2017 (5) TMI 149 - AT - Service Tax

Turn Key Contract - classification of services - The appellants herein are claiming the classification of their services under the category of Custom House Agents and other services while Revenue seeks to classify these services under Port services - case of Revenue is that various services were rendered by the appellant were within the Port area and hence were to be classified under the category of Port services - The contention of the appellant is that the license issued to the appellant by the port authority to carry out service inside the port cannot be considered as authorization by port - Held that - In the assessee s own case Aspinwall & Co. Ltd. Versus Commissioner of Central Excise, Mangalore 2010 (10) TMI 321 - CESTAT, BANGALORE , dealing with their operation in Mangalore Port, the Tribunal has decided the issue and held that It would imply that the modified/altered or expanded definition of Port Services would definitely encompass the services rendered by the appellants herein, but from 08.05.2010 - the demand for service tax under Port Services is not sustainable and hence is set aside. Valuation - CHA services - abatement claimed of 85% - Board Circular No. B43/1/97-TRU dated 06.06.1997 - Revenue has been taken that the benefit of the 1997 Circular will not be allowable to the appellant, since, the appellant is showing the items separately - Held that - It is not in dispute that the contracts of the appellant with their clients is on lumpsum basis and Service Tax already stands discharged on 15% of the consideration received in terms of the 1997 Circular - the Agency Commission actually attributable to the CHA services will be far lesser than the 15% already consider for payment of service tax - the demand of Service Tax made by considering the entire amount received from the client is without basis and hence merits to be set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Classification of services under Port services and demand of differential duty.
2. Disallowance of abatement claimed for CHA services.
3. Confirmation of service tax amounts and penalties.

Analysis:

1. Classification of services under Port services:
The appellant, engaged in shipping services in Cochin Port, was classified under Port services for activities within the port area. The Revenue demanded service tax based on various charges recovered, including port and dock charges, cargo handling charges, railway haulage charges, container handling charges, and labor charges. The appellant contended that their services should be classified as CHA services and not under Port services. The Tribunal referred to previous judgments, including the appellant's case in Mangalore Port, to conclude that services rendered within the port area did not fall under Port services. The demand for service tax under Port services was set aside.

2. Disallowance of abatement claimed for CHA services:
The dispute also involved the disallowance of the 85% abatement claimed by the appellant for CHA services. The appellant argued that they were discharging service tax based on 15% of the total consideration received, as per a Circular from 1997. The Revenue contended that since the appellant billed various charges separately, the abatement could not be allowed. The Tribunal held that the service tax payable for CHA services should only be on the agency commission charge, not on reimbursement of expenses. As the appellant's contracts were on a lump sum basis, the demand for service tax considering the entire amount received was deemed unjustified and set aside.

3. Confirmation of service tax amounts and penalties:
The impugned order confirmed service tax amounts for CHA and Port services, along with penalties under various sections of the Finance Act, 1994. However, the Tribunal, after considering arguments from both sides and perusing the records, set aside the impugned order. The Tribunal allowed the appeal, concluding that the demand for service tax under Port services and the disallowance of abatement for CHA services were not justified based on legal precedents and the specific circumstances of the case.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand for service tax under Port services and disallowance of abatement for CHA services. The judgment highlighted the importance of proper classification of services and adherence to relevant circulars in determining the tax liability for specific types of services.