not come within the definition of port service. The Tribunal observed that Section 32(3) of GMB Act, 1981 provides for an authorisation from the port for performing specified services, thus, the same is to be considered for determining the liability to pay the Service Tax. There being no authorisation in favour of the Appellant, under Section 32(3) ibid in respect of services rendered by the appellant, cannot be said to be rendering any service which was authorized by port, which alone could be taxed under the head of Port Service at the relevant point of time. The Tribunal set-aside the adjudication order on merit and limitation. The relevant portion of the said decisions in the case of M/s Shreeji Shipping (supra), is reproduced below:-
12.?The appellant had in the course of personal hearing brought on record an authorization issued by the GMB vide Notification No. GMB/T/12(25)/37-38/2007-16, dated 8-8-2007 in exercise of powers conferred under Section 32(3) of the GMB Act, 1980, authorizing M/s. Atash Nor Control Ltd. to provide for Vehicle Traffic and Port Management Services in the Gulf of Khambhat and recover fee for the same as has been fixed in Sections 37, 38, 41 and 42 of the GMB Act, 1980. No such authorization under Section 32(3) has been brought on record in respect of the services being rendered by the appellant. In our view, in the absence of an authorization having been issued in favour of the appellant under Section 32(3) they cannot be said to be rendering any service which has been authorized by the port, which alone have been taxed under the head of port services at the relevant point of time.
. . . .
17.?We also find that no cognizance had been taken of the amendment made to the definition of Port Service w.e.f. 1-7-2010 to provide that port service would mean any service rendered within a port or other port, in any manner. The amendments effected from 1-7-2010 are extracted herein below for the ease of reference.
65(82)?Port Services means any service rendered within a port or other port, in any manner 65(105)?to any person, by any other person, in relation to port services in other port, in any manner;
Provided that the provisions of Section 65A shall not apply to any service when the same is rendered wholly within other port; The explanatory memorandum to the Finance Bill, 2010 explaining the said changes has clarified that the definition of port service and other port service was being amended to provide that an authorization from the port authority would not be a pre-condition for taxing the said services and further that all services provided entirely within the port would be taxable under the said head. The said amendment clearly brings out the legislative intent of not taxing services other than those provided by a port or a person authorized by the port prior to 1-7-2010.
. . . .
20.?The ld. Counsel for the Revenue has contended that the decision of the Tribunal in the case of Velji Sons Pvt. Ltd., which was upheld by the Apex Court, cannot be relied upon as even though the service rendered by Velji & Sons were at a Minor Port the judgment had been rendered considering provisions of the Major Port Trusts Act. We have hereinabove reproduced provisions governing Major Ports & Minor Ports and find are pari materia insofar as the requirement for grant of an authorization is concerned and that the mere fact that Velji had referred to the provision of the Major Ports Act, this by itself would not render the said decision inapplicable. Even otherwise the said judgment having been affirmed by the Apex Court by dismissing the Civil Appeal filed by the Revenue, the same is required to be followed as a precedent.
21.?We also find considerable force in the submission of the appellant that a substantial portion of the demand against them is barred by limitation as the dispute in hand is one of interpretation and high judicial forums have at different time taken a different view. The Apex Court has in the case of Jaiprakash Industries Ltd. v. CCE reported in 2002 (146) E.L.T. 481 held that in such cases where different statutory authorities have taken divergent view extended period cannot be invoked.
