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TMI Blog2016 (2) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... pment of finished steel goods. The Central Excise officers of Directorate General of Central Excise Intelligence (DGCEI) conducted search operation on 13.04.2007 at the premises of M/s Essar Steel. They seized various documents of M/s Essar Steel and other documents relating to the Appellant Company. In the follow up action, the Central Excise officers recorded statements of the employee of the Appellant Company, M/s Essar Steel and GMB on different dates. A show cause notice dt.07.01.2011 was issued to the Appellant, proposing demand of Service Tax of Rs. 49,57,70,669.00 alongwith interest and to impose penalty under the various provisions of Finance Act, 1994 for the period from 01.10.2005 to 30.09.2010. It has been alleged that the Appellant had been providing the "Port services" to M/s Essar Steel. The Lighterage and Stevedoring services rendered by the Appellant in relation to the vessel or goods at the port would be classified as Port service as defined under Section 65(82) of the Finance Act, 1994, as amended and covered as taxable service under Section 65 (105)(zzi) of the said Act, 1994. By the impugned order, the Adjudicating authority confirmed the demand of Service Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vedoring and Lighterage charges, are covered under the definition of Port services as amended by Finance Bill of 2010. In this context, he referred to Board Circular F.No.354/1/2010-TRU, dt.26.02.2010. He drew the attention of the Bench to the letter dt.24.08.2009 of the Chartered Accountant of GMB that they have not issued any authorization to the appellant and therefore, the Appellant is not covered within the definition of Port service prior to 01.07.2010. He referred to various decision on this issue before the Bench. He further submits that decision of the Hon'ble Gujarat High Court in the case of Kandla Shipchandlers & Ship Repairers Association Vs UoI 2013 (29) STR 233 (Guj.) is not applicable in the present case, as, in that case, the petitioners were authorized by the Port. On the other hand, the present case is squarely covered by the decision of the Tribunal in the case of M/s Shreeji Shipping Vs CCE & ST 2014 (36) STR 569 (Tri-Ahmd). Apart from that the Stevedoring & Lighterage services rendered into the SEZ unit of M/s Essar Steel is exempted from Service Tax by virtue of Section 26(i) (e) of the said SEZ Act, 2005 read with Rule 31 of the said Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1994. He relied upon the decision of the Hon'ble Gujarat High Court in the case of Essar Steel Ltd Vs UoI - 2010(249) ELT 3 (Guj.) 7. The learned Authorised Representative also submits that the employee of the Appellant Company in his statement dt.26.08.2009 admitted the tax liability. The Appellant had not disclosed the details of the said services in their return, which amounts to suppression of facts to evade payment of tax and extended period of limitation would be invoked. He strongly relied upon the decision of Tribunal in the case of Lakhan Singh & Co and Anr Vs CCE Jaipur - Final Order No.ST/A/58310-58311/2013-CU(DB), dt.15.10.2013. The learned Authorised Representative submitted "Written Submissions" with compilation of case laws. 8. Heard both the sides and perused the records. 9. The issue involved in this appeal to be decided, is whether the Appellant is liable to pay the Service Tax on Lighterage & Stevedoring services rendered by them in relation to vessel or goods at the Magdalla/Hazira port under Port Services as defined under Section 65(82) of the Finance Act, 1994 as amended and covered as taxable service under Section 65(102)(zzl) of the said Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhavnagar/Dahej/Pipavav/Mumbai, and the Logistics Operators agree to carry out the lighterage and transshipment of the above mentioned cargos, on their own or chartered vessels. (2) The Logistics Operators guarantee that sufficient lighterage craft and other equipment will be provided by them, including licencesed Stevedores for carrying out the lighterage/transshipment operations at Hazira. (3) Manufacturers to provide all fuel required for all Operating vessels at Hazira on actual expenses to Operators. In case Manufacturers are unable to provide replenishment of bunkers at outports, Operators shall arrange for the same. (4) All dues payable towards vessels berthing, Pilotage, berth hire, employment of Tugs, watchmen and any other vessel related dues as levied by the port authorities and any taxes on the vessel will be to the Operators account. (5) All dues payable towards wharfage, loading charges and any other cargo related dues at levied by the port or other authorities to be to Manufacturers account." According to the Appellant, Stevedoring Services rendered to DTA unit of M/s Essar Steel, they were discharging Service Tax under the head of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under one head. 1.2 It was reported that divergent practices are being followed regarding classification of services being performed within port/airport area. In some places, all services performed in these areas [even those falling within the definition of other taxable services] are being classified under the port/airport services. Elsewhere, individual services are classified