2010 (3) TMI 742 - AT - Service Tax

Stay petition and order - Port services - The appellant, allowed L&T to construct a captive jetty exclusively for their use - According to the agreement L&T will be liable to pay 20 per cent of normal wharfage charges till they recover the cost incurred by them in construction of captive jetty - The department has taken a stand that appellant is required to pay the service tax on the wharfage charges to the extent of 100 per cent even though they are charging 20 per cent of the actual wharfage since leviable concession is directly linked to the cost of construction of jetty - submits that what they are doing are statutory functions and not related to any service. He also submits that they are paying service tax on 20 per cent collected from L&T since the amount is collected as wharfage which is one of the terms used for various services provided by a port - that GMTB is a State Government entity and there are questions of law involving applicability of Policy and Valuation rules prior to 2006, includeability of additional consideration before 2006, we find that the issue is contentious. Learned advocate was not willing to make any offer as regards pre-deposit but submitted that early hearing may be allowed so that the issue can be settled finally without any delay. Learned SDR has no objection. Since GMTB is also A State Government entity, the dispute is between State Government and Central Government. We consider that it will be appropriate to allow the stay petition and also order early hearing of the matter so that issue can be decided without any delay.

Summary

Issues:
1. Liability of Gujarat Maritime Board (GMTB) to pay service tax on wharfage charges.
2. Applicability of concessional rate to L&T for construction of captive jetty.
3. Invocation of extended period for duty evasion.
4. Classification of charges levied by GMTB as service charges.
5. Dispute between State and Central Government entities.

Analysis:

1. The primary issue in this case revolves around the liability of GMTB to pay service tax on wharfage charges. The department contends that GMTB must pay service tax on the full amount despite charging only 20% of the normal wharfage, as the concession is linked to the construction cost of the jetty. However, GMTB argues that the charges are for permission to construct the jetty, not for providing a service, and thus, no service tax is due. The tribunal notes that GMTB's collection of wharfage charges weakens their argument, but acknowledges the contentious nature of the issue due to questions regarding policy applicability and additional considerations.

2. The issue of concessional rates granted to L&T for the captive jetty construction is also under scrutiny. While L&T is eligible for a reduced rate until they recover the construction costs, the charges would have been significantly higher without the jetty construction. The department argues that the contract details were not disclosed, justifying the invocation of the extended period for duty evasion. This discrepancy raises concerns about the impact of the Build-Operate-Transfer (BoT) agreement on the service charges levied by GMTB.

3. The tribunal considers the nature of the charges imposed by GMTB, labeling them as service charges due to the collection of wharfage fees. Despite GMTB's argument that their activities are statutory functions rather than services, the tribunal finds their position weak. The involvement of State and Central Government entities further complicates the dispute, leading to the decision to allow a stay petition and expedite the hearing process for a prompt resolution.

In conclusion, the judgment addresses multiple complex issues concerning service tax liability, concessional rates, duty evasion, and the classification of charges, emphasizing the need for a thorough examination of the contractual arrangements and legal frameworks involved.