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TMI Blog2014 (4) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... st mode of interpretation. The expression authorized by the port has a specific connotation under the Major Port Trusts Act, 1963 (which governs all Major Ports) as also under GMB Act, 1980, Maharashtra Maritime Board Act, Tamilnadu Maritime Board Act, and other similar Maritime Board Acts issued by various State Governments governing Minor Ports. Section 42(3) of the Major Port Trust Act, 1963 and Section 32(3) of the GMB Act, 1980 provide for an authorization from the Port for performing specified services. The said provisions further provide that the person authorized by the port shall charge or recover for the service rendered by them in accordance with the scale of rates which have been framed. There is no infirmity in referring to provisions of the GMB Act while deciphering the meaning of the expression authorized by the portused in the definition of port service under the Finance Act, 1994. It is an undisputed position that the Ports Act specifically provides for services which a Port would render and also provides for grant of an authorization in favour of a third person for rendering services. It is these services which the Finance Act seeks to tax and therefore the two st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e port area; the said services are fully covered under the taxable head port services; holding such a view a show cause notice was issued to the appellant for the payment of differential service tax liability. The said show cause notice also directed the appellant to show cause as to why interest be not demanded on such differential service tax liability and penalties be not imposed on them. Appellants contested the show cause notice on merits as well as on limitation. The adjudicating authority after granting an opportunity of personal hearing to the appellant and after considering the written submissions made by them, he rejected the contentions raised by the appellant and held that the services rendered by the appellant are classifiable under port services and are liable to pay the differential service tax and demanded interest; imposed equivalent penalties under various sections of the Finance Act, 1994. 3. Ld. Counsel appearing on behalf of the appellant after taking us through the Order-in-original, made submissions which are summarized as under: He would draw our attention to the definition of port services and submit that to fall under the said category, a person has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ports are concerned and are covered by the State Governments who legislate the law governing and functioning of minor ports and in State of Gujarat, it is governed by Gujarat Maritime Board Act, 1981. It is his submission that the said Gujarat Maritime Board Act provides for authorization to perform services specified in the Gujarat Maritime Board Act on such terms and conditions that may be agreed upon. It is his submission that in exercise of the provisions of grant of license, Government of Gujarat has framed the Gujarat Ports (licensing of persons engaged in unloading or loading of vessels) Rules, 1969, which provide for restriction on persons to work in the business of loading or unloading of steamers except under and accordance to the terms and conditions of license issued by a licensing officer for such purpose. It is his further submissions that the terms of aforesaid rules licenses have been issued to appellant for undertaking, stevedoring and lighterage services. Hence, the said activities undertaken by the appellant in terms of a license granted to them cannot be considered as an authorization issued to them under Section 32(3) of the Gujarat Maritime Board Act, 1981. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h respect to interpreting referential incorporation, it is settled law by the Apex Court that, 'when a single section of an act of parliament is introduced into another act, I think it must be read in the sense in which it bore in the original act from which it is taken, and that consequently it is perfectly legitimate to refer to all the rest of the act in order to ascertain what the section meant though other sections are not incorporated in the new act.' Referred Port Small Corporation Vs. Smith 1985 (10) SC 364 was relied by the Apex Court and quoted in the judgment of Surana Steel Pvt. Ltd. Vs. Dy. Commissioner of IT [1999 (4) SCC 306]. For this preposition, he would also rely upon the judgment of the Apex Court in the case of Afali Pharmaceuticals [1989 (44) ELT 613]. He would submit that w.e.f. 01.07.2010 the definition of port service and the taxable service has been amended by the Finance Act, 2010 to provide that port service would mean any service rendered within a port or other port in any manner. He would also draw our attention to the explanatory memorandum to the Finance Bill, 2010 which explains that the changes were clarified as to that the definition of port s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has also invoked extended period of limitation. It is his submission that this action of invoking extended period in the second show cause notice when an identical issue is in dispute by issuance of a show cause notice, extended period cannot be invoked. It is the submission that the allegation as to appellant had split their contract values and billed separately for stevedoring services, lighterage services and transportation within the port, so as to avoid liability to service tax on the entire consideration, is totally wrong observation in as much as, the appellant has suo moto started discharging service tax under the head of cargo handling services w.e.f. 16.08.2002 while service tax under the head of port services, for other ports, was introduced only w.e.f. 01.07.2003 and hence extended period which has been invoked is incorrect. 