Customs, Excise and Gold Tribunal - Mumbai
Mazgaon Dock Ltd. vs Commissioner Of Service Tax on 29 April, 2008
ORDER M.V. Ravindran, Member (J)
1. This appeal is filed against Order-in-Appeal No. BR(25)25/STC/2005 dated 9.9.2005, vide which the learned Commissioner (Appeals) has upheld the order of the adjudicating authority that the appellant is covered under the service of "Port Services" and upheld the confirmation of demand and imposition of penalties.
2. The relevant facts that arise for consideration are that the appellant herein was providing services of chipping, painting and repairing of ships and vessels under authorization of Mumbai Port Trust under Dry Dock Licence No. 336 dated 1.7.2004, which appeared to fall within the meaning and definition of 'Port Services' under Section 65(67) of the Service Tax Act. These activities were carried out in the premises of the appellants and in the case of inadequacy of facility in their premises, they carried out these activities in the premises of Mumbai Port Trust. The premises of the appellant are situated in the jurisdiction of Mumbai Port Trust and are leased out to the appellant by the Trustees of Board of Mumbai Port Trust.
3. After investigation, the authorities below came to the conclusion that the appellant had erred in not taking out the licence and registration of the Service Tax and did not discharge the Service Tex liability. Show cause notices were issued to the appellant to show cause as to why Service Tax amounting to Rs. 617,97,695/- should not be demanded and recovered under the various provisions of Finance Act, 1994 and to show cause as to why penalty be not imposed and recovery of interest at the applicable rate. The appellant contested the show cause notice mainly on the ground that they are not covered under the category of service "Port Services", basically on the ground that their services are covered under repairs and maintenance and they did not render any other service other than repairs and maintenance. The adjudicating authority did not accept the contention and confirmed the demand and also imposed penalty and sought to recover interest from the appellant. On an appeal, the learned Commissioner (Appeals) also came to the conclusion that the activities, which are carried out by the appellant as regards chipping, painting and repairing of ships and vessels will be considered as "Port Services" as the appellants are working under authorization of Trustees of Mumbai Port Trust. After coming to such conclusion, he upheld the impugned order on all counts. The appellants are in appeal against the said order.
4. The learned Counsel appearing on behalf of the appellant submits that the activities as carried out by the appellant cannot be covered under the category of "Port Services". He submits that activities, which are carried out by the appellant at the premises of Mumbai Port Trust are repairs and maintenance and as such are not covered by the category of "Port Services". It is his further submission that in an identical issue, in respect of one of their sub-contractors i.e. Homa Engineering Works v. CCE, Mumbai-I, the Tribunal, vide its order as reported at (2007) 9 VST 47, has held that these services as rendered by the appellant in that case are not covered under the category "Port Services". He would also like to rely upon the decision of the Tribunal in the case of Velji P & Sons (Agencies) Put. Ltd. and Anr. v. CCE, Bhavnagar as reported at (2007) 9 VST 372 (CESTAT-Ahd) for the proposition that the Port Services would not include the service rendered by the CHA. It is his submission that both the lower authorities have just not considered the fact that the appellant has not provided any services under the category of Port Services.
5. The learned Jt. CDR, on the other hand, submits that the order of the lower authorities are correct and does not require any interference. It is his submission that Section 65(67) of the Finance Act, 1994 defines Port Services as "any service rendered by a port or a person authorized by the port in any manner, in relation to a vessel or goods." It is his submission that reference to the Major Port Trusts Act, 1963 in Section 65(66) of the Finance Act, 1994 is only for the purpose of deriving the meaning/defining the word "port". It is also his submission that except for definition of "port", any reference to the Major Port Trusts Act, 1963 is clearly uncalled for. He submits that Mr. G.P. Singh in his book "Statutory Interpretation" illustrates as under:
It is not a sound principle of construction to interpret expressions used in one Act with reference to their use in another Act, any decisions rendered with reference to construction of one Act cannot be applied with reference to provisions of another Act, when the two Acts are not in pari material.
The meaning of the phrase pari material was explained in the American case of Untied Society v. Eagle Bank (1829) 7 Connecticut 457 as "Statutes are in pari materia which relate to the same person or thing."