17. On perusal of the above decisions, we find that there are two types of the decisions. In the case of Homa Engineering Works (supra), it has been held that authorization must relate to those activities which the Port is either obliged or exclusively required to perform under the Major Port Trust Act, 1963. On the other hand, in the case of Shreeji Shipping (supra), it has been held that in the absence of an authorization having been issued in favour of the Appellant under Section 32(3), of the GMB Act, they cannot be said to be rendering any service which was authorized by port, which alone could be taxed under the head of Port Service at the relevant point of time. In the present case, we are not concerned with the decision in the line of Homa Engineering Works (supra). The present case relates to the decision of Shreeji Shipping (supra). The learned Authorised Representative on behalf of the Revenue submits that in view of the decision Kandla Shipchandlers & Ship Repairers Association (supra), there is no need to look into the above decisions of the Tribunal. In the case of Kandla Shipchandlers & Ship Repairers Association (supra), Petitioner No.1 is an association of shipchandlers. The Petitioner Nos. 2 & 3 are individual agencies undertaking certain task with respect to vessels reached at major and other ports in the State. Members of Petitioner No.1 provide various services such as supply of provisions to the crew of the vessels and minor repairs of the vessels, as required. The Superintendent of Service Tax, by a communication dt.02.03.2004 to the President of Petitioner No.1 Association stated the service provided by the Member of Petitioner No.1 Association amounts to port service as defined in Section 65(105)(zn) of Finance Act, 1994 and they are liable to register themselves under Section 69 of the Act, 1984 and to pay tax accordingly. The Petitioners strongly relied upon the decision of the Tribunal in the case of M/s Homa Engineering Works (supra), which was over-ruled by Hon'ble High Court. The relevant portion in the case of Kandla Shipchandlers and Ship Repairers Association (supra) are reproduced below:-
10. It is not in? dispute that the members of the petitioner-Association are authorized by the port authorities constituted under the Major Port Trusts Act, 1963 to provide such services. It is also not in dispute that without such authorization, such services could not be rendered by them. In fact, the petitioners have produced on record, a licence issued by port authorities authorizing the petitioners to provide such services. In that view of the matter, the question is whether the agencies involved in providing repair service to the vessel would or would not be covered within the meaning of port service. To our mind, the term port service as defined under Section 65(82) is sufficiently wide to include such services. In our opinion, the members of the petitioner-Association who have been authorized by the port authorities to provide such services can be stated to be rendering service in relation to a vessel. The words in any manner would further go to show that the Legislature intended to make the definition wide to include range of services which may be provided in relation to a vessel. Repair work of vessel would undoubtedly be in relation to the vessel and therefore would be covered under the definition of port service under Section 65(82) of the Act.
11. Counsel for? the petitioner, however, contended that the term authorized used under Section 65(82) would include only those services which the port authorities are obliged to undertake under the Major Port Trusts Act or such other statute which are delegated to other agency. He would contend that if such service is not exclusively to be undertaken by the port authorities, any permission to carry out such service granted to the members of the petitioner-Association would not be included within the expression authorized by such port as used in Section 65(82) of the Act. We are not inclined to accept such contention. The language used in Section 65(82); in our opinion, does not permit such interpretation. It includes any service rendered by a port or other port or any person authorized by such port or other port. The section does not provide that the authorization that may be granted by the port must be of such service which the port is exclusively obliged to undertake under the statute. The statutory provision does not draw any such distinction.
12. We may notice? that CESTAT in the case of Homa Engineering Works v. Commissioner of C.Ex., Mumbai, 2007 (7) S.T.R. 546 (Tri.-Mumbai) did hold that activity of ship repair at dry docks would not amount to port service. In the said decision, the Tribunal referred to the provisions contained in the Major Port Trusts Act, 1963 and formed an opinion that repair of the vessel not being done by the port, it cannot be stated to have been authorized by the port. It was held as under:
11. As such, we find that the powers of the Board to execute the work and provide compliance in terms of section 35(1) are not to the effect so as to carry out the repairing activity themselves. Understandably, the vessel which come on the port after sailing for a considerable period, would require minor/major repairing activities on account of the damages or mechanical faults incurred on account of vagaries of sea and for the subject purposes dry docks and workshops are established in the port for the purposes of rectifying the defect and to make the vessel seaworthy. However, extension of above facility does not mean that it is the duty of the Board to undertake the repairing activity themselves. In fact, under the said section, the port is required to provide facility for repair and not to undertake the repair itself. Ship breaking activities and ship manufacturing activities may also be done in the port area, for which purposes facility may be provided by the port, but that will not make the same as port services. The Tribunal was of the opinion that the term any other services in respect of vessels has to be extended to the services which are connected to the movement of the vessel. The Tribunal applied the principle of ejusdem generis. The view expressed by the Tribunal does not command to us. Firstly, the authorization of the port has undoubtedly been granted in the present case. We do not find that such authorization must relate to those activities which the port is either obliged or exclusively required to perform under the Major Port Trusts Act, 1963. Further, in our opinion, the term in relation to a vessel must be seen as to expanding the scope of coverage of the port service and cannot be confined to those services which are in relation to movement of vessels so as to exclude from its ambit the work of repair of vessels.
