2016 (6) TMI 319 - AT - Service Tax

Other port services - Consideration received for exclusive use of jetty and back-up land - Demand of Service tax alongwith interest and imposition of penalty - Section 76, 77 and 78 of the Finance Act, 1994 - Held that - the respondent has been discharging its tax liability on the consideration for cargo handled. In relation to the fixed charges, the very nature of the charge delinks it as consideration for handling of cargo. The fixed charges pertain to exclusive access afforded to M/s United Shippers Ltd of the jetty and the back-up land. There is no segregation of consideration for the back-up land even if that is assumed to be facilitation of space in relation to cargo. It is also an admitted fact that duty liability on import cargo is discharged while yet on the mother vessel. Consequently, custodianship of import cargo requiring assigning of storage space is not a statutory obligation of the Maharashtra Maritime Board. Therefore, even if the goods are allowed to be stored after landing, the lease terms does not transform the activity into one of rendering other port services. Therefore, show cause notice do not sustain. - Decided against the revenue

Issues:
1. Whether fixed payments received by the respondent for exclusive use of jetty and back-up area should be included in taxable consideration as per section 67 of Finance Act, 1994.
2. Whether the fixed charges constitute rental for sub-lease or fall under the category of rendering other port services.
3. Whether the respondent, as the person authorized by the port, is liable to tax for all receipts obtained from the sole user of the port.
4. Interpretation of the definitions of port service and other port service under the Finance Act, 1994.
5. Application of tax liability on port services before and after the 2010 amendments.

Analysis:

1. The case involved a dispute where the Revenue appealed against the dropping of proceedings initiated against the respondent for not discharging tax liability on fixed payments received for exclusive use of a jetty and back-up area. The respondent had entered into agreements with M/s United Shippers Ltd for such use, and the issue was whether these fixed payments should be included in taxable consideration as per the Finance Act, 1994.

2. The original authority found that the fixed payments were akin to rental for sub-lease rather than falling under the category of rendering other port services. It was established that the respondent was not providing storage and warehousing services, and the fixed charges were for exclusive access to the jetty and back-up land. The adjudicating authority held that these charges were not covered under other port services, especially considering the nature of the agreements and services provided.

3. The Revenue contended that the respondent, as the authorized person by the port, should be taxed for all receipts obtained from the sole user of the port. However, the Tribunal analyzed the definitions of port service and other port service under the Finance Act, 1994. It was concluded that the taxable entry was restricted to activities rendered by other port and not all activities within the port, implying that not all receipts are necessarily includible in taxable value.

4. The Tribunal delved into the definitions of port service and other port service under the Finance Act, 1994, to determine the scope and applicability of tax liability on services provided by ports. The analysis included the statutory obligations related to vessels and cargo, emphasizing that taxable services were geographically-oriented until 2010, focusing on the location where services were provided.

5. The judgment also discussed the functions of ports in relation to vessels and cargo, highlighting the responsibilities of ports, including custodianship of import cargo and facilities for handling cargo. The Tribunal found that the fixed charges received by the respondent were for exclusive access to the jetty and back-up land, not for handling cargo, and thus did not fall under the purview of rendering other port services.

In conclusion, the Tribunal rejected the appeal, stating that the contentions in the show cause notice were not sustained, and there was no reason to interfere with the findings of the original authority that dropped the proceedings against the respondent.

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