It is his further submission that the phrase "in relation to" has a wider meaning. Hence, repair of a vessel is certainly within the purview of "in relation to a vessel" and it was taxable at the relevant time because the appellants were clearly authorized by Mumbai Port Trust for such repair service within the port area. He submits that the decision relied upon by the learned Counsel has not considered the words viz. "in any manner" as appearing in the definition of the "Port Services". It was submitted that these words were not considered by the Division Bench in the case Homa Engineering Works (supra). It is his submission that even if the category of "Maintenance and Repair Services" was brought in statute from 1.7.03, it would not mean that the services as rendered by the appellant in respect of the vessels in the premises of Mumbai Port Trust would not get covered under the services of "Port Service" for the earlier period. It is his submission that the judgment in the case of Homa Engineering Works (supra) has not considered why Section 65(67) is, in itself, not sufficient to decide the scope of the "port services". It is his submission that the appellants carried out repairs of the vessels, which were clearly a "services in relation to vessels" more so when the appellants were clearly authorized by Mumbai Port Trust for such repair services within the port area. It is his submission that the appellants do not have a case on merits and the matter may be referred to Larger Bench for resolving the issue. It is his further submission that show cause notices and the impugned order refer to and take support of the statutory definition of the Port Services under Section 65(67) of the Finance, Act, 1994 as authorized under Major Port Trust Act. He submits that the law, as has been legislated by the Parliament, is to be interpreted without allowing any extraneous material to divert its attention from the focus even if the lower authorities referred to such extraneous material.
6. In rejoinder, the learned Counsel submits that the learned Jt. CDR has re-argued the appeal in the case of Homa Engineering Works (supra) and it is impermissible. It is his submission that reference to Larger Bench does not arise as learned Jt. CDR has not brought on the record any contrary decisions. It is his submission that the services rendered by the appellants would not get covered under the category of "Port Services" as statute is not a complete act by itself and hence Major Port Trust Act has to be relied upon and the services as rendered by the appellant would not get covered as "Port Services".
7. Considered the submissions made at length by both sides and perused the records. It is the undisputed fact that the appellants were engaged in chipping, painting and repairing of ships and vessels in their own premises as well as in the premises as leased out by the Mumbai Port Trust. It is also undisputed that the period of the appeal in this case is from 16.7.01 to 30.3.2004. It is also undisputed that the appellant by virtue of the authority given to them by Mumbai Port Trust has further delegated the work of chipping, painting and repairing of ships and vessels to their various sub-contractors. In this factual position, the finding of the learned Commissioner (Appeals) needs to be read:
The activity of the appellant is to provide Ship repairing service and other marine repairs, paining, chipping etc. to ships and vessels. Section 65(67) of the Service Tax Act defines "port service" to means any service rendered by a port or any person authorized by such port, in any manner, in relation to a vessel or goods. A combined reading of Sections 35 and 42 of the Major Port Trusts Act, 1963 with Section 65(67) of the Service tax Act clearly envisages that the said activities as carried out by the appellant is a port service in relation to a vessel/ship. The appellant has been necessarily provided with necessary registrations/licences by Port agencies for these port services on such terms and conditions as may be agreed upon as provided under Section 36 and 42(3) of the Major Port Trusts Act, 1963 or under such other rules and regulations made under. Further, the providing of facilities of dry docks etc. for carrying out repairs of vessels is a facility which is provided in all major ports through out India and worldwide and these facilities are normally provided, as is understood in common trade parlances are part of the Port Services in relation to ships and vessels. As may be seen from statutory provisions of Section 33 read with second proviso to Section 34(1) of the Port Act, the Trustees and other authorities of the Mumbai Port Trust could lease the premises to the appellant only for performance of functions of the Board, which are detailed in Section 35 and Section 42 of the Port Act. The Port premises are leased by the Mumbai Port Trust to the appellant to enable the appellant to carry out amongst others the activities of ship repairs, which are one of the functions of the Port Trust is evident from conjoint reading of Section 35(1)1, Section 35(2)h, Section 32(2)(1), Section 42(1)(e), Section 42(3), Section 42(3A) and Section 48(1)(e) of the Port Act. The appellant is carrying out the activities of ship repairs in accordance with the terms and conditions of the lease deed and in furtherance of carrying out the objectives of the Mumbai Port Trust/Board under the Port Act. Even the area leased to the appellant by the Government of Maharashtra is a part of the Port area of the Mumbai Port Trust and is governed by the provisions of the Major Port Trusts Act, 1963. This fact is also not under dispute. The appellant has also been granted Dry Dock Licence No. 336 for carrying out such ship repair activities at Merewether and Hughes Dry Docks situated in the Mumbai Port Trust premises. In order to levy service tax, the service is to be rendered in a major port area notified by the Central Government under Section 3(8) of the Indian Ports Act read with Section 2(q) of the Port Act. This is the case with the appellant and the levy of service tax must occur. Thus, adjudicating authority has properly hold that the repairing and other incidental services provided by the appellant are in the nature of "Port Services" in relation to a vessels/ships as defined under Section 65(67) of the Act in view by the Circular No. 67/16/2003-ST dated 11.10.2003 issued by CBEC.