13.1 From the above, it can be seen? that under the Major Port Trusts Act, the Board has certain functions and duties to be performed and enjoys certain powers to perform such functions and duties. It is, however, not necessary that to authorize a person to perform any functions and duties in the port area, such functions must be those which the Board must under the Act, exclusively perform. To our mind, the contention of the petitioner that such authorization must be of those functions which are to be performed by the Board exclusively under the Act is wholly erroneous. We cannot confuse authorization with delegation. If the Board was required to exclusively perform certain functions, the question of its delegation may arise. The term authorization would indicate permitting a person or agency to perform certain tasks subject to the prescribed conditions. In absence of such authorization, it may not be open to such person or agency to perform such tasks. However, such authorization need not necessarily be in respect of only those functions which the Board itself was required to perform under the Act.
18. The Hon'ble High Court observed that the authorization of the port has undoubtedly been granted to the petitioner. It is further observed that it is not required that such authorization must relate to those activities which the port is either obliged or exclusively required to perform under the Major Port Trust Act, 1963. The term in relation to in the definition of Port services, must be seen as to expanding the scope of coverage of the Port service and cannot be confined to those services which are in relation to movement of vessels so as to exclude from its ambit the work of repair of vessels. In that case, there is no doubt that the petitioners were authorized by the Port to perform the activities in the Port, which were not included the work of repair of vessels. In this context, the Hon'ble High Court observed that the work of repair of vessels would be treated as included in the authorization as per the wide scope of definition of Port service. In the present case, we find that the undisputed fact is the Appellant were not authorized by the Port to perform any activity. It is seen from the letter dt.24.08.2009 of the Chartered Accountant on behalf of the Gujarat Maritime Board to the Superintendent of Central Excise, DGCEI that the authorization has been issued only to M/s Essar Steel Ltd under Section 32(3) of Gujarat Maritime Board Act, 1981. The Adjudicating authority observed that in the written contract dt.01.04.2006 between M/s Essar Steel Ltd and the Appellant, it is mentioned that the Appellant has agreed to carry out the lighterage and transshipment on their own vessels or chartered vessels at Hazira and transshipment between Hazira anchorage and Bhavnagar, Dahej, Pipavav, Mumbai etc. It has been further observed that the Appellant has been authorized by the Port and the services of lighterage and stevedoring would be covered by the Port services. We do not find any evidence on record that Port had issued any authorization to the Appellant to perform any service in the port and such finding of the Adjudicating authority is totally erroneous, contrary to the record and therefore, such findings cannot be sustained.
19. The learned Authorised Representative for the Revenue drew the attention of the Bench particularly to the Para 13.1 of the case of Kandla Shipchandlers & Ship Repairers Association (supra) and submitted that it is not necessary that the authorization is directly required to the Appellant by the port for rendering service. It may be noted that a decision must be read in the facts of the case and the issues, which are decided in that case. The essence of a decision is to be carved out from the reading of the facts, points for consideration and the decision arrived on. The Hon'ble Supreme Court in the case of Al Noor Tobacco Products India Ltd 2004 (170) ELT 135 (SC), held that the ratio of a decision can be applied only if the facts are identical. A slight or a material change in the facts could lead to an entirely different conclusion. The Hon'ble Supreme Court in the case of Commissioner of Central Excise, Delhi v. Allied Air Conditioning Corp. (Regd.) reported in 2006 (202) E.L.T. 209 (S.C.), held that :-
A judgment should be understood in the light of facts of the case and no more should be read into it then what it actually says. It is neither desirable nor permissible to pick out a word or a sentence from the judgment divorced from the context of the question under consideration and treat it to be complete law decided by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. [See Mehboob Dewood Shaik v. State of Mahatrashtra, 2004 (2) SCC 362]. In the above perspective, we find that the Hon'ble High Court in the case of Kandla Shipchandlers & Ship Repairers Association (supra) enlarged the scope of the definition of Port Service prior to 01.07.2010 to the extent the authorization need not necessarily be in respect of only those functions which the Board itself was required to perform under the Act. (Para 13.1 of the Judgment). The Hon'ble High Court categorically observed that the petitioners are authorized by the Port, which would include repair work of the vessels, even it may not be the function of the Board. It is already stated above that in the present case, there is no authorization in any manner to the Appellant, which is admitted by the Board. The point for consideration is that even there is no authorization by the Port in any manner, the service rendered by the Appellant would come under the Port Service. So, the submission of the learned Authorised Representative that the present case is covered by the decision of Kandla Shipchandlers & Ship Repairers Association (supra) is mis-reading of the said case law. In other words, the present case is covered by the earlier decision of the Tribunal in the case of Shreeji Shipping (supra). In that case also, there was no authorization and therefore, the decision of the Tribunal in the case of Shreeji Shipping (supra) cannot be held per incuriam. As per Blacks Law Dictionary, 7th Edition, the word per incuriam means wrongly decided, usually because the judge was or judges were ill informed about the applicable law. It is seen that the facts and the issue before the Tribunal in the case of Shreeji Shipping are different from the case of Kandla Shipchandlers & Ship Repairers Association (supra) and therefore, the decision of Shreeji Shipping cannot be per incuriam.
