2014 (3) TMI 1079 - AT - Service Tax

Levy of tax - charter hire agreement with Hazira Port Pvt. Ltd. for supply of vessels for undertaking various operations in the port - Supply of Tangible Goods for Use Service or port service - Held that - In similar circumstances, in the case of Vikram Ispat 2008 (5) TMI 44 - CESTAT MUMBAI , this Tribunal took the view that the activity is one of supply of tangible goods for use and not port services . The purpose of creating a omnibus entry as port services was to bring within one service the various activities rendered therein so as to minimize the disputes regarding classification. Therefore, to qualify as a port services, the activity rendered should be a taxable service first. If an activity per se is not a taxable service, it cannot be brought under airport services for the purpose of taxation as it would create discrimination between services rendered within the airport area and services rendered outside the airport area - prior to 16-5-2008, the services rendered by the appellant by way of charter of hire of vessels to HPPL would not qualify as port services . Appeal allowed - decided in favor of appellant.

Summary

Issues:
Service tax liability under 'Port Services' and 'Supply of Tangible Goods for Use Service' for the period April 2005 to February 2010.

Analysis:
The appeal challenged the Order-in-Original confirming service tax demands under 'Port Services' for a significant amount. The appellant contended that the services provided fell under 'Supply of Tangible Goods for Use Service' and thus, prior to a specific date, did not attract service tax liability.

The appellant argued that the vessels supplied were under their control, and qualified staff operated them, making it a 'Supply of Tangible Goods for Use Service.' The appellant cited relevant circulars and previous Tribunal decisions supporting their stance, emphasizing the distinction between 'port services' and 'supply of tangible goods for use service.'

The Revenue argued that the appellant was liable for service tax under 'port services' for vessels on charter hire to the port. They referenced the adjudicating authority's distinction between relevant cases and supported the applicability of a specific decision.

The Tribunal considered both arguments and noted the control of vessels by the appellant, the consideration received on a daily basis, and the provision of qualified personnel. Drawing parallels with previous Tribunal decisions, the Tribunal opined that the activity could be classified as 'supply of tangible goods for use service' rather than 'port services' before a specified date.

Consequently, the Tribunal found merit in the appellant's argument and granted a stay on the recovery of the balance of dues during the appeal, acknowledging a prima facie case for the same.