4. Ld. Special Counsel for the Revenue would take us through the facts of the case in appeal no.ST/473/2009-DB. After taking us though the findings recorded by the adjudicating authority, he would take us through provisions of Major Ports Trust Act, 1963, Gujarat Maritime Board Act, 1981. He would also take us to the meanings of the word author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... local transportation services rendered within the port area. * During the aforesaid years, all these incomes were inclusive of the income generated in handling export cargo. * During the period from 1/7/2003 to 31/3/2007, which is the period covered in the present Appeals, even though Shreeji was providing a composite service involving complete handling of cargo, including bringing goods from the ships to the wharf and shifting them to the place of storage at the port, they deliberately raised separate invoices in respect of only import cargo handling and paid tax thereon. * In their case, rendering of services commences from the anchorage point, right upto the designated goods storage place in the port / jetty. While providing lighterage services, Shreeji is unloading the goods from a vessel in a lighter or barge, bringing the same to the wharf / berth of the port and unloading the same in the port area. Thus, collectively, the services rendered by Shreeji i.e. lighterage, transportation within the port area and loading and unloading in the said process are squarely covered under the definition of 'Port service' provided in an 'other port'. [Para 22 of the OIO]. * Under 'Port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r provisions of the 1908 Act are either borrowed or incorporated in full / part or referred to in the definition. * Following the ratio of the judgment rendered by the Apex Court in the case of Onkarlal Nandlal vs. State of Rajsathan [1986 AIR 2146], there was no need to refer to any other provision of the 1908 Act once the incorporation of the definition of 'other port' was carried out in the definition of 'port service' in the FA, 1994. * The observations of the Larger Bench of the Hon'ble Tribunal in Paras 9.2 to 9.16 of their Order in the case of Western Agencies Pvt. Ltd. and others [2011 (220) STR 305 (T-LB)] also support this view. * Accordingly, there is no need to interpret the expression 'authorised' in terms of any of the provisions of the 1908 Act. Without prejudice to the above stand, assuming that it is argued that Section 32 of the Gujarat Maritime Board Act, 1981, should be taken aid of to interpret the expression 'authorised' appearing in the definition of 'port service' the following submissions may kindly be given due consideration. In the present case, admittedly, Shreeji possesses licences for providing stevedoring services and for plying barges / lighters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, without which he cannot undertake such services. In the regulations framed by the Central Government (A copy of Regulations issued by the Chennai Port is at pages 29 34) a stevedoreis defined as an authorized agent for loading and unloading and stowage of cargo in any form on board the vessels in Ports. Here too, authorization and licensing convey the same meaning. It is pertinent to note here that Section 42 of MPTA, 1963 (relied upon in Veljis case) does not make a specific mention of stevedoring as against the specific provision in Section 32 of GMB Act. > Fourthly, a survey of the GMB Act reveals that the expression authorisedhas been used therein to convey meanings, such as permitted, licensed, authorized to act or sign on behalf of the GMB. A typical example is that of piloting of vessels at the port. Piloting is one of the services specified in Section 32(1) of the Act. Under Section 18 of the Act, no person shall be appointed as a pilot at any port who is not for the time being authorized by the State Government under the Indian Ports Act, 1908, to pilot vessels at that port. Every port, major as well as minor, or the Maritime Board, has made regulations relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port is only to provide the facility of dry dock / workshop and it is not the duty of the port to undertake repair work; * activity of ship repair work is not mentioned in section 42(e); * no rates could be specified for repair work and such rates can be only with routine services vide section 42(4); * activity is covered under maintenance / repair services Hence, it was held that Port Service was not attracted in respect of repair work done by Homa Engineering Works. [Appeal against this order is pending before the Mumbai High Court] (B) Velji P. and Sons [2007 (7) STR 236 (T)] Assessee herein was already paying STax on CHA services and the activities in question were, arranging for or hiring barges, cranes, fork lifts on behalf of the importer / exporter on reimbursement basis. The Honble Tribunal took the view that, * Section 35 of MPTA, 63 did not include the activities undertaken by Velji. * Services provided by Velji were not required to be performed by the port. * There is no authorization by the port; licences issued cannot be regarded as authorization. * U/s. 42, authorization should have prior approval of Central Government and under sub-section (4) rates are to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/2009. IV. Several decisions followed the line taken in the aforesaid three decisions of the Tribunal and in all those cases, stevedoring and allied / ancillary activities performed in the port area were held as not covered under the category of port services. However, in the case of M/s. Western Agencies Pvt. Ltd. And others [2008 (12) STR 739 (T)], the Chennai Bench of Tribunal took the view that since in Veljis case the activities were undertaken in a minor port, reliance placed on the provisions of MPTA, 1963 was not correct. Further, the dismissal