20. The learned Authorised Representative submitted that after considering the concession agreement between M/s. Essar Steel and GMB and the agreement between the appellant and M/s. Essar Steel, it will be construed that GMB authorised the M/s. Essar Steel, who in turn appointed the appellant as sub-contractor, as delegation of power. We are unable to accept the submissions of the learned Authorised Representative. The legislative words authorised by such port or other port, in the definition of port service make it clear that the port would authorize any person and such act cannot be delegated unless the law provides for such delegation. The principle as summarized in Halsburys Laws of England (Vol. 1,4th ed. Para 32):
32. Sub-delegation of powers. In accordance with the maxim delegatus non potestdelegare, a statutory power must be exercised only by the body or officer in whom it has been confided, unless sub-delegation of the power is authorised by express words or necessary implication. There is a strong presumption against construing a grant of legislative, judicial or disciplinary power as impliedly authorizing sub-delegation; and the same may be said of any power to the exercise of which the designated body should address its won mind. It has been held by the Hon'ble Supreme Court in a catena of judgments that when a particular thing is prescribed to be done in a particular manner, it cannot be done in any other manner. The appellant places reliance on the following cases:-
(a) State of Jharkhand vs. Ambay Cements 2004 (178) ELT 55 (SC) 26. Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. It is the cardinal rule of the interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way.
(b) Tata Chemicals Limited vs. Commissioner of Customs- 2015 (320) ELT 45 (SC) .. In law equally the Tribunal ought to have realized that there can be no estoppel against law. If the law requires that something be done in a particular manner, it must be done in that manner, and if not done in that manner has no existence in the eye of law at all. The Customs Authorities are not absolved from following the law depending upon the acts of a particular assessee. Something that is illegal cannot convert itself into something legal by the act of a third person. The learned Authorised Representative contended that the Stevedoring and Lighterage charges as shown in the contract between M/s Essar Steel Ltd and GMB are similar to the contract between the Appellant and M/s Essar Steel. The Adjudicating authority observed that the Appellant admittedly informed GMB of the contract and arrangement between the Appellant and M/s Essar Steel and the argument that they were not authorized by the port, holds no water. But, on perusal of the agreement, there is no mention that the charges would be as per tariff schedule of the Port. The Appellant contended that the charges were fixed in the contract entered by way of negotiations. It is clear from the contract between the Appellant and M/s Essar Steel that it is an independent contract. In any event, the intimation given by the Appellant to GMB of the contract between them and M/s Essar Steels, cannot be treated as authorization by the port.
After considering the above decisions and the provisions of Finance Act, 1994, in our considered view, the facts in the case of Kandla Shipchandlers and Ship Repairers Association (supra) would not be applicable in the present case, as there was no authorization issued by the GMB to the appellant and the demand of service tax on Stevedoring and Lighterage charges, under port service, on the appellant, prior to 01.7.2010, cannot be sustained.
