2015 (12) TMI 1599 - AT - Service Tax

Demand - port services - storage and warehousing services - Held that - Ports are statutorily required to handle goods and vessels; to that extent they provide a safe harbour for ships with berths for holding them fast. These are generally presented as pilotage and berth hire. In relation to goods ports provide space for storage - either in the open or in covered godowns - and ports collect wharfage. Handling of cargo is not a part of the core activities of the port. Even if the port authority in a major port does handle it it is performed through the Dock Labour Board which is an official stevedore - It would therefore appear that ports licence entities to interact with them and with others in relation to vessels and cargo steamer agents stevedores ship chandlers etc. which are not in the nature of authorisation to perform such activities that the port otherwise undertakes. Storage and warehousing service - Held that - the definition of storage and warehousing in Section 65(102) of Finance Act 1994 we find that it specifically excludes service in relation to agriculture produce. On this count too the demand of tax on the service rendered by the appellant is untenable - The appellant handles cargo which involves loading unloading and transporting. Moreover such handlers are often required to provide space for aggregation and security of cargo till they are ready to be moved to the vessels carrying these. The storage and warehousing that is intended to be taxed is a specialised field that has for long held a vital position in commodity logistics. Such warehousekeepers are recognised in law as transit custodians with enacted responsibility and rights over the goods. Even to the extent of according the right of transfer of ownership through the transfer of warehouse receipt. The storage space provided by the appellant does not fall within that category but is one of renting of space. The demand of tax therefore is not sustainable. Appeal allowed.

Summary

Issues:
1. Tax liability on services provided by the appellant under the category of 'port services.'
2. Tax liability on services provided by the appellant under the category of 'storage and warehousing services.'

Analysis:
1. The appellant contested the tax levied on them for 'port services,' arguing that they were not a port and the license issued to them did not constitute authorization as per the relevant sections of the Finance Act, 1994. The Tribunal examined the definitions of 'port service' before and after the 2010 amendment. It was noted that the scope of taxable activities expanded post-amendment to include services beyond those traditionally rendered by a port authority. The Tribunal clarified that during the disputed period, the appellant did not fall under the definition of a 'port' and therefore, the taxability of their services depended on whether they performed activities typically undertaken by a port and authorized by the port. The Tribunal highlighted that ports handle goods and vessels, providing storage space and collecting wharfage, whereas handling cargo is not a core port activity. The decision emphasized that the appellant's activities did not align with those of a port, and hence, the tax demand was deemed unsustainable.

2. Regarding the tax liability on 'storage and warehousing services,' the appellant's counsel referenced a High Court decision exempting tax on services related to export cargo. The Tribunal examined the definition of 'storage and warehousing' under the Finance Act, 1994, noting the exclusion of services related to agricultural produce. The Tribunal emphasized the specialized nature of taxed storage and warehousing services, highlighting the legal recognition and responsibilities of warehousekeepers over goods. The appellant's provision of storage space was distinguished as rental space and not falling under the category of taxable warehousing services. Therefore, the Tribunal concluded that the tax demand on the appellant's services was not sustainable, leading to the setting aside of the impugned order and allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the tax demands on both 'port services' and 'storage and warehousing services' based on the analysis of the definitions, activities, and legal precedents cited during the proceedings.