2010 (5) TMI 479 - AT - Service Tax

Port service royalty charges - royalty received by the appellant is not a consideration for any port services rendered Held that - Port service means any service rendered by a port or other port, or by such port or other port, in any manner in relation to a vessel or goods - assessee pays service tax as demanded, the same will be available to it as cenvat credit, and can be used to meet its liability on services rendered - demand not liable to be sustained Ownership/lease hold rights of the equipment of the appellant shall stand transferred to the licensee from the date of receipt of first installment of the upfront payment. The leasehold rights and ownership of crane leased from M/s. ABG Heavy Industries Ltd., was also passed on to the licensee. The consideration received was accounted in the financial records of CPT as sundry debtors and the value of the assets written off at the written down value of Rs. 7.6 crores. Even if the equipment is held to have been leased to IGTPL and not sold, - no tax can be levied on the consideration as it is not received towards port services rendered by CPT. The assessee did not put up jetties but collected charges for licenses granted to other persons to put up structures on the waters coming within the administrative jurisdiction of CPT. These charges are collected in accordance with Cochin Port(licensing of jetties, slipways and boat pen) Regulations, 1968 - these charges for licenses as not classifiable under port services or taxable under that head.

Summary

Issues Involved:

1. License fee and upfront charges for use and transfer of equipment.
2. Royalty charges received from IGTPL.
3. Rental amounts collected for renting out jetties.
4. Boat registration fee.
5. Estate rentals for storage facilities.

Issue-wise Detailed Analysis:

1. License Fee and Upfront Charges:

The appellant, Cochin Port Trust (CPT), entered into an agreement with India Gateway Terminal Pvt. Ltd. (IGTPL) for the operation and management of the Cochin Sea Port, including necessary modifications. The agreement stipulated a license fee and upfront charges. The Commissioner determined that the activities constituted services rendered in relation to vessels or goods and thus were liable to service tax. However, the Tribunal found that the license fee was for the use of land and not for port services. The upfront charges were considered part of the sale of equipment, not services, and thus not subject to service tax.

2. Royalty Charges:

CPT received royalties from IGTPL, calculated as a percentage of gross revenue. The Commissioner held that these royalties were for allowing IGTPL to carry out port services and thus taxable. The Tribunal disagreed, stating that the royalty was not a consideration for port services rendered by CPT. It was a share of the revenue earned by IGTPL and not directly linked to any service provided by CPT.

3. Rental Amounts for Jetties:

CPT rented out jetties within the port area, and the Commissioner classified this under port services. The Tribunal found that these were charges for licenses granted to other persons to construct jetties and not for services rendered by CPT. Therefore, these charges were not taxable under port services.

4. Boat Registration Fee:

The Commissioner confirmed the proposal to levy service tax on boat registration fees collected by CPT. The appellant did not contest this demand, and the Tribunal did not address it further.

5. Estate Rentals:

CPT received estate rentals for providing storage facilities for import/export goods. The Commissioner held these rentals as liable to service tax under port services. The Tribunal found that these rentals were for leasing out immovable property, a service introduced only post the period of dispute. Therefore, the demand under port services was set aside.

Conclusion:

The Tribunal vacated the impugned demand and penalties, allowing the appeal. The license fee, upfront charges, royalty charges, and rental amounts for jetties were not considered taxable under port services. The estate rentals were also not taxable as they fell under a service category introduced after the period of dispute.