21. The another aspect of this matter is that the Appellant contended that w.e.f. 01.09.2009, Transportation Of Coastal Goods And Goods Transported Through National Water was introduced in Service Tax net. The lighterage service was not covered under the Service Tax net prior to 01.09.2009 and the demand of Service Tax prior to 01.09.2009 on lighterage service cannot be sustained. This is supported by the Finance Ministers Speech on 06.07.2009 as reproduced at Para 11 of this Order. The Adjudicating authority observed that the lighterage do cover the loading and unloading and not merely transportation. The lighterage activity has taking lighter or barges to the place where the vessel is anchored, off-loading of goods by using crane from the vessels, loading and stacking of goods properly lighter or barges and bringing back lighter or bar, wharfage area of the Port, off-loading the goods from lighter to wharfage area and handling and moving the goods to storage area allotted by the Port and therefore, the Service Tax on port service include lighterage. The adjudicating authority relied upon the decision of the Tribunal in the case of Reliance Industries Limited (supra). We find that the Hon'ble Supreme Court in the case of Ispat Industries Limited vs. Commissioner of Customs, Mumbai 2006 (202) ELT 561 (SC), held that the barge charges incurred for moving the goods from mother vessel to the jetty and vice-versa were nothing but cost of transportation. The relevant portion of the said decision is reproduced below :-
22. Learned counsel for the Revenue emphasized on Rule 9(2)(a) of the Rules in support of his contention that barging charges have also to be included in the value of the imported goods as they are also transportation charges.
23. On first impression the submission of learned counsel for the Revenue appears to be sound, because surely the transportation by barge is also part of the transportation of the goods. However, on a deeper analysis, we are of the opinion that the submission of the learned counsel of the Revenue is clearly untenable. Admittedly, all the contracts entered into with the foreign sellers are either CIF contracts or FOB contracts with Bills of Lading nominating Bombay/JNPT/Dharamtar as the ports of discharge. As such the cost of transport has already been included in the price paid to the seller under the CIF contract or an ascertainable freight determined and paid by the buyer from the foreign port to the Indian port. Hence, a further addition to the transport charges under Rule 9(2)(a) of the Customs Valuation Rules, 1988 is in our opinion clearly impermissible.
37. In our opinion, it is? really not necessary to decide whether the place of importation is the jetty or the BFL. Whether the place of import is deemed to be the BFL or Dharamtar jetty it would make no difference to the conclusion we have arrived at because the cost of transportation of the imported goods has already been included for delivery at the Dharamtar jetty and has already been paid to the seller in the CIF or FOB contract. Hence, a further addition to the transport charges in the form of barge charges for the transportation by barges cannot be said to be contemplated by Section 14 of the Act.
60. In the impugned order dated 7-3-2001 the Tribunal has based its decision on its conclusion that the place of import was the Dharamtar Jetty and not the BFL (vide paragraphs 9 to 18 of The Tribunals order). Without commenting on the correctness or otherwise of this view, we are of the opinion that whether we treat the place of import as BFL or the Dharamtar jetty it will make no difference to the conclusion we have reached viz. that charges for transport of the goods by barges from BFL to Dharamtar jetty cannot be included in the valuation of the goods.
61. It is not disputed that the freight upto the Dharamtar jetty had been paid by the buyer. Hence we cannot agree that additional transportation charges being the charges for carrying the goods by barges from the mother ship to the Dharamtar Jetty have to be added to the valuation. The fact that the mother ship could not come upto the Dharamtar Jetty is an extraordinary situation (due to lack of draft) and hence any extra transportation charge to meet this situation cannot, in our opinion, be added to the value of the goods.
64. For the reasons given above, this appeal is allowed and the impugned order of the Tribunal as well as of the Customs authorities are set aside, and it is held that the charges for transportation of the goods by barges from the mother ship at BFL to the Dharamtar Jetty cannot be added to the valuation of the imported goods for the purpose of levying customs duty.
