Custom, Excise & Service Tax Tribunal
The Commissioner Of Central Excise - ... vs M/S.La Opla Rg Ltd on 15 November, 2018
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,
EAST REGIONAL BENCH : KOLKATA
Appeal Nos.ST/14 &15/2008 and ST/19/2010
(Arising out of Order-in-Original No.Commr./BBSR-I/St-06/2007 dated
30.10.2007, Commr./BBSR-I/St-14/2007 dated 28.12.2007 and
Commr./BBSR-I/St-09/2009 dated 23.11.2009 all passed by the
Commissioner of Central Excise, Customs & Service Tax, BBSR-I)
M/s Paradeep Port Trust
...APPELLANT(S)
VERSUS
Commissioner of Central Excise, Customs & Service Tax, BBSR-I
...RESPONDENT (S)
APPEARANCE Shri Pulak Kumar Saha & Shri Manish Jalan, CAs for the Appellant Shri S.S.Chattopadhyay, Suptd. (AR) for the respondent. CORAM:
HON'BLE SHRI P. K. CHOUDHARY, JUDICIAL MEMBER Hon'ble SHRI V.Padmanabhan, Member (Technical) Date of Hearing : 09.10.2018 Date of Pronouncement: 15.11.2018 ORDER NO.FO/A/76929-76931/2018 Per Shri V.Padmanabhan :
The issues involved in these three appeals are common and relates to the same appellant for different periods. Hence, they are taken up for hearing and disposal through this common order. The details of the three impugned orders are as follows:
Appeal No. O-I-O No. & Period Amount SCN dated
Date Involved Involved
(Rs.)
ST/14/2008 Commr./BBSR- 16.07.2001 8,18,98,432 26.10.2006
I/St-06/2007 to
dated 31.03.2006
30.10.2007
2
Appeal No.ST/14/2008
ST/15/2008 Commr./BBSR- 01.04.2006 4,11,56,523 12.10.2007
I/St-14/2007 to
dated 31.03.2007
28.12.2007
ST/19/2010 Commr./BBSR- 01.04.2007 2,05,84,149 21.10.2008
I/St-09/2009 to
dated 31.03.2008
23.11.2009
The appellant is a body corporate constituted under the Major Port Trusts Act, 1963. They are registered for payment of service tax since July, 2001 under the category of 'Port Service' defined under Section 65(82) of the Finance Act, 1994. The appellant entered into an agreement dated 28.06.1993 with the erstwhile South Eastern Railway, presently East Coast Railways (ECR). As per the terms of the agreement it was agreed that ECR will make necessary arrangement for interconnecting of Port Trust Railway System and ECR Railway System. Under this agreement, both parties have fixed interchange points and at these interchange points all inward wagons to and outward from the Port Trust Railway are interchanged between the parties. The appellant provided to the Railways under the agreement a bouquet of services, such as booking of goods, collection of freight, trafficking of goods to and from railway, maintenance of assets including railway track, shunting and placement of wagons within the port area etc. The amounts collected by way of port charges and haulage charges etc. from service recipients were remitted to the Railways on daily basis. For such services, in terms of the agreement, the appellant received lumpsum amounts representing the charges for billing, collection, account maintenance etc. from the Railways which was described as 'Terminal Charges'. The department noticed, while scrutinizing the balance sheet of 3 Appeal No.ST/14/2008 the appellant for the period commencing from 2001-2002 to 2005-2006, that such 'Terminal Charges' were not being included in the taxable value as required under Section 67 of the Act. Since the entire activities rendered by the appellant to the Railways was provided in the port area, department was of the view that the appellant was liable to payment of service tax on the 'Terminal Charges' under the category of Port Services. Though the appellant was making payment of service tax periodically under the category of Port Services, the receipt of Terminal Charges was not included or declared in the ST-3 Returns filed from time to time. Accordingly, show cause notice dated 26.10.2006 was issued to the appellant proposing to demand service tax by invoking the extended period of limitation (covering the five years period from 2001-2006). Subsequently, show cause notice dated 12.10.2007 (covering the period 01.04.2006 to 31.03.2007) and show cause notice dated 21.10.2008 (covering the period dated 01.04.2007 to 31.03.2008) were issued. These three show cause notices resulted in confirmation of service tax under the category of Port Services through issue of the three Order-in-Originals which are under challenge in the present appeals.
