2020 (10) TMI 201 - HC - Service Tax

Classification of services - port services or not - stevedoring services - contention of the petitioner's counsel is that they had not been authorised by the port - HELD THAT - Whether the petitioner was authorised by the port or not is a pure question of fact. He highlighted the fact that the petitioner did not even reply to the show cause notice issued by the first respondent. Of course they took part in the personal hearing. In the personal hearing also, the petitioner did not take the stand that they were not authorised by the port to render the stevedoring service. Penalty - HELD THAT - Since a question of law has been raised and the same is still pending consideration before the Principal Seat, it may not be fair to impose penalty on the petitioner - Penalty imposed on the petitioner is set aside. In all other respects, the order impugned is sustained. Petition allowed in part.

Summary

Issues:
Assessment of service tax liability for stevedoring services rendered by a customs house agent without authorization by the port.

Analysis:
The case involved a writ petition by a customs house agent challenging a show cause notice issued by the first respondent regarding the payment of service tax for a specific period. The impugned order confirmed the demand for service tax along with interest and imposed a penalty under Section 76 of the Finance Act 1994. The petitioner did not challenge the order promptly but filed the writ petition upon receiving a recovery notice. The petitioner argued that they were not authorized by the port to render stevedoring services and, therefore, should not be liable for service tax under Section 65(67) of the Finance Act, 1994.

The Standing Counsel for the respondents contended that the impugned order was justified and should not be interfered with. The court considered the arguments from both sides and reviewed the materials on record. It was highlighted that whether the petitioner was authorized by the port was a factual question, and the petitioner did not contest this fact during the show cause notice or the personal hearing. The Standing Counsel pointed out that the petitioner's membership in the stevedoring Association implied authorization by the port, as membership required a port license.

Reference was made to the decision of the Larger Bench of CESTAT, which clarified the interpretation of "port service" under Section 65(82) of the Finance Act, 1994. The Larger Bench affirmed that stevedoring in a major or minor port constitutes a port service. Considering the failure of the petitioner to contest the show cause notice and the precedent set by the Larger Bench, the court upheld the impugned order regarding the service tax liability. However, the court decided to set aside the penalty imposed on the petitioner due to the pending question of law before the Principal Seat. The writ petition was partly allowed, with the penalty being the only aspect set aside, and no costs were awarded.