The appellant was responsible for taking out necessary registration under the Act at the relevant time when their services became liable to Service Tax. In the instant case, the appellant are doing repair of vessels/ships and other activities for providing of "port services" within the meaning of Section 65(67) of the Service Tax Act read with Section 65(90) (zn) of the Service Tax Act. Further, Section 67 of the Service Tax Act provides that for the purposes of this chapter, the value of any taxable service shall be the gross amount charged by the service provider for such service rendered by him. The appellant were well aware of the provisions of the Major Port Trusts Act, 1963. They were also aware of the clauses of the licence between them and the Mumbai Port Trust. These facts are further evidenced from the lease licenses, which have been issued to the appellant to enable them to carry out ship repair services, and other services which is in the nature of services in relation to vessels/ships. There is no evidence that appellant has brought in the notice of department prior to investigations. All the correspondences rests after the investigation started by department. Thus, the extended period is applied in the instant case. In view of the above facts, the confirmation of service tax, interest and imposition of penalties under various provision of the Act, in the impugned order-in-original are maintainable and sustainable. The cases relied by the appellants cannot be made applicable to the present case in view of aforesaid discussions and facts. I find that there is no any reasonable cause for providing relaxation under Section 80 of the Service Tax Act; as there is no reasonable cause shown for non payment of service tax and observation of its procedures. Hence, impugned order-in-original is sustainable on all counts including service tax, interest and penalties.
It can be seen from the above reproduced portion of the order that the learned Commissioner (Appeals) while coming to the conclusion that the appellants have rendered the services of "port services" has relied upon the various Sections of the Major Port Trust Act. The entire tenor of the order of the learned Commissioner (Appeals) would indicate that the lower authorities have held that the appellants having been given the authorization from the Mumbai Port Trust/Board to carry out activities of repairing in relation to the vessels and ships would get covered under the category of "Port service". The definition of the "port service" has already been reproduced by us in the submission made by the learned Jt. CDR.
8. We find that for the period 16.7.2001 to 30.9.2003, one of the sub-contractor of the appellants i.e. M/s Homa Engineering Works was also issued a show cause notice by the lower authority on an identical set of facts and sought to classify the said services under the category of port services. The coordinate Bench of the Tribunal in the case of Homa Engineering Works v. CCE, Mumbai 2007-TIOL-CESTAT-MUM, after considering all the submissions made by both sides has held as under:
8. After carefully going through the submissions made by both the sides and after going through the relevant provisions of law, as extracted above, we find that taxable services under the net of "Port Service" means any service rendered by a port or any person authorized by such port. As such, the services which can be taxed under the said category have to be either services rendered by port itself or any person authorized by such port Admittedly, repair of the vessel is not being done by the port. The lower authority has held the appellant to be a person authorized by such port to undertake the activity of repairing of vessel.
9. The appellant is admittedly a partnership firm carrying on a business of all types of marine repairs for which purpose they are given a repair contract involving supply of material, steel removal job, fabrication, refitting, and overhauling of machinery, from the principle contractor like Mazagaon Docks Ltd. etc. For such purposes, they have been given vendor registration. They also receive direct contract of repair from foreign ship owners or through their steamer agent.