2. Shri Pulak Kumar Saha & Shri Manish Jalan, CAs appeared for the Appellant and Shri S.S.Chattopadhyay, Suptd. (AR) appeared for the respondent.
3. Ld. CA challenged the impugned orders mainly on the following grounds:
i) He submitted that the activities are not liable to payment of service tax under Port Services. The service tax on Port Services becomes liable in respect of any service provided within a port in relation to vessels or goods. In the case of the agreement of the appellant with railways, such services were provided not in relation to vessels or goods, but in relation to railway freight. In this connection he referred 4 Appeal No.ST/14/2008 to the circular issued by the Railway Board vide Office Memorandum No.F(X)I-2001/23/2/Service Tax dated 20.04.2005. He submitted that on the basis of the aforesaid letter and also based on the bonafide belief, the appellant did not discharge service tax on the Terminal Charges collected from Railways.
ii) He also referred to the communication issued by Ministry of Finance, Department of Revenue (CBEC) vide Office Memorandum dated 30.10.2006, in which it was clarified that similar issue pertaining to Chennai Port Trust was adjudicated by the Commissioner of Service Tax, Chennai vide his Order No.IV/16/116/2004/STC ADJ dated 11.05.2006. He submitted that vide the above order, service tax was ordered to be paid under the category of 'Business Auxiliary Service'.
iii) He further submitted that w.e.f. 01.09.2007 (after the period of the present disputes) the appellant has started recovering Terminal Charges from customers in addition to freight and started depositing service taxes on such charges.
iv) With reference to the first show cause notice dated 26.10.2006, he submitted that the department was not justified in invoking extended period, since they are not in possession of any cogent evidences to prove that service tax, so demanded was not levied and paid by reason of fraud, collusion, suppression of fact etc. The appellant had entertained a bonafide belief that no service tax was payable under Port Services on Terminal Charges. As such in the light of the decision of the Hon'ble Supreme Court in the case of Uniworth Textiles Ltd. [2013(288) ELT 161 (S.C.)], the department cannot invoke the suppression clause in the case of ordinary default. 5
Appeal No.ST/14/2008
4. Ld.DR justified the impugned orders.
i) He referred to the decision of the Larger Bench of the Tribunal at Chennai in the case of Western Agencies Pvt. Ltd vs. Commissioner of C.Ex., Chennai [2011(22) STR 305 (Tri.-LB)] and submitted that Larger Bench has held that any service rendered within the port area is to be covered within the definition of Port Service.
ii) He also referred to the clarification issued specially in the case of the present dispute by the CBE&C vide letter dated 16.07.2009. CBE&C has given the opinion that the Terminal Handling Services provided by Port towards the Indian Railways is appropriately classifiable under Port Service, since the service is provided within the port area by the port and is in relation to goods.
5. Heard both sides and perused the appeal records.
6. We have perused the copy of the agreement entered into by the appellant with the East Coast Railway. As per the agreement the appellant got the exclusive authority to provide the services of receiving and delivering, transporting booking and dispatching the goods originating in the vessels in the Port and intended for carrying by the neighboring Railways or vice versa. The scope of the agreement is to apply to all description of traffic interchanged between the Port Trust Railway and Southern Eastern Railway. The Port Trust is paid by the Railways for providing such services at the rate notified from time to time known as "Terminal Charges". The dispute is regarding the liability to pay service tax on such Terminal Charges.
7. The adjudicating authority was of the view that the appellant is in the position of a service provider to Railways. Further, he held that all the 6 Appeal No.ST/14/2008 services provided by the appellant are in relation to goods and further that such services are provided within the port area. As such he ordered payment of service tax under the category of Port Services.
8. We have perused the opinion given by the CBEC with reference to the present dispute and submitted by ld. DR to the effect that service tax is liable to be paid under the category of Port Services by the present appellant. But such opinion cannot be considered as binding precedent as far as this Appellate Authority is concerned.