according to their individual description on the grounds that the provisions Section 65A of Finance Act, 1994 prescribes adoption of a specific description over a general one. 1.3 Further, both the definitions use the phrase any person authorised by port/airport. In many ports/airports there is no procedure of specifically authorizing a service provider to undertake a particular activity. While there may be restriction on entry into such areas and the authorities often issue entry-passes or identity cards, airport/port authorities seldom issue authority/permission letters to a service provider authorising him to undertake a particular task. Many taxpayers have claimed waiver of tax under these services on the ground that the port/airport authority has not specifically authorised them to provide a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or goods for mass consumption, as suitable exemptions would be provided." 12. The Adjudicating authority classified the Lighterage and Stevedoring services rendered by the appellant under "Port Service" for the period 1.10.2005 to 30.09.2010. On plain reading of the definition of "Port service" prior to the amendment as on 01.07.2010, it is clear that any service rendered by a port or other port, or any person authorised by the said port, in any manner, in relation to vessel and goods, would come within the definition of "Port service". The Appellants contended that the services rendered by them were not authorised by port to them and it would not come within the purview of definition of port service prior to 1.07.2010. The power of GMB to authorize any person to perform any service in the Port is provided under Section 32(3) of GMB Act, 1981 as under:- (1) The Board shall have the powers to undertake the following services:- (a) Stevedoring, landing, shipping or trans shipping passengers and goods between vessels in port and the wharves, piers, quays, or docks belonging to or in the possession of the Board. (b) Receiving, removing, shifting, transporting, stori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the Board; (b) receiving, removing, shifting, transporting, storing or delivering goods brought within the Board's premises; (c) carrying passengers by rail or by other means within the limits of the port or port approaches, subject to such restrictions and conditions as the Central Government may think fit to impose (d) receiving and delivering, transporting and booking and despatching goods originating in the vessels in the port and intended for carriage by the neighbouring railways, or vice versa, as a railway administration under the Indian Railways Act, 1890 (9 of 1890); (e) piloting, hauling, mooring, remooring, hooking, or measuring of vessels or any other service in respect of vessels (f) developing and providing, subject to the previous approval of the Central Government, infrastructure facilities for ports.] 4[(f) developing and providing, subject to the previous approval of the Central Government, infrastructure facilities for ports.]" (2) A Board may, if so requested by the owner, take charge of the goods for the purpose of performing the service or services and shall give a receipt in such form as the Board may s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which is within the ambit of the definition of port service. It is further contended that there is no need for specific authorisation from GMB. The expression in any manner, in relation to a vessel or goods in the definition of port service enlarged the scope of the definition which includes the sub-contractor, who are providing the specified port service within the port area of Gujarat, are liable to pay Service Tax. 15 We find that this issue has been discussed in various decisions by the Tribunal and the Hon'ble High Court as under:- a) Homa Engineering Works Vs CCE Mumbai-2007 (7) STR 546 (Tri-Mum) In that case, the Appellants were engaged in the business of repairing, chipping, cleaning and painting of the vessels of Coast Guard, Naval Dock and ONGC at Mazagaon Docks Ltd. A Show Cause Notice was issued, alleging that the services undertaken by the Appellant are Port services which are liable to Service Tax. The Revenue contended that the Appellant has been authorized to do so, he steps into the shoes of the Board and as such, the services rendered by him has to be treated as port services rendered by any person authorized by the port and thus liable to service tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial gazette. The said decision was upheld by the Hon'ble Supreme Court as reported in 2009 (13) STR J 31 (SC). (c) M/s Konkan Marine Agencies Vs CCE Mangalore-2007 (8) STR 472 (Tri-Bang) In that case, the Appellants provided Cargo Handling Services to the various exporters in relation to export of iron ore fine from New Mangalore Port. They filed a refund claim for erroneous payment of Service Tax as the export cargo is excluded from levy of Service Tax under the cargo handling service. According to the Revenue, the Appellant correctly paid the Service Tax under the category of port service and rejected the refund claim. The Tribunal allowed the appeal of the Appellant. The Appellants obtained the stevedoring license from the Mangalore Port Trust for carrying out the stevedoring operations. The stevedoring operations actually mean loading and unloading of cargo within the port premises. The