10. Revenue hats placed reliance upon Section 35 of the Major Port Trust Act, 1963, which defines power of the Board to execute the work Sub-Clause (1) to Clause 2 of the said Section stands invoked by Revenue in the impugned order. The said clause is to the effect that the work of the Board will include establishing of dry dock, slipways, boat basins and workshop to carry out repair or overhauling vessels/tugs, boats, machinery or other appliances.
From this, it stand concluded by Revenue that in as much the Board's job is to execute the work provided in above Section, which in respect of performance itself, has been entrusted to the appellant, he will step into the shoes of the port and services provided by him should be considered as port services. However, on minute examination of the above provisions, we find that the work required to be executed by Board is to provide the facility like dry dock, etc. to carry out the repairs or overhauling of vessels etc. and not the repair job itself.
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".
12. Further, much reliance has been placed by Revenue on the provisions of Section 42(E) of the Major Port Trust Act. Admittedly, the activity of ship repair is not specifically mentioned in the said Section. The Revenue has sought to bring the same under the Clause - "or any other services in respect of vessels". Learned advocate for the appellant has strongly contested that all the activities mentioned in the said clause are relatable to movement of vessel and as such, the expression "or any other services in respect of vessels" has to take its colour from preceeding entry.
We find force in the above contention of learned advocate. Where group of words followed by a general expression, the subsequent general expression has to derive its meaning from the previous expression. Admittedly, piloting, hauling, mooring, remooring, hooking, or measuring of vessels are activities which are directly connected with the entry or exit of the vessel from port area. As such, the subsequent expression appearing in the said clause has to be held as covering the services which are in relation to the movement of the vessel and has to be understood and construed by applying the principle of ejusdem generis. We may, at this stage, borrow the observations made by Hon'ble Supreme Court in case of Sidhdheshwari Cotton Mills (P) Ltd. v. UOI , reproduced hereunder:
12. The expression ejusdem generis - 'of the same kind or nature' - signifies a principle of construction whereby words in a statute which are otherwise wide but are associated in the text with more limited words are, by implication, given a restricted operation and are limited to matters of the same class or genus as preceding them. If a list or string or family of genus-describing terms are followed by wider or residuary or sweeping-up words, then the verbal context and the linguistic implications of the preceding words limit the scope of such words.
13. In Statutory Interpretation Rupert Cross (p. 116) says:
The draftsman must be taken to have inserted the general words in case something which ought to have been included among the specifically enumerated items had been omitted....
14. The principle underlying this approach to statutory construction is that the subsequent general words were only intended to guard against some accidental omission in the objects of the kind mentioned earlier and were not intended to extend to objects of a wholly different kind. This is a presumption and operates unless there is some contrary indication. But the preceding words or expressions of restricted meaning must be susceptible of the import that they represent a class. If no class can be found, ejusdem generic rule is not attracted and such broad construction as the subsequent words may admit will be favoured.
By applying the above principles to the dispute before their Lordship, it was observed as under:
19. The preceding words in the statutory prevision which, under this particular rule of construction, control and limit the meaning of the subsequent words must represent a genus or a family which admits of a number of species or members. If there is only one species it cannot supply the idea of a genus.
20. In the present case, the expressions 'bleaching, mercerizing, dyeing, printing, water-proofing, rubberizing, shrink-proofing, orandie processing' which precede the expression 'or any other process' contemplate processes which impart a change of a lasting character to the fabric by either the addition of some chemical into the fabric or otherwise. "Any other process' in the section must share one or the other of these incidents. The expression 'any other process" is used in the context of what constitutes manufacture is its extended meaning and the express on "unprocessed" in the exempting notification draws its meaning from that context. The principle of construction considered appropriate by the Tribunal in this case appears to us to be unsupportable in the context in which the expression "or any other process" has to be understood.
13. In the light of above declaration of law of Hon'ble Supreme Court, It has to be held that expression "or any other services in respect of vessels" has to be extended to the services which are connected with the movement of the vessel. It is nobody's case that repairing of vessel in the dry docks is connected with the movement of vessel. As such, the Revenue's reliance on the above provisions do not advance the case.
