2007 (5) TMI 52 - AT - Service Tax

Demand(service tax) Alleged that the activity performed by the appellant is covered under Port service and liable for service tax and demand were made alongwith penalty Held that impugned services of repair of vessels not covered under port service and appeal allowed

Summary

Issues Involved:
1. Classification of services as "Port Services" under the Finance Act, 1994.
2. Interpretation of relevant provisions of the Major Port Trust Act, 1963.
3. Authorization by the port and the nature of services rendered.
4. Applicability of service tax on repair services during the relevant period.
5. Extended period of limitation for demand of service tax.

Detailed Analysis:

1. Classification of Services as "Port Services":
The authorities below confirmed service tax of Rs. 68,50,147/- against the appellant, classifying the services under "Port Services" as per Section 65(67) of the Finance Act, 1994. The appellant argued that their services of repairing, chipping, cleaning, and painting vessels do not fall under "Port Services" and hence are not liable to service tax. The authorities relied on Board's Circular No. 67/16/2003-ST and various provisions of the Major Port Trust Act, 1963, to uphold the classification.

2. Interpretation of Relevant Provisions of the Major Port Trust Act, 1963:
The appellant's counsel referred to Section 42(e) of the Major Port Trust Act, which lists services like piloting, hauling, mooring, remooring, hooking, or measuring of vessels. The appellant contended that the phrase "or any other service in respect of the vessels" should be interpreted ejusdem generis, meaning it should be related to the entry or exit of vessels from the port. The Tribunal agreed with this interpretation, citing the Hon'ble Supreme Court's decision in Sidhdheshwari Cotton Mills (P) Ltd. v. UOI, which emphasized that general expressions should derive their meaning from preceding specific terms.

3. Authorization by the Port and the Nature of Services Rendered:
The appellant argued that they were not authorized by the port to render "Port Services" as defined under Section 65(67) of the Finance Act, 1994. They performed repair services under independent contracts, not as an extension of the port's services. The Tribunal found that the Board's powers under Section 35 of the Major Port Trust Act are limited to providing facilities like dry docks for repairs, not performing the repairs themselves. Hence, the appellant's services were independent and not "Port Services."

4. Applicability of Service Tax on Repair Services During the Relevant Period:
The Tribunal noted that maintenance and repair services were made taxable from 1-7-2003, and the appellant had registered and paid service tax under this category post this date. The Tribunal agreed that if the services were already covered under "Port Services," the appellant's subsequent registration and payment under "maintenance and repair services" would be contradictory. Therefore, the Tribunal concluded that the repair services for the period before 1-7-2003 could not be classified as "Port Services."

5. Extended Period of Limitation for Demand of Service Tax:
The demand was confirmed by invoking the extended period of limitation, but the Tribunal found no evidence of suppression or misstatement by the appellant. The issue revolved around a bona fide interpretation of the law, and the appellant had disclosed their activities in statutory documents. Consequently, the Tribunal held that the extended period of limitation was not applicable, making the demand time-barred.

Conclusion:
The Tribunal allowed the appeal on merits and on the ground of limitation, setting aside the impugned orders. The appellant's services were not classified as "Port Services," and the extended period of limitation for the demand was not justified. The judgment emphasized the correct interpretation of statutory provisions and the importance of bona fide belief in tax matters.