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2023 (6) TMI 307 - AT - Service TaxClassification of services - Support Services of Business or Commerce or renting of immovable property - royalty / concession fee / lease charges received by the Port from KPPL represents consideration for providing services relatable to the taxable service - notice is time barred or not. Revenue is of the opinion that the entire activities carried out under the concession agreement are in the nature of composite services, which consists of a combination of different taxable service and therefore it should be classified as if it consisted of a service which gives the essential character in accordance with Section 65A of Finance Act, 1994. HELD THAT - By the Concession agreement, the Appellant has entrusted upon KPPL the rights to develop / operate / maintain the Port including project facilities on a BOT basis. The expression infrastructural support services given under Section 65(104C), includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security. None of these services are being provided or to be provided, to KPPL by the Port Department. KPPL has developed the land, built a Port and are offering services to the trading community on the basis of fees fixed by KPPL. This contractual permission by the Port Department to KPPL for setting up and running port facilities cannot be termed as support services of business or commerce, to be taxed at the Port Departments hands. The concession fee paid by KPPL to the Puducherry Port as a percentage of gross revenue generated by the concessionaire each year is also not a payment for any support services of business or commerce given by the Port Department to KPPL. It is basically a payment for the rights to develop / operate / maintain the Port including project facilities - the impugned order has erred in classifying the activity of the BOT contract under sec. 65(105)(zzzq) of the Finance Act, 1994 and that the levy must fail. The Appellant has relied upon the judgment in COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, GOA VERSUS MORMUGAO PORT TRUST AND VICE-VERSA 2015 (10) TMI 1736 - CESTAT MUMBAI . The facts of the case are that M/s Mormugao Port Trust is rendering Port Services and is duly registered for this purpose with the service tax authorities. The Assessee had entered into an agreement with M/s. South West Port Ltd., Mormugao, (SWPL) under which it had leased out/rented out pieces or parcels of land which were situated in the operational area of the harbour to SWPL on which the latter had constructed a jetty which was used for loading and unloading of cargo from ocean going vessels, in lieu of which it received license fee and royalty from SWPL. Considering the facts of that case the Hon ble Tribunal felt that the arrangements between the parties was one of public-private partnership and was in the nature of a joint venture where two parties have got together to carry out a specific economic venture on a revenue sharing basis and there is no service rendered by Mormugao Port which can be taxed. Another stand taken by the appellant is that the activity in question is covered under the scope and ambit of renting of immovable property and the legislature has excluded leasing out of vacant land from the definition of immovable property for purposes of taxation, whereas the above judgment in the Mormugao Port Trust case rules out the classification of the service under renting of immovable property. The appeal having being decided on merits in favour of the appellant, the issue of the show cause notice invoking the extended period of time does not survive. The impugned order is set aside and the appeal is allowed.
Issues:
The appeal involves determining whether the royalty/concession fee/lease charges received by the Port Department represent consideration for providing services under the taxable service defined in sec. 65(105)(zzzq) of the Finance Act, 1994, and whether the notice is time-barred. Issue 1: Royalty/Concession Fee/Lease Charges The Port Department entered into a Concession Agreement for the development of a port project, granting rights to a subsidiary for operation and maintenance. The impugned order classified the fees received as consideration for taxable services under 'Support Services of Business or Commerce'. The appellant argued that the fees were for leasing vacant land, not infrastructural services, citing legal provisions and case law. The Port Department did not provide infrastructural support services to the subsidiary, which developed and operated the port independently. The Tribunal found the impugned order erred in classifying the activity under sec. 65(105)(zzzq) and concluded the levy must fail. Issue 2: Time Bar The appellant contended that the extended time for the notice was wrongly invoked, as the dispute involved legal interpretation, where suppression cannot be alleged. The Revenue argued that the Port Department, a registered service provider, suppressed taxable value in returns, uncovered through investigation. The Tribunal, having decided in favor of the appellant on the merits, found the issue of the extended time notice no longer relevant. Conclusion The Tribunal set aside the impugned order, allowing the appeal with consequential relief, as the fees received were not for taxable services under 'Support Services of Business or Commerce'. The legal interpretation favored the appellant's position, and the extended time notice issue was deemed irrelevant post the merit-based decision.
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