Tribunal observed that in terms of Section 42 of the Major Port Trust Act, the major port is supposed to carry out a number of activities and there is provision in terms of the said section for the port to authorize any other person to render such services after taking prior approval of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 65(23) clearly puts a bar with regard to the imposition of tax meant for export which also includes handling of the export cargo." (d) M/s H.K. Dave Ltd Vs CCE Bhavnagar-2008 (12) STR 561 (Tri-Ahmd) The appellants are having annual licences as steamer/stevedores agent issued by Gujarat Maritime Board. They are authorized to provide services of cargo handling and other services; they hired barges to provide services at the port. The Appellants claimed that they are covered under the category of Cargo Handling Service and exempted from Service Tax. The Department demanded the Service Tax under the category of port service. The Tribunal, following the earlier decision in the case of Konkan Marine Agencies (supra) and in the case of Velji & Sons (Agencies) P. Ltd (supra), allowed the appeal filed by the Appellant. (e) Commissioner of Customs & Central Excise, Visakhapatnam vs. Chowgule Brothers Pvt. Limited - 2010 (18) STR 164 (Tri. -Bang.) In that case the respondents were Custom House Agent (CHA). The adjudicating authority confirmed the demand of service tax for the period 01.07.2003 to 01.09.2006, on the ground that the Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said to be rendering any service which was authorized by port, which alone could be taxed under the head of Port Service at the relevant point of time. The Tribunal set-aside the adjudication order on merit and limitation. The relevant portion of the said decisions in the case of M/s Shreeji Shipping (supra), is reproduced below:- "12. The appellant had in the course of personal hearing brought on record an authorization issued by the GMB vide Notification No. GMB/T/12(25)/37-38/2007-16, dated 8-8-2007 in exercise of powers conferred under Section 32(3) of the GMB Act, 1980, authorizing M/s. Atash Nor Control Ltd. to provide for Vehicle Traffic and Port Management Services in the Gulf of Khambhat and recover fee for the same as has been fixed in Sections 37, 38, 41 and 42 of the GMB Act, 1980. No such authorization under Section 32(3) has been brought on record in respect of the services being rendered by the appellant. In our view, in the absence of an authorization having been issued in favour of the appellant under Section 32(3) they cannot be said to be rendering any service which has been authorized by the port, which alone have been taxed under the head of port services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; . 20. The ld. Counsel for the Revenue has contended that the decision of the Tribunal in the case of Velji Sons Pvt. Ltd., which was upheld by the Apex Court, cannot be relied upon as even though the service rendered by Velji & Sons were at a Minor Port the judgment had been rendered considering provisions of the Major Port Trusts Act. We have hereinabove reproduced provisions governing Major Ports & Minor Ports and find are pari materia insofar as the requirement for grant of an authorization is concerned and that the mere fact that Velji had referred to the provision of the Major Ports Act, this by itself would not render the said decision inapplicable. Even otherwise the said judgment having been affirmed by the Apex Court by dismissing the Civil Appeal filed by the Revenue, the same is required to be followed as a precedent. 21. We also find considerable force in the submission of the appellant that a substantial portion of the demand against them is barred by limitation as the dispute in hand is one of interpretation and high judicial forums have at different time taken a different view. The Apex Court has in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers of the petitioner-Association are authorized by the port authorities constituted under the Major Port Trusts Act, 1963 to provide such services. It is also not in dispute that without such authorization, such services could not be rendered by them. In fact, the petitioners have produced on record, a licence issued by port authorities authorizing the petitioners to provide such services. In that view of the matter, the question is whether the agencies involved in providing repair service to the vessel would or would not be covered within the meaning of port service. To our mind, the term port service as defined under Section 65(82) is sufficiently wide to include such services. In our opinion, the members of the petitioner-Association who have been authorized by the port authorities to provide such services can be stated to be rendering service in relation to a vessel. The words in any manner would further go to show that the Legislature intended to make the definition wide to include range of services which may be provided in relation to a vessel. Repair work of vessel would undoubtedly be in relation to the vessel and therefore would be covered under the definition of "po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot to undertake the repair itself. Ship breaking activities and ship manufacturing activities may also be done in the port area, for which purposes facility may be provided by the port, but that will not make the same