22. We find that this issue was also discussed by the Tribunal in the case of United Shippers Ltd Vs CCE, Thane-II 2015 (37) STR 1043 (Tri-Mum), which was upheld by Hon'ble Supreme Court as reported in 2015 (39) STR J 369 (SC). In that case, the Tribunal held that the transportation of the goods from the mother vessel to the jetty and vice versa is not liable to tax. It has been observed that the activity of transshipment of import and export cargo from mother vessel to the jetty and vice versa is carried out by the barges (termed as Daughter Vessel) on account of draft not permitted the mother vessel to travel until the jetty at minor port. It is stated that first transportation of cargo from the mother vessel to the jetty is to be treated as continuation of journey of the goods in the import stream into India. The Tribunal in the case of United Shippers Ltd (supra) held as under:-
5.2?As regards the first issue, since the transaction involves a customs transaction and a service transaction, it is necessary to decide where the customs transaction ends and the service transaction begins. The issue as to what constitutes imports has been settled by the Honble Apex Court in the case of Garden Silk Mills Ltd. (supra), wherein the Apex Court held as follows :-
Truly speaking, the imposition of import duty, by and large, results in a condition which must be fulfilled before the goods can be brought inside the customs barriers, i.e. before they form part of the mass of the goods within the country.
It would appear to us that the import of the goods into India would commence when the same cross into the territorial waters but continues when the goods become part of the mass of goods within the country; the taxable event being reached at the time when the goods reach the customs barriers and the bill of entry for home consumption is filed. Thus when the goods are being transported by the barges from the mother vessel to the jetty onshore, that activity is part of the import transaction of bringing the goods into India from a place outside India. The question of rendering any service in respect of such goods by way of cargo handling or otherwise can take place only after the customs transaction is completed. Therefore, the question of levying to Service Tax the transportation by barges from the mother vessel to the jetty onshore, would not arise at all since the said activity is part of the import transaction leviable to import duty and we hold accordingly.
5.3?This is also evident from the fact that Section 14 of the Customs Act, 1962 relating to determination of value of import goods for the purposes of levy of customs duty and the Customs Valuation Rules, 2007 (CVR in short) were amended to specifically include barge charges and handling charges in the transaction value of the imported goods vide Finance Act, 2007 to overcome the adverse decision in the case of Ispat Industries (supra). Section 14 was substituted to specifically provide that transaction value of imported goods shall include, in addition to the price, any amount paid or payable for costs and services, including commissions, ., cost of transportation to the place of importation, insurance, unloading and handling charges to the extent and in the manner specified in the rules made in this regard. Rule 10(2) of CVR specifically provided for (2)?For the purposes of sub-section (1) of Section 14 of the Customs Act, 1962 (52 of 1962) and these rules, the value of the imported goods shall be the value of such goods, for delivery at the time and place of importation and shall include
(a) the cost of transport of the imported goods to the place of importation;
(b) loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation; and
(c) the cost of insurance;
Provided that
(i) where the cost of transport referred to in clause (a) is not ascertainable, such cost shall be twenty per cent of the free on board value of the goods;
(ii) the charges referred to in clause (b) shall be one per cent of the free on board value of the goods plus the cost of transport referred to in clause (a) plus the cost of insurance referred to in clause (c);
(iii) where the cost referred to in clause (c) is not ascertainable, such cost shall be 1.125% of free on board value of the goods;
Provided further that in the case of goods imported by air, where the cost referred to in clause (a) is ascertainable, such cost shall not exceed twenty per cent of free on board value of the goods:
Provided also that where the free on board value of the goods is not ascertainable, the costs referred to in clause (a) shall be twenty per cent of the free on board value of the goods plus cost of insurance for clause (i) above and the cost referred to in clause (c) shall be 1.125% of the free on board value of the goods plus cost of transport for clause (iii).
Provided also that in case of goods imported by sea stuffed in a container for clearance at an Inland Container Depot or Container Freight Station, the cost of freight incurred in the movement of container from the port of entry to the Inland Container Depot or Container Freight Station shall not be included in the cost of transport referred to in clause (a).
Explanation.-?The cost of transport of the imported, goods referred to in clause (a) includes the ship demurrage charges on charted vessels, lighterage or barge charges.
These amended provisions came into force with effect from 10-10-2007. The C.B.E. & C. has also clarified vide Circular 34/2009, dated 30-11-2009 that the issue of ineligibility of barge charges in the value (of imported goods) will be governed by the provisions of Section 14 of the Customs Act, 1962 read with the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 for the assessment arising in the period from October 10, 2007 onwards. Thus the question of demand of Service Tax on barge charges and the handling charges connected therewith would not arise at all with effect from 10-10-2007 as they form an integral part of the transaction value for levy of customs duty. Even for the period prior 10-10-2007, the same position would apply for the reason that the import transaction is complete only when the goods reach the customs barriers and the bill of entry for home consumption is filed.
