2011 (9) TMI 93 - AT - Service Tax

Sharing of revenue - support services of business or commerce - As per the sub concession agreement, MICT is to make the payment to the appellants as water upfront charges, royalty at the ate of 10% of the total revenue per annum and profit sharing, by whatsoever name called. - Held that - infrastructure development by the appellants was an obligation on their part created under the agreement between them and Government of Gujarat, and it cannot be held the same was primarily and basically for MICT. The appellants have been given the right to develop Mundra Port and it was for the development of port that such infrastructure facilities were being created by them. - no services, falling under the category of support services of business or commerce, were being provided by the appellants to MICT. Freight & terminal sharing from Railways - As per agreement entered by the appellants with North Western Railways, they have laid down the railways lines for the running of the railways. As per the new policy, the cost of laying down of railways lines, instead of being borne by the Government of India, is to be borne by the private parties. The Railways operates the said railways and after recovering all the operation cost, pays balance amount to the investors.- Held that - it is the railways who have provided services to the appellants. Similarly, maintenance of the assets which are admittedly assets of the appellants does not amount to providing any business support services to the railways. - not liable to service tax. Vacant land - held that - it is use of the vacant land, which stands provided by the appellants to various lessees alongwith the facilities, the same would not fall even within the taxable services of rent of immovable property. The demand on this count is accordingly not sustainable. Rule 6(3) of Cenvat Credit - Exempted service or non taxable service - the appellant took plea that they are not providing taxable as well as exempted services. The services which are considered to be exempted are, in fact, are non taxable services. In such a case, the provisions of Rule 6(3) (c) of Cenvat Credit Rules, 2004 would not get invoked. - Held that - It is not being disputed the excess utilization of credit was in the knowledge of the Revenue, inasmuch, ST-3 returns were being filed by the appellants. Further, there could be some scope of entertaining the bonafide that inasmuch the appellants are not providing the taxable as well as exempted services, the entire credit was available to them for utilization. - Demand set aside in view of of the provisions of section 73 and section 80 of the Act. Services provided to SEZ units - payment of 8% - Held that Board s circular No. 105/8/08 dated 16.9.08 clarifies the issue of payment of service tax applicable on taxable services provided by the SEZ unit except such services which are exempted by Notification No.04/04-ST dt.31.3.04, is apt. If the services provided to SEZ unit are exempted services they are required to pay an amount of 8% of the value of exempted service in terms of the provision of Rule 6(3) (i) of Cenvat Credit Rules, 2004 - Demand upheld on this issue.

Summary

Issues Involved:

1. Non-payment of service tax under various heads including Port Services and Business Support Services.
2. Wrong availment of Cenvat credit.
3. Recovery of amounts under Rule 6(3) of Cenvat Credit Rules, 2004.
4. Limitation and penalty.

Detailed Analysis:

1. Non-payment of Service Tax:

Revenue Sharing from MICT:
The appellants entered into a sub-concession agreement with MICT, granting them rights to operate a container terminal. The Revenue argued that payments received under this agreement were for "support services of business and commerce" under Section 65(104c) of the Finance Act, 1994. The appellants contended that the agreement granted rights but did not involve providing business support services. The Tribunal held that the relationship was of a licensee and sub-licensee, and the services provided were obligations under the agreement with the Government of Gujarat, not business support services. The demand of Rs. 7,93,40,617/- was set aside.

Freight & Terminal Sharing from Railways:
The appellants built and maintained a railway line under a private participation scheme. The Revenue claimed this constituted business support services. The Tribunal found that the payments received were for capital costs, not for providing services, and upheld the Commissioner's decision to drop the demand.

Deferred Infrastructure Development Income:
The appellants leased vacant land with facilities like water and electricity connections. The Commissioner confirmed the demand for six agreements but dropped it for nine similar agreements. The Tribunal found no justification for this inconsistency and noted that vacant land is excluded from the taxable entry for renting immovable property under Section 65(105)(zzzz). The demand was set aside.

Vessel Priority Income, Dispatch Money Vessel, and Cargo Documentation Fees:
The Tribunal acknowledged that these services fell under "port services" as defined in Section 65(82) of the Finance Act, 1994. However, due to earlier favorable decisions for the appellants, the Tribunal held that the extended period of limitation could not be invoked. The demand beyond the normal period was set aside, and penalties were canceled.

2. Wrong Availment of Cenvat Credit:

The Tribunal upheld the denial of Cenvat credit on rail, sleeper, fish plates, and bitumen, citing an earlier decision in the appellants' case. However, the Tribunal noted that the appellants had paid the disputed amount before the issuance of the show-cause notice, and no penalty was warranted under Section 73(3) and Section 80 of the Finance Act, 1994.

3. Recovery of Amounts under Rule 6(3) of Cenvat Credit Rules, 2004:

The Tribunal upheld the Commissioner's decision that the appellants were entitled to utilize accumulated credit from 1.4.08 due to legislative amendments. However, interest on the excess utilization was confirmed, but penalties were dropped due to the peculiar circumstances and legislative changes.

4. Limitation and Penalty:

The Tribunal found that due to earlier favorable decisions, there was a bona fide doubt about the taxability of certain services. Consequently, the extended period of limitation could not be invoked, and penalties were not justified. For other issues where the Tribunal upheld the tax liability, the matter was remanded to the Commissioner to consider the limitation aspect and consequent penalties.

Conclusion:

The appeals were disposed of with specific directions to set aside certain demands, uphold others, and remand the matter for reconsideration of limitation and penalties for specific services. The Tribunal emphasized the need for consistency and adherence to legislative amendments and clarified definitions in the Finance Act, 1994.