2017 (10) TMI 560 - AT - Service Tax

Port Services - CHA/Stevedoring service - demand of service tax - Held that - The appellant is not contesting the liability to pay the demand of service tax but has only requested for remand to consider the eligibility of credit on input services in relation to stevedoring services - in case the appellant has paid service tax on input services in relation to stevedoring services, the same is eligible for credit - to verify the same, matter requires to be remanded - matter on remand. Penalties - Held that - the issue was an interpretational one - penalties deserves to be set aside. Appeal allowed in part by way of remand.

Summary

Issues:
Demand of service tax under "Port Services" for stevedoring services rendered by the appellant from April 2002 to November 2005, eligibility of credit on service tax paid to the Port Trust for other services, penalties imposed under sections 76, 77, and 78 of the Finance Act, 1994.

Analysis:

Issue 1: Demand of Service Tax under "Port Services" for Stevedoring Services
The appellant, a partnership firm providing CHA/Stevedoring services, faced a demand of service tax amounting to ?51,20,238 for stevedoring services rendered from April 2002 to November 2005. The original authority confirmed this demand along with interest and penalties under relevant sections of the Finance Act, 1994. The appellant did not contest the liability to pay the service tax but sought a remand to consider the eligibility of credit on input services related to stevedoring services. The Tribunal remanded the matter to verify the eligibility of input service credit, emphasizing that if service tax was paid on input services for stevedoring, it should be eligible for credit.

Issue 2: Eligibility of Credit on Service Tax Paid to Port Trust for Other Services
The appellant, acting as an intermediary, collected service charges including service tax from clients and paid the same to the Tuticorin Port Trust (TPT). The appellant requested credit for the service tax paid to TPT for other services falling under port services. The Tribunal acknowledged that service tax on other services under port services was eligible for credit and directed the adjudicating authority to verify if the appellant was entitled to input service credit for services related to stevedoring.

Issue 3: Penalties Imposed under Sections 76, 77, and 78 of the Finance Act, 1994
The penalties imposed under sections 76, 77, and 78 of the Finance Act, 1994 were contested by the appellant. The appellant argued that the issue of whether stevedoring services fell under the definition of "Port Services" was subject to confusion and interpretation, as evidenced by litigations up to the Larger Bench of the Tribunal and writ petitions before the High Court. The Tribunal agreed with the appellant's argument, setting aside all penalties imposed due to the interpretational nature of the issue.

In conclusion, the Tribunal sustained the service tax demand while remanding the matter to verify the appellant's eligibility for input service credit related to stevedoring services. Additionally, all penalties imposed under sections 76, 77, and 78 of the Finance Act, 1994 were set aside based on the interpretational nature of the issue regarding whether stevedoring services fell under the definition of "Port Services." The appeal was partly allowed in these terms.