2008 (7) TMI 138 - AT - Service Tax

Royalty received by the Port Trust from person constructing/operating container terminal - grant by the Port Trust to M/s. SICAL under the agreement is a licence which inter alia includes authorisation to render Port Service - For such services the authorised person has been paying service tax - Revenue plea that the royalty received by the Port Trust for the right to use the seventh berth comes within the purview of levy of such Port Services can not be sustained - Stay granted

Summary

Issues:
1. Liability of service tax on royalty received by Port Trust from a company for port services rendered.
2. Interpretation of 'Port Service' under Section 65(82) of the Finance Act, 1994.
3. Determination of whether royalty payments constitute consideration for 'Port Services.'
4. Granting waiver of pre-deposit and stay of recovery of service tax, interest, and penalties.
5. Application for out-of-turn disposal of the appeal.

Analysis:

1. The case involved a Port Trust being asked to pay service tax on royalty received from a company, M/s. SICAL, for services rendered at a container terminal. The Port Trust argued that the royalty was akin to rent for the use of the terminal and not consideration for 'Port Services' as defined under the Finance Act, 1994.

2. The definition of 'Port Service' under Section 65(82) of the Finance Act, 1994 was crucial in determining the tax liability. The Tribunal noted that the agreement between the Port Trust and M/s. SICAL authorized the latter to render services falling under Section 42(3) of the Major Port Trusts Act, which were considered taxable 'Port Services.'

3. The Tribunal analyzed whether the royalty payments made by M/s. SICAL to the Port Trust could be construed as consideration for 'Port Services.' It was observed that M/s. SICAL had been paying service tax for the services rendered to cargo owners at the terminal, and the royalty payments were not directly linked to these services. Therefore, the Tribunal was not convinced that the royalty constituted consideration for 'Port Services.'

4. In light of the above analysis, the Tribunal decided to grant a waiver of pre-deposit and stay of recovery concerning the service tax, interest, and penalties imposed on the Port Trust. This decision was made based on the Tribunal's assessment of the arguments presented and the lack of evidence supporting the imposition of service tax on the royalty payments.

5. Additionally, the Tribunal addressed an application for out-of-turn disposal of the appeal due to the high stakes involved in the case. The application was unopposed, and the Tribunal granted the request, directing the appeal to be posted for a specific date to ensure timely resolution of the matter.

This detailed analysis of the judgment highlights the key legal issues, interpretations of relevant provisions, and the Tribunal's decision regarding the liability of service tax on royalty payments and the subsequent actions taken in the case.