as "port services"." The Tribunal was of the opinion that the term "any other services in respect of vessels" has to be extended to the services which are connected to the movement of the vessel. The Tribunal applied the principle of ejusdem generis. The view expressed by the Tribunal does not command to us. Firstly, the authorization of the port has undoubtedly been granted in the present case. We do not find that such authorization must relate to those activities which the port is either obliged or exclusively required to perform under the Major Port Trusts Act, 1963. Further, in our opinion, the term in relation to a vessel must be seen as to expanding the scope of coverage of the port service and cannot be confined to those services which are in relation to movement of vessels so as to exclude from its ambit the work of repair of vessels. . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Port service. In the present case, we find that the undisputed fact is the Appellant were not authorized by the Port to perform any activity. It is seen from the letter dt.24.08.2009 of the Chartered Accountant on behalf of the Gujarat Maritime Board to the Superintendent of Central Excise, DGCEI that the authorization has been issued only to M/s Essar Steel Ltd under Section 32(3) of Gujarat Maritime Board Act, 1981. The Adjudicating authority observed that in the written contract dt.01.04.2006 between M/s Essar Steel Ltd and the Appellant, it is mentioned that the Appellant has agreed to carry out the lighterage and transshipment on their own vessels or chartered vessels at Hazira and transshipment between Hazira anchorage and Bhavnagar, Dahej, Pipavav, Mumbai etc. It has been further observed that the Appellant has been authorized by the Port and the services of lighterage and stevedoring would be covered by the Port services. We do not find any evidence on record that Port had issued any authorization to the Appellant to perform any service in the port and such finding of the Adjudicating authority is totally erroneous, contrary to the record and therefore, such findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n there is no authorization by the Port in any manner, the service rendered by the Appellant would come under the Port Service. So, the submission of the learned Authorised Representative that the present case is covered by the decision of Kandla Shipchandlers & Ship Repairers Association (supra) is mis-reading of the said case law. In other words, the present case is covered by the earlier decision of the Tribunal in the case of Shreeji Shipping (supra). In that case also, there was no authorization and therefore, the decision of the Tribunal in the case of Shreeji Shipping (supra) cannot be held per incuriam. As per Blacks Law Dictionary, 7th Edition, the word per incuriam means wrongly decided, usually because the judge was or judges were ill informed about the applicable law. It is seen that the facts and the issue before the Tribunal in the case of Shreeji Shipping are different from the case of Kandla Shipchandlers & Ship Repairers Association (supra) and therefore, the decision of Shreeji Shipping cannot be per incuriam. 20. The learned Authorised Representative submitted that after considering the concession agreement between M/s. Essar Steel and GMB and the agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the act of a third person." The learned Authorised Representative contended that the Stevedoring and Lighterage charges as shown in the contract between M/s Essar Steel Ltd and GMB are similar to the contract between the Appellant and M/s Essar Steel. The Adjudicating authority observed that the Appellant admittedly informed GMB of the contract and arrangement between the Appellant and M/s Essar Steel and the argument that they were not authorized by the port, holds no water. But, on perusal of the agreement, there is no mention that the charges would be as per tariff schedule of the Port. The Appellant contended that the charges were fixed in the contract entered by way of negotiations. It is clear from the contract between the Appellant and M/s Essar Steel that it is an independent contract. In any event, the intimation given by the Appellant to GMB of the contract between them and M/s Essar Steels, cannot be treated as authorization by the port. After considering the above decisions and the provisions of Finance Act, 1994, in our considered view, the facts in the case of Kandla Shipchandlers and Ship Repairers Association (supra) would not be applicable in the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntracts or FOB contracts with Bills of Lading nominating Bombay/JNPT/Dharamtar as the ports of discharge. As such the cost of transport has already been included in the price paid to the seller under the CIF contract or an ascertainable freight determined and paid by the buyer from the foreign port to the Indian port. Hence, a further addition to the transport charges under Rule 9(2)(a) of the Customs Valuation Rules, 1988 is in our opinion clearly impermissible. 