2022 (3) TMI 804 - AT - Service Tax

Classification of services - taxable under port services or otherwise i.e service of water transportation or not? - barge activity carried out by the Appellant for transportation of goods from port to Mother Vessel through barges and barging/ lighterage charges recovered from customers - period from November 2006 to May 2009 - HELD THAT - Under the Port Service service provided by a Port other port or any person authorised by such port is taxable. The Appellant liable to pay tax under above entry only if they had been authorized by the Port to render services in relation to vessels or goods. In the present case department failed to produce any evidence by which it can be prooved that the Appellant were authorized by the port for providing services at port. There is no authorization by the Port to the appellant to render the said services - the lease agreement dtd. 03.04.2006 made between Appellant and Director of Port Inland Water Transport Government of Karnataka and observed that the said lease agreement is for use of Port Land for stacking and import /export of Iron Ore / Manganese Ore and other Bulk Cargoes at Belekeri Port. In the present matter it is also noted that other than the barging charges Appellant also collected charges from Customers for handling of the cargo and loading and unloading of cargo etc. and Appellant had paid the Service tax on the amount charged towards cargo handling activity. The Appellant have not paid the service tax on barging activity during the period November 2006 to May 2009. They also not charged any service tax to customers on receipts related to barging service. The new entry viz Transport of Coastal Goods and Goods Transport through National Water ways and Inland Water Ways was introduced from Finance Act 2009. Time limitation - Penalty - HELD THAT - In the facts of the present that firstly the issue involved is of pure interpretation of legal provisions therefore it cannot be said that the Appellant had any mala fide intentions and have suppressed any fact with intention to evade payment of service tax. It is also on record that the Appellant have represented the matter before Audit team and also before department during the investigation of case. This clearly shows that there is no suppression or willful misstatement on the part of the Appellant. The Appellant in the present matter also provided all the details /documents/ records related to the disputed activity before department. In this circumstances charge of suppression or wilful misstatement do not survive against the Appellant. Thus extended period of limitation is also not invokable in the present matter and no penalty is payable. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Classification of lighterage services under "Port Services" or "Transport of Goods by Waterways Service."
2. Authorization to provide "Port Services."
3. Inclusion of freight charges in the assessable value for Customs Duty.
4. Interpretation of contract terms for service tax liability.
5. Invocation of extended period of limitation.
6. Imposition of penalties for interpretational issues.

Issue-Wise Detailed Analysis:

1. Classification of Lighterage Services:
The primary issue was whether the lighterage services provided by the appellant should be classified under "Port Services" or "Transport of Goods by Waterways Service." The appellant argued that since the entry "Transport of Coastal Goods and Goods Transported through National Waterways and Inland Waterways" was introduced in 2009, the lighterage services should not be classified under "Port Services" for the period before this new entry. The Tribunal agreed, noting that the service was appropriately classified under the new entry and not under "Port Services" before its introduction.

2. Authorization to Provide "Port Services":
The appellant contended that they were not authorized to provide "Port Services" as per Section 65(82) of the Finance Act, 1994. The Tribunal examined the lease agreement and found that it was for the use of port land for stacking cargo, not for providing port services. The Tribunal concluded that the appellant was not authorized by the port to render the said services, thus the services could not be classified under "Port Services."

3. Inclusion of Freight Charges in Assessable Value:
The appellant argued that the freight charges for barge transportation should form part of the assessable value for Customs Duty and should not be subject to service tax under "Port Services." The Tribunal did not specifically address this issue separately but implied that since the services were not classified under "Port Services," this argument was moot.

4. Interpretation of Contract Terms:
The appellant argued that the contract should be interpreted separately for "Cargo Handling Service" and "Transportation activity," with service tax applicable only to cargo handling. The Tribunal did not delve deeply into this argument, as it had already concluded that the lighterage services were not taxable under "Port Services."

5. Invocation of Extended Period of Limitation:
The Tribunal found that the extended period of limitation was not applicable. The appellant had disclosed all relevant facts to the Audit team and the department, which did not raise objections initially. Thus, there was no suppression or willful misstatement by the appellant, and the extended period could not be invoked.

6. Imposition of Penalties:
The Tribunal held that no penalties could be imposed as the issue was one of interpretation. The appellant had a bona fide belief based on the existing provisions and legal precedents that their services were not taxable under "Port Services." The Tribunal cited various judgments to support the principle that no penalty should be imposed in cases of interpretational issues.

Conclusion:
The Tribunal set aside the impugned order, holding that the lighterage services provided by the appellant were not taxable under "Port Services" for the period before the introduction of the new entry in 2009. The appeal was allowed with consequential reliefs in accordance with the law.

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