14. We also find a force in the appellant's argument that sub-section of Section 42 provides for authorization by the Board for the various services at the rate specified by that port in the Official Gazette. This has reflected upon the fact that various services, which can be authorized by the Board to any other person are routine services for which various rates can be fixed in advance. As far as the repairing of vessel is concerned, the charges would definitely depend upon the extent of work required to be done. We are informed that such consideration depends upon the contract arrived at after much negotiations. This fact leads us to hold that such contract services of repair of vessel cannot be held to be "port services".
15. During the course of arguments, it was also contended by Revenue that the appellant are given a licence and registration to carry out the services, which port is required to do. We have seen the by-laws governing grant of licence to carry out the work of vessels in the trustees dry docks. The same require the contractor/agent to submit an application for obtaining a licence for carrying out the work in dry dock. Such contractors must have facility such as enough number of painting gears and other necessary tools etc. The said contractor shall be bound to employ foreman and tindals of experience to supervise the work, who shall be bound to use reasonable means for preventing accidents to the men employed under them. It is further part of the said by-law that contractor desired to carry out the repairing to hull shall have a workshop of their own which shall be equipped with the accessories and appliances enumerated therein. The other clauses of the said by-laws are also to the effect that the contractor would be liable for any mis-hap or for any damage to the gear used by him and supplied by the Board. The said facts leads us to belief that contractor / sub contractor is an independent person, hired by the port to provide services to its customers, which may be ship owner or their agent.
16. We note that the category of maintenance and repair services was made leviable to service tax w.e.f. 1.7.03. The appellant had taken registration for the said services and had started paying duty thereafter. Revenue has not raised any objection to the said registration of the appellant and payment of duty by them under the category 01 maintenance and repair services. If the services being rendered by them were already covered by the above services, there was no justification on the part of Revenue to accept their registration under the category of maintenance and repair of services. The said category having been created w.e.f. 1.7.03, we agree with the appellant that the said activity for the past period cannot be held to be covered under the category of port services.
17. Lower authorities also relied upon the Board's Circular No. 67/16/2003-ST, dt. 10.11.03, clarifying that ship repair activities at the dry docks would be taxable under the port services. The said clarification, though may be binding on the department officers, is not binding on the assessee. Having held, after examination of the relevant provisions of law that such activity would not be included under the expression 'port services', we hold that above circular issued by Board, is not in accordance with the law.
9. It can be noticed from the above reproduced portion of the Tribunal's decision that the very same definitions and the very same issue as to whether the services as rendered by one of the sub-contractor of the appellant would get covered under the "port services" or not was being agitated before the Bench. The above said judgment and order of the Tribunal very categorically held that it would not be. We find the very same judgment and order has considered the all issues as pointed out by the learned Jt. CDR. We also find that the Tribunal in the case of Velji P & Sons (supra) was considering whether the services of CHA would get covered under the category of "port services". Relying upon the decisions of the Homa Engineering Works (supra), coordinate Bench has held very clearly that CHA services would not get classified under the category of "port service". This decision of the Tribunal (in the case of Velji P & Sons) was taken up in appeal by the Revenue to Apex Court Hon'ble Supreme Court while dismissing the Civil appeal on 24th March, 2008, held as under:
Delay condoned The Tribunal, relying upon its own decision in the case of Home Engineering Works v. CCE, Mumbai, has allowed the present appeal filed by the assessee. Against the aforesaid case in Home Engineering Works v. CCE, Mumbai, Revenue has not filed any appeal in this Court.
In view of this, the appeal is dismissed.
It is seen that the Apex Court has upheld the decision of the Tribunal in the case of Velji P & Sons. Hence, the issue is no more res-integra.
10. We find that two coordinate Benches of this Tribunal in an identical set of facts had allowed the appeal of the appellants and very clearly and categorically held that "port service" as defined under Section 65(67) would not cover the services of "chipping, painting and repairs of vessels/ships" undertaken by the current appellant.
11. Accordingly, respectfully following the judgment of the coordinate Bench of the Tribunal as has been upheld by the Apex Court, we hold that the impugned order is not sustainable and is liable to be set aside and we do so. Accordingly, the appeal is allowed.
(Pronounced in Court on 29/04/08)