9. It is further seen that the Chennai Bench of the Tribunal had occasion to adjudicate the identical dispute in respect of Chennai Port Trust with regard to the Terminal Charges received by them from Southern Railways. This decision is reported as Chennai Port Trust vs. Commissioner of Central Excise [2017 (5) GSTL 394 (Tri.-Chennai)]. The observations of the Tribunal are reproduced below:
"14.The learned Consultant, Sh. Meenakshi Sundaram has made elaborate arguments which were mainly focused on the additional grounds raised in the miscellaneous application. Under an agreement called "Working Agreement" entered into by assesse with Southern Railway, the assessee undertook the activity of transporting Cargo (both imported and exported) between the dock and the entry point of the Port. It is the Railways who directly undertake transportation from and up to this entry point. Within the Port area, the assessee undertakes the activity of unloading/loading the cargo from/to the vessel to the railway wagons. The wagons are owned by Railways. The consideration for the services for loading/unloading/transportation was collected by assessee by cheque drawn in favour of Railway. The assessee issued the Railway receipts to the cargo owners/customers. The amount collected was then deposited in RBI by assessee in favour of Railways. For such services the assessee received Terminal Handling Charges (THC) which according to department is taxable under Business Auxiliary Service. The 14 services carried out by the assessee are as under :-
1. Harbour haulage charges - clause 3(a)
2. Level crossing maintenance - clause 4(iii) 7 Appeal No.ST/14/2008
3. Maintenance of lines, sidings and signals and telecommunication installations - clause 5
4. Joint train examination - clause 6(a)(i)
5. Provision of facilities for repair of sick wagons - clause 7(a)
6. Placement of sick wagons and withdrawal of repaired wagons - 7(b)
7. preparation of list of damages and deficiencies of the stock tendered by the railway to the trust - clause 8(a)
8. Intimation of accidents to railway representatives -
clause 10(i)
9. Restoration of track - clause 10(ii)
10. Assessment of damages caused due to accident - clause 10(iii)
11. Enquiry as regards accidental claim and compensation -
clause 11
12. collection of freight - clause 18
13. Remittance of freight and other charges into the Reserve Bank of India - clause 19
14. Accounts maintenance - clause 20.
15. Out of these services, Sl. nos. 12, 13 and 14, namely the collection of freight, remittance of freight/other charges into the Reserve Bank of India and accounts maintenance, are the main activities according to department which would fall within the definition of Business Auxiliary Service. For better appreciation, the definition of Business Auxiliary Service as it stood from 1-7-
2003 to 9-9-2004 and from 10-9-2004 onwards is as under :-
During the period 1-7- During the period
2003 to 9-9-2004 from 10-9-2004 to
27-8-2007
(19) "business auxiliary (19) "business auxiliary
service" means any service service" means any
in relation to, - service in relation to -
(i) promotion or marketing (i) promotion or
or sale of goods marketing or sale
produced or provide by of goods
or belonging to the produced or
client; or provided by or
belonging to the
client; or
(ii) promotion or marketing (ii) promotion or
of service provided by the marketing of service
client; or provided by the
client; or
(iii) any customer care service (iii) any customer care
provided on behalf of the service provided on
client; or behalf of the client;
or
(iv) any incidental or auxiliary (iv) procurement of
support service such as goods or services,
billing, collection or which are inputs for
recovery of cheques, the client; or
accounts and remittance, (v) production of goods
8
Appeal No.ST/14/2008
evaluation of prospective on behalf of the
customer and public client; or
relation services, (vi) provision of service
on behalf of the
client; or
and includes services as a (vii) a service incidental
commission agent, but does not or auxiliary to any
include any information technology activity specified in
service. sub-clauses (i) to
(vi), such as billing,
Explanation. - For the removal of issue or collection or
doubts, it is hereby declared that for recovery of cheques,
the purposes of this clause payments,
"information technology service" maintenance of
means any service in relation to accounts and
designing, developing or maintaining remittance, inventory
of computer software, or management,
computerized data processing or evaluation or
system networking, or any other development of
service primarily in relation to prospective customer
operation of computer systems; or vendor, public
relation services,
management or
supervision,
and includes services as a
commission agent, but does not
include any information
technology service and any
activity that amounts to
"manufacture" within the meaning
of clause (f) of section 2 of the
Central Excise Act, 1944 (1 of
1944).