37. In our opinion, it is really not necessary to decide whether the place of importation is the jetty or the BFL. Whether the place of import is deemed to be the BFL or Dharamtar jetty it would make no difference to the conclusion we have arrived at because the cost of transportation of the imported goods has already been included for delivery at the Dharamtar jetty and has already been paid to the seller in the CIF or FOB contract. Hence, a further addition to the transport charges in the form of barge charges for the transportation by barges cannot be said to be contemplated by Section 14 of the Act. 60. In the impugned order dated 7-3-2001 the Tribunal has based its decision on its conclusion that the place of impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the customs transaction ends and the service transaction begins. The issue as to what constitutes 'imports' has been settled by the Honble Apex Court in the case of Garden Silk Mills Ltd. (supra), wherein the Apex Court held as follows :- "Truly speaking, the imposition of import duty, by and large, results in a condition which must be fulfilled before the goods can be brought inside the customs barriers, i.e. before they form part of the mass of the goods within the country. It would appear to us that the import of the goods into India would commence when the same cross into the territorial waters but continues when the goods become part of the mass of goods within the country; the taxable event being reached at the time when the goods reach the customs barriers and the bill of entry for home consumption is filed. Thus when the goods are being transported by the barges from the mother vessel to the jetty onshore, that activity is part of the import transaction of bringing the goods into India from a place outside India. The question of rendering any service in respect of such goods by way of cargo handling or otherwise can take place only after the customs transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the free on board value of the goods is not ascertainable, the costs referred to in clause (a) shall be twenty per cent of the free on board value of the goods plus cost of insurance for clause (i) above and the cost referred to in clause (c) shall be 1.125% of the free on board value of the goods plus cost of transport for clause (iii). Provided also that in case of goods imported by sea stuffed in a container for clearance at an Inland Container Depot or Container Freight Station, the cost of freight incurred in the movement of container from the port of entry to the Inland Container Depot or Container Freight Station shall not be included in the cost of transport referred to in clause (a). Explanation.- The cost of transport of the imported, goods referred to in clause (a) includes the ship demurrage charges on charted vessels, lighterage or barge charges". These amended provisions came into force with effect from 10-10-2007. The C.B.E. & C. has also clarified vide Circular 34/2009, dated 30-11-2009 that the issue of ineligibility of barge charges in the value (of imported goods) will be governed by the provisions of Section 14 of the Customs Act, 1962 read with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble Supreme Court in the case of Medley Pharmaceuticals Ltd Vs CCE Daman 2011 (263) ELT 641 (SC), held that doctrine of merger applicable if appeal dismissed in the absence of detailed reasons or without reasons when superior Court upholds decision of lower court from which appeal arose. The relevant portion of the decision is reproduced below:- "32. This Court has consistently held that the medical supplies supplied to the Doctors are liable to excise duty. Elaborate consideration may not be forthcoming in these judgments, but, in our view, the issue stands concluded. We say so for the reason that this Court, in catena of cases, has opined that in case, the appeal has been dismissed in the absence of detailed reasons or without reasons, such order will entail the application of the doctrine of merger, wherein the superior court upholds the decision of the lower court from which the appeal has arisen. In the case of V.M. Salgaocar & Bros.(P) Ltd. v. C.I.T., (2000) 5 SCC 373, this Court held : "8. Different considerations apply when a special leave petition under Article 136 of the Constitution is simply dismissed by saying "dismissed" and an appeal prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1091-CESTAT-AHM iii) Tata Consultancy Services Ltd Vs CCE-2012-TIOL-1034-CESTAT-MUM We find that it has already been held that the demand of Service Tax on Stevedoring and Lighterage services on the Port service prior to 01.07.2010 cannot be sustained. Hence, there is no need to look into this issue, which is merely academic one in the present appeal. 26. The Appellant also contested that the demand of tax is barred by limitation. We find that it is a case of classification of service and interpretation of the definition of the Port Services. The Adjudicating authority, while invoking the extended period of limitation, observed that the Appellants had suppressed the gross amount charged and received from M/s Essar Steels. Even after rendering the stevedoring services (export cargo) and lighterage service (inward as well as outward cargo), they failed to include the stevedoring charges (export cargo) and lighterage charges (both inward and outward cargo) while showing the taxable values in the ST 3 returns under Port services. We find that the Appellant was paying Service Tax on Stevedoring service under the category of 'Cargo Handling Service' except export cargo, as it was ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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