23. The learned Authorised Representative on behalf of the Revenue submitted that the dismissal of appeal without giving reason by the Hon'ble Supreme Court in the case of United Shippers Ltd, does not amount to precedent. We are afraid to accept the submission of the learned Authorised Representative. The Hon'ble Supreme Court in the case of CCE Thane-II Vs United Shippers Ltd, dismissed the Civil Appeal filed by the Revenue. The judgment of the Hon'ble Supreme Court in the case of United Shippers Ltd is as under:
1. Delay condoned.
2. These appeals are directed against the judgment and order passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai in Order No. A/1626-1630/2014-WZB/C-I (CSTB) in ST/85933, 86857-86859 and 87184/2013-Mum, dated 16-10-2014 = 2014-TIOL-2500-CESTAT-MUM.
3. We have heard Shri Mukul Rohatgi, learned Attorney General appearing for The appellant and carefully perused the material available on record. In our considered opinion, we do not see any good ground to interfere with the judgment and order passed by the Tribunal. Accordingly, the Civil Appeals are dismissed. The submission of the learned Authorised Representative is that the above judgment is without any reason. In the case of Kunhayammed Vs State of Kerala 2001 (129) ELT 11 (SC), the Hon'ble Supreme Court held that where an appeal or revision is provided against an order passed by a court, Tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. The Hon'ble Supreme Court in the case of Medley Pharmaceuticals Ltd Vs CCE Daman 2011 (263) ELT 641 (SC), held that doctrine of merger applicable if appeal dismissed in the absence of detailed reasons or without reasons when superior Court upholds decision of lower court from which appeal arose. The relevant portion of the decision is reproduced below:-
32.?This Court has consistently held that the medical supplies supplied to the Doctors are liable to excise duty. Elaborate consideration may not be forthcoming in these judgments, but, in our view, the issue stands concluded. We say so for the reason that this Court, in catena of cases, has opined that in case, the appeal has been dismissed in the absence of detailed reasons or without reasons, such order will entail the application of the doctrine of merger, wherein the superior court upholds the decision of the lower court from which the appeal has arisen. In the case of V.M. Salgaocar & Bros.(P) Ltd. v. C.I.T., (2000) 5 SCC 373, this Court held :
8.?Different considerations apply when a special leave petition under Article 136 of the Constitution is simply dismissed by saying dismissed and an appeal provided under Article 133 is dismissed also with the words the appeal is dismissed. In the former case it has been laid by this Court that when a special leave petition is dismissed this Court does not comment on the correctness or otherwise of the order from which leave to appeal is sought. But what the Court means is that it does not consider it to be a fit case for exercise of its jurisdiction under Article 136 of the Constitution. That certainly could not be so when an appeal is dismissed though by a non-speaking order. Here the doctrine of merger applies. In that case, the Supreme Court upholds the decision of the High Court or of the Tribunal from which the appeal is provided under clause (3) of Article 133. This doctrine of merger does not apply in the case of dismissal of a special leave petition under Article 136.
24. We find that the order of the Tribunal in the case of United Shippers Ltd (supra) is an appealable order before the Hon'ble Supreme Court under Section 35L of the Central Excise Act, 1944. The Hon'ble Supreme Court affirmed the decision of the Tribunal and the decision of the Tribunal merges in the decision by the Hon'ble Supreme Court which remains operative in the eye of law. So, the submission of the learned Authorised Representative cannot be sustained.