Explanation.- For the removal of
doubts, it is hereby declared that
for the purposes of this clause,
"information technology service"
means any service in relation to
designing, developing or
maintaining of computer software,
or computerised data processing or
system networking, or any other
service primarily in relation to
operation of computer systems;
16.The contention of the learned Consultant is that sub- clause (iv) of section 65(19) would be applicable only if the activities are incidental or auxiliary to the activities mentioned in sub-clauses (i), (ii) and (iii) whereas the contention of department is that the activities of billing, collection or recovery of cheques, accounts and remittances mentioned in sub-clause
(iv) by themselves would be activities falling under the definition of Business Auxiliary Service. On bare perusal of the definition as noticed above, we have to say that the contention raised by the assessee does not hold water. The definition, as it stood prior to 10-9-2004, expressly mentions the words "billing, 9 Appeal No.ST/14/2008 collection or recovery of cheques, accounts and remittances"
which are the services falling under Sl. Nos. 12 to 14 out of the fourteen services rendered by the assessee. It is not necessary that such services should be incidental or auxiliary to the services mentioned in sub-clauses (i), (ii) and (iii). As rightly argued by the department, the services of billing, collection of freight, etc., are stand alone services by themselves and would qualify to be Business Auxiliary Service.
17.Another contention raised is that the services would be taxable as Business Auxiliary Service only if such services are provided on behalf of the client. That the assessee is not rendering any services on behalf of any client and therefore their activities are not Business Auxiliary Service. We are unable to appreciate this contention. The assessee, is preparing the Railway receipt, billing, collecting the Railway Freight and remitting the same in RBI for Railways. For utilizing the services of Railways within the Port area the customers have to pay charges to Railways. The assessee cannot collect freight from the customers unless authorized by the Railways. For this reason, the issuance of railway receipts and collection of freight is definitely rendered on behalf of Railways and the remittances of the amount in Reserve Bank of India is also rendered on behalf of Railways which would make the services rendered on behalf of client.
18.From the above discussions we find that the demand of service tax under Business Auxiliary Service is correct and proper."
10. By following the detailed decision of the Tribunal, we are of the view that the activity under taken by the appellant for Railways will be appropriately classifiable under the 'Business Auxiliary Services', and liable to payment of service tax.
11. Appellant has made a case on limitation for show cause notice dated 26.10.2006 that they entertained a bonafide belief that the terminal charge collected from ECR was not liable to payment of service tax under Port Service. They have cited that they received the copy of the Railway Board's Office Memorandum dated 20.04.2005 which was addressed to the CBEC expressing the view that no service tax would be payable on Terminal Charges. They have further submitted that clarification has been issued by the CBEC to Railway Board attaching a copy of the Order passed by the 10 Appeal No.ST/14/2008 Commissioner of Service Tax, Chennai in respect of Chennai Port Trust. In this order the activity was ordered for payment of service tax under Business Auxiliary Service. But in the recent decision of the Chennai Bench, the view of the Commissioner, Service Tax, Chennai have been upheld.
12. We have also gone through the decision of the Hon'ble Supreme Court in the case of Uniworth Textiles Ltd. vs. Commissioner of Central Excise, Raipur [2013(288) ELT 161 (S.C.)], in which the Hon'ble Supreme Court has observed that mere non-payment of duties is not equivalent to collusion or willful mis-statement or suppression of facts. By following the decision of the Hon'ble Supreme Court, we are of the view that the demand for service tax has to be restricted to the normal time limit in respect of the initial show cause notice dated 26.10.2006.
13. In view of the above discussions, we uphold the demand for service tax under Business Auxiliary Service in respect of all the impugned orders. But in respect of Appeal No.ST/14/2008, the demand will be restricted normal time limit. We also set aside the penalty under Section 78. Penalty under Section 76 and 77 are, however, upheld. The adjudicating authority is directed to requantify the matter. The interest under Section 75 ibid will be payable.
(Pronounced in the open court on 15.11.2018) S/d. S/d.
(P. K. CHOWDHARY) (V.Padmanabhan)
MEMBER (JUDICIAL) MEMBER (TECHNICAL)
ss