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2016 (6) TMI 623 - AT - Service TaxScope of the term and taxability of Port Service - Authorized operations - Held that - By reading the provisions in respect of definition of port services as it was defined for the period prior to 1.7.2010 and for the period after 1.7.2010 and also after making a reading of corresponding taxable service(s) under Section 65(105)(zn) and (zzl) it is clear that various services which were rendered within the port area by the appellant in question the said services cannot be called and categorised as port service for levying service tax when the definition of port service during the relevant period did not exactly cover such services which were rendered by them for transportation of goods handling of cargo etc. within Port area. Any service rendered by anyone unless it was by the Port itself or unless there was proper authorisation for port services only could not be taxed under the head of port services - in respect of the respective services rendered by the appellant M/s. HML Agencies (P) Ltd. Mangalore during the relevant period they cannot be made liable to pay service tax under the category of port services. Consequently the impugned order confirming the demand along with interest and imposing penalties under various provisions of Service Tax Law i.e. the Finance act 1994 is hereby set aside - Decided in favor of assessee.
Issues Involved:
1. Demand under Goods Transport Agency 2. Demand under Customs House Agent Service 3. Demand under Cargo Handling Service 4. Demand of duty under Port Service 5. Classification of services within the Port area 6. Barred by limitation 7. Penalties and interest Issue-wise Detailed Analysis: 1. Demand under Goods Transport Agency: The appellant argued that to attract service tax under the category of goods transport agency, the appellant must have availed the service of a Goods Transport Agent. The appellant used their own vehicle or availed services of transport owners/operators, hence no liability arises as per Rule 2(1)(d)(v) and the Finance Minister’s budget speech of 2004. 2. Demand under Customs House Agent Service: The appellant contended that they were executing a turnkey contract, which cannot be vivisected. The respondent erred in demanding service tax on CHA service by bifurcating the contract. 3. Demand under Cargo Handling Service: The appellant argued that the demand for service tax under Cargo Handling Service is unsustainable as the respondent bifurcated the indivisible turnkey contract into bits to suit revenue requirements. The appellant relied on the Tribunal’s decision in Daelim Industrial Co. Limited vs. CCE, which held that turnkey contracts cannot be vivisected. 4. Demand of duty under Port Service: The appellant submitted that the respondent erroneously re-classified services rendered inside the port as port services and outside the port under cargo handling services. The appellant claimed they had already paid service tax under the CHA category and had not rendered cargo handling or port services. They relied on various Tribunal decisions supporting their contention that their activities do not attract tax under port services. 5. Classification of services within the Port area: The Tribunal analyzed similar facts in the case of Aspinwall & Co. Ltd. and concluded that services rendered within the port area by the appellant could not be classified as port services before the amendment of 1.7.2010. The definition of port services before and after the amendment was scrutinized, emphasizing that prior to 1.7.2010, services rendered within the port area could not be categorized as port services unless specifically rendered by the port or an authorized person. The Tribunal cited several decisions, including Konkan Marine Agencies and Velji P. Sons (Agencies) P. Ltd., supporting this interpretation. 6. Barred by limitation: The appellant argued that the entire demand is barred by limitation. The department had registered the appellant under the CHA category in 2002 and had consistently accepted their returns and tax payments under this category. The sudden shift in the department's stance was unjustifiable. 7. Penalties and interest: The appellant contended that no penalty could be imposed as there was no liability to differential tax and no culpable mental state or mens rea. They relied on the Supreme Court decision in Hindustan Steel Limited vs. State of Orissa, which held that penalties should not be imposed unless the party acted deliberately in defiance of law. The appellant also cited various decisions supporting their contention that penalties and interest should not be imposed when the principal tax is not payable. Conclusion: The Tribunal concluded that the services rendered by the appellant within the port area during the relevant period could not be classified as port services. Consequently, the demand for service tax, along with interest and penalties, was set aside, and the appeal was allowed with consequential relief to the appellant.
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