25. The other issue is whether the Stevedoring and Lighterage services at Magdalla Port rendered by the Appellant to unit located in SEZ status (i.e. prior to 20.10.2006) and after SEZ status, would qualify as Port service and whether the Service Tax will be leviable on their service. The learned Authorised Representative on behalf of the Revenue submitted that if there is no exemption notification under the Finance Act, 1994, the Appellant would be liable to pay the Service Tax. He relied upon the decision of Hon'ble Gujarat High Court in the case of M/s Essar Steel Ltd Vs UoI 2010 (249) ELT 3 (Guj.). On the other hand, the learned Advocate on behalf of the Appellant submits that by virtue of Section 26(1)(e) of the SEZ Act read with Rule 31 of the said Rules, there was exemption from levy of Service Tax on the taxable service provided to a developer or a unit to carry on the authorized operation in state. He relied upon the following decisions:-
i) Reliance Ports and Terminals Ltd Vs CCE 2013-TIOL-1473-CESTAT-MUM
ii) Intas Pharma Ltd Vs CST 2013-TIOL-1091-CESTAT-AHM
iii) Tata Consultancy Services Ltd Vs CCE 2012-TIOL-1034-CESTAT-MUM We find that it has already been held that the demand of Service Tax on Stevedoring and Lighterage services on the Port service prior to 01.07.2010 cannot be sustained. Hence, there is no need to look into this issue, which is merely academic one in the present appeal.
26. The Appellant also contested that the demand of tax is barred by limitation. We find that it is a case of classification of service and interpretation of the definition of the Port Services. The Adjudicating authority, while invoking the extended period of limitation, observed that the Appellants had suppressed the gross amount charged and received from M/s Essar Steels. Even after rendering the stevedoring services (export cargo) and lighterage service (inward as well as outward cargo), they failed to include the stevedoring charges (export cargo) and lighterage charges (both inward and outward cargo) while showing the taxable values in the ST 3 returns under Port services. We find that the Appellant was paying Service Tax on Stevedoring service under the category of Cargo Handling Service except export cargo, as it was excluded by the definition of Cargo Handling Service. The DGCEI officers initiated enquiry in the matter in 2007. Even then, after introduction of the Service Tax on Transport of the Coastal Goods and Goods Through National Waterways and Inland Water by General Budget 2009, the Superintendent of Central Excise, by letter dt.23.09.2009, directed the Appellant for obtaining the Service Tax registration as under:-
As you are aware that in the last General Budget 2009, Finance Minister has proposed amendment to Section 65 thereby including new services i.e. Service provider in relation to transport of coastal goods and goods through National Waterways and Inland Water being among others new services liable to attract Service Tax. Since you are also engaged in the above category of service, you are liable to pay Service Tax on the gross amount so collected in this regard. It may further be mentioned that date of levy of Service Tax is 01.09.2009 as per Notification No.26/2009-ST, dt.19.09.2009. You are therefore, requested to apply immediately for obtaining Service Tax Registration for the above category as required under Section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Act, 1994. It is clearly revealed from the Boards Circular in 2010 (reproduced in Para 11 of this Order) that there were divergent practices followed by the different Assessees in respect of payment of tax on Port service. It is apparent from the facts that the Department was also not clear on the classification of service rendered by the Appellant, as revealed from the various decisions, Board Circular etc. It is well settled that if the two views are possible and if the Assessee entertains a bonafide belief that they are not liable to pay tax, intention to evade payment of tax cannot be attributed. The Hon'ble Supreme Court in the case of Uniworth Textile Ltd Vs CCE Raipur 2013 (288) ELT 161 (SC) held that the extended period of limitation cannot be invoked for mere non-payment and requires a deliberate default on the part of the Assessee. It may be construed from the above facts that there was no suppression of facts with intent to evade payment of Service Tax. It is noticed that on the identical situation, the Tribunal in the case of Shreeji Shipping (supra) and United Shippers Ltd (supra) and other cases, as mentioned above, allowed the appeal on limitation also. Hence, the extended period of limitation cannot be invoked. So, the demand of Service Tax alongwith interest and penalties for the extended period of limitation is liable to be set aside. Hence, the imposition of penalties is unwarranted.
27. In view of the above discussion, we modify the impugned order to the extent the demand of Service Tax alongwith interest on Lighterage and Stevedoring services rendered by the Appellant in relation to vessel or goods at the Magdalla/Hazira Port under Port services would be upheld from 01.07.2010 and the extended period of limitation cannot be invoked. The demand of tax alongwith interest prior to 01.07.2010 and penalties are set aside. The appeal filed by the Appellant is disposed of in the above terms. The application for extension of stay order is dismissed as infructuous.
(Pronounced in Court on 04.02.2016)
(P.M. Saleem) (P.K. Das)
Member (Technical) Member (Judicial)
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