of the appeal against it by the Apex Court being not on merits, the said decision was held to be not a good precedent for the appeals before them. The Bench also noted that for the subsequent period appellants in that case had voluntarily paid STax in respect of operations, such as inter-carting and storage of goods in port area ancillary to stevedoring i.e. loading of cargo into vessels, unloading of cargo from vessels and transshipment of cargo within the port area and hence, the matter stood conceded for the present and future. Besides, the Bench expressed the view that in interpreting the definition of port servicesthere was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planatory note as part of Budgetary changes for 2010-2011, excerpted below; 4.1 Airport Service and Port Service: Airport Service and Port Service cover specified taxable services provided by airport, major port and minor port or persons authorized by such port. For activities like vessel repair or other maintenance work in dry docks, Service tax liability is contested on the ground that such services are not provided under authorization by port. Classification of activities rendered by various service providers inside port area has also been subject to interpretation. To provide clarity on such issues and may be, taking note of judicial decisions, all relevant services are now being amended so as to remove the requirement of authorization by the port concerned to the service provider. Unlike the pre-amended categories where services provided by port are being taxed, post-amendment, all services provided within the port will be taxable and will be classifiable under Port service ousting application of Section 65A of Finance Act, 1994. It is evident, therefore, that the amendment made in 2010 in the definition of Port Serviceis essentially to bring about greater clarity in the cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices (sea transportation from the location where the mother vessel is anchored till the jetty and vice versa); rendered by the appellant at minor ports in Gujarat could be taxed under Section 65(105)(zzl) as port service, which has been defined in Section 65(82) to mean any services rendered by a port or other port or any person authorized by such port or other port, in any manner, in relation to a vessel or goods. 8. The term Porthas been defined under Section 65(81) of the Finance Act, 1944 to have the same meaning as in Section 2(q) of the Major Port Trusts Act, 1963. While the expression other port has been defined in Section 65(76) to mean a Portas defined in Section 3(4) of the Indian Ports Act, 1908. 9. It is the appellants contention that during the material period (prior to 01.07.2010) for being taxed under the head of Port service the service was required to be rendered by the port or by any person authorized by such port or other port. The appellant not being authorized by port or other port for rendering the aforesaid services could not be held liable to discharge service tax under the head of port services. The appellant has contended that at the minor ports in Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionalization) Act, 1972 (57 of 1972); Taxable Service 65(16)(c) to a policy holder, by an insurer carrying on general insurance business, in relation to general insurance business; b. Chapter V of the Finance Act, 1994, has been amended from time to time to add services such as those relating Rent-a-cab, Architect Services, Custom House Agent Services, Practicing Chartered Accountant, Practicing Cost Accountant, Practicing Company Secretary, Tour Operators, Banking and other Financial Services, Computer Network Services, Cable Operator Services, Goods Transport Operator Services, etc. The scope and ambit of these services has also been circumscribed by the relevant enactment governing the same, as can be seen from the relevant definition in the Finance Act, 1994 which are extracted herein after for ease of reference. Custom House Agent Definition 65(13) customs house agent means a person licensed, temporarily or otherwise, under the regulations made under sub-section (2) of section 146 of the Customs Act, 1962 (52 of 1962); Taxable Service 65(41)(h) any service provided to a client by a CHA in relation to the entry or departure of conveyances or the import or export of good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er; Practicing Company Secretary Definition 65(33) "practicing company secretary" means a person who is a member of the Institute of Company Secretaries of India and is holding a certificate of practice granted under the provisions of the Company Secretaries Act, 1980 (56 of 1980) and includes any concern engaged in rendering services in the field of company secretaryship; Taxable Service 65(48)(u) to a client, by a practicing company secretary in his professional capacity, in any manner; Banking and Other Financial Services Definition 65(9) and 65(10) (9) "banking" and banking company shall have the meanings assigned to them in clauses (b) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), (10) banking and other financial servicesmeans, the following services provided by a banking company or a financial institution including a non-banking financial company, namely : (i) financial leasing services including equipment leasing and hire-purchase by a body corporate; (ii) credit card services; (iii) merchant banking services; (iv) securities and foreign exchange (forex) broking; (v) asset management including portfolio management, all form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scale of rates which have been framed. The relevant portion of Section 42 of the Major Port Trust Act, 1963 and Section 32 of the GMB Act, 1980 is reproduced herein below for ease of reference: Section 42(3) Notwithstanding anything contained in this section, the Board may, with the previous sanction of the Central