2005 (7) TMI 672 - AT - Service Tax

Pre-deposit - repairing activity - failed to pay service tax - Penalty - HELD THAT - The activity of repairing by the appellants, in our prima facie view is not covered by a service rendered by the Port or any person authorised by the Board to do so, inasmuch as the provisions of section 42(e) cannot be extended and stretched so as to cover the repairing activity. We also find favour in the ld. Advocate s arguments that sub-section (4) of Section 42 provides for authorisation by the Board for the various services, at the rate specified by a notification in the official gazette. This reflects upon the fact that the various services, which can be authorised by the Board by any person are routine service for which various rates can be fixed. As far as repairing of the vessel, chipping and painting is concerned, the charges would definitely depend upon the extent of work required to be done. Such consideration, we have been told, depends upon the contract arrived at after negotiations. As such, prima facie, we are of the view that the services of repairing of the vessels are not Port Services and not liable to service tax during the relevant period. We, accordingly, allow the stay petition unconditionally and fix the main appeal itself on 5 August 2005.

Summary

Issues:
Interpretation of the term "Port Services" under the Finance Act, 1994 for service tax liability.

Analysis:
The case involved a dispute regarding the classification of services provided by the appellants as "Port Services" liable to service tax under the Finance Act, 1994. The appellants were engaged in repairing, chipping, cleaning, and painting vessels for various clients. The authorities contended that these services fell under the category of "Port Services" and were subject to service tax. The appellants argued that the services provided were independent of port activities and should not be considered as "Port Services."

The appellants' advocate referred to the definition of "Port Services" under the Finance Act, 1994 and the Major Port Trust Act, 1963. He highlighted that the services listed in the Act were related to the entry or exit of vessels from port areas. By applying the principle of ejusdem generis, he argued that the repairing activities undertaken did not fall under the definition of "Port Services" as they were not directly linked to vessel entry or exit. The advocate also emphasized that the charges for the services were based on negotiated contracts, not standard tariff rates.

The Departmental Representative (DR) countered by citing Section 35 of the Major Port Trust Act, 1963, which empowered the Board to provide facilities for vessel repairs. The DR argued that since the appellants were authorized to carry out repairs on behalf of the Board, their services should be considered as "Port Services" subject to service tax.

After considering both arguments, the Tribunal found merit in the appellants' contentions. The Tribunal agreed that the repairing activities performed by the appellants were not synonymous with the services typically authorized by the Board under the Major Port Trust Act. The Tribunal noted that the charges for vessel repairs were based on individual contracts and not fixed tariff rates, indicating an independent service provision. Consequently, the Tribunal granted an unconditional stay on the service tax amount and penalties imposed, ruling that the repairing services were not classified as "Port Services" liable to service tax during the relevant period.

In conclusion, the Tribunal's judgment clarified the interpretation of "Port Services" under the Finance Act, 1994, emphasizing the need for a direct nexus between the services provided and port-related activities to determine service tax liability accurately.