2012 (6) TMI 67 - AT - Service Tax

Waiver of pre-deposit Whether assessee CPT was liable to pay Service Tax under Port Services on royalty, upfront charges, rent on jetties and estate rentals received Royalty - Royalty charges were paid by IGTPL to develop and operate RGCT within the port premises Held that - This amount was paid by IGTPL to CPT for allowing it to develop and operate Rajiv Gandhi Container Terminal at the port premises. royalty received by the appellant is not a consideration for any port services rendered by CPT. If at all IGTPL 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 by it. demand not liable to be sustained Regarding upfront charges - ownership/lease hold rights of the equipment of the appellant shall stand transferred to the licensee from the date of receipt of first instalment of the upfront payment. 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 ₹ 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 Regarding rental amounts collected for renting out various jetties within the port area Held that - 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 Regarding estate rentals - these are recovered for leasing out immovable property of IGTPL for permitting it the use of the site belonging to CPT. Renting of immovable property services under which the impugned activity will be appropriately classified was introduced only on 1.6.2007 post the period of dispute. Therefore, the impugned demand under Port Services is liable to be set aside Demand and penalty set aside and appeal allowed

Summary

Issues:
1. Liability to pay Service Tax on various receipts by M/s. Cochin Port Trust (CPT).
2. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Issue 1: Liability to pay Service Tax

The appeal by M/s. Cochin Port Trust (CPT) pertained to the liability to pay Service Tax on receipts from activities such as royalty, upfront charges, rent on jetties, and estate rentals. The agreement with M/s. India Gateway Terminal Pvt. Ltd. (IGTPL) involved payments based on gross revenue and transfer of equipment. The Commissioner held CPT liable for Service Tax under 'Port Services' on these receipts, along with imposing penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant challenged the order, arguing that the amounts received were not consideration for taxable services and should not be subject to Service Tax. The appellant contended that the upfront charges were for equipment transfer, and the rent on jetties was not for services rendered. During the hearing, it was noted that a similar dispute had been decided in favor of the assessee in a previous order.

Issue 2: Imposition of Penalties

The Commissioner imposed penalties on CPT under Sections 76, 77, and 78 of the Finance Act, 1994. However, during the hearing, it was highlighted that a previous order by the Bench had favored the assessee in a similar dispute. The penalties were challenged by the appellant, emphasizing that the demands under 'Port Services' were not sustainable. The Bench examined the case records and found that the royalty amounts paid by IGTPL were not for port services rendered by CPT. Similarly, the upfront charges were considered as part of an agreement for equipment transfer, not taxable under Service Tax. The rental amounts for jetties and estate rentals were also deemed not classifiable under 'Port Services.' Consequently, the Bench vacated the impugned demand and penalties, allowing the appeal in favor of the appellant.

In conclusion, the Appellate Tribunal CESTAT, Bangalore ruled in favor of M/s. Cochin Port Trust (CPT) regarding the liability to pay Service Tax on various receipts and the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The Tribunal found that the receipts in question were not taxable under 'Port Services,' as they were related to agreements for equipment transfer, leasing of immovable property, and licensing of jetties. The penalties imposed by the Commissioner were set aside, and the appeal was allowed in favor of the appellant.