Government, authorize any person to perform any of the services mentioned in sub-section (1) on such terms and conditions as may be agreed upon. Section 42(4) No person authorized under sub-section (3) shall charge or recover for such service any sum in excess of the amount specified by the Authority, by notification in the Official Gazette. Section 32(3) Notwithstanding anything contained in this section, the Board may authorize any person to perform any of the services mentioned in Sub-section (1) on such terms and conditions as may be agreed upon. Section 32(4) No person authorized under Sub-section (3) shall charge or recover for such service any sum in excess of the amount leviable according to the scale framed under Sections 37, 38 or 40. The law is laid down by the Apex Court in the case of Aphali Pharmaceuticals vs. State of Maharashtra reported in 1989 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section of an Act of Parliament is introduced into another Act, I think it must be read in the sense in which it bore in the original Act from which it is taken, and that consequently it is perfectly legitimate to refer to all the rest of that Act in order to ascertain what the section meant though other sections are not incorporated in the new act For this reason also we find that there is no infirmity in referring to provisions of the GMB Act while deciphering the meaning of the expression authorized by the portused in the definition of port service under the Finance Act, 1994. 14. The Ld. Counsel appearing for the Revenue has relied upon a three judges bench decision of the Apex Court in the case of Onkarlal Nandlal Vs. State of Rajasthan reported in 1986 AIR 2146 to contend that there was no need to refer to any provision of the Major Port Trust Act or any other Act, for determining the scope of the expression authorized by the Port under the head of Port services. We have perused the said case law and find that in that case Section 4(2) of the CST Act had been borrowed in the Rajasthan Sales Tax Act, 1954. The Revenue therein was contending that while construing whether or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same meaning in the subsequent Act. It is always open for the court to refer to relevant provisions of the earlier Act from which the provision has been enacted in the subsequent Act though not specifically incorporated, if such provisions throw light to the meaning of provision which has been incorporated in the subsequent Act. In the classic and celebrated words of Lord Blackburn, it is perfectly legitimate to refer to the rest of the Act from where a single section has been incorporated in order to ascertain what the section meant, though rest of the sections have not been incorporated in the subsequent Act. When a provision is adopted in any later Act, such adoption by incorporation ordinarily and normally takes in all the amendments in the earlier Act till the date of adoption. The exception being the provisions not incorporated which has come in the section incorporated as an exception or proviso. 15. The suggestion of the Counsel for the Revenue that the reasoning laid down by the Larger Bench in the case of the Western Agencies Pvt. Ltd. & Ors. Vs. CCE, reported in 2011 (220) STR 305, ought to be applied is also misplaced as Western Agencies has filed a Writ before the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port or other port, in any manner. The amendments effected from 01.07.2010 are extracted herein below for the ease of reference. 65(82) "Port Services" means any service rendered within a port or other port, in any manner 65(105) to any person, by any other person, in relation to port services in other port, in any manner; Provided that the provisions of Section 65A shall not apply to any service when the same is rendered wholly within other port; The explanatory memorandum to the Finance Bill, 2010 explaining the said changes has clarified that the definition of port service and other port service was being amended to provide that an authorization from the port authority would not be a pre-condition for taxing the said services and further that all services provided entirely within the port would be taxable under the said head. The said amendment clearly brings out the legislative intent of not taxing services other than those provided by a port or a person authorized by the port prior to 01.07.2010. 18. We also find the Division Bench which referred the matter to the Larger Bench was not apprised of certain vital and relevant facts which lead them to refer the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified therein on such terms and conditions may be agreed upon. It further provides that the person so authorized, shall not charge or recover for the services in respect of which such person has been authorized to recover any sum in excess of the amount leviable according to the scale framed under Section 37, 38 or 40 of the relevant Act. Similar provisions exist in other States also and the same provide for the port to authorize a third person to render services. Had these facts been brought to the notice of the referral bench, then perhaps the reference itself may not have been required. 19. The reliance placed by the Ld. Counsel for the Revenue on the decision of the Honble Karnataka High Court in the case of Kokan Marine Agencies reported in 2009 (13) STR 7 is completely misplaced as in that case the Honble Court was not dealing with the question as to whether a license granted under the regulations for undertaking stevedoring operations was the same as an authorization under Section 42(3) of the Major Ports Act. In fact the court proceeded on the presumption that the assessee therein had an authorization under Section 42(3). Since the High Court was not concerned with the q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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