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TMI Blog2022 (1) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... ount 80% rebate was given by GMB. The transaction which is under question in the present case is not between GMB and EBTL but it is between EBTL and ESTL, in this transaction the capital expenditure incurred by the EBTL is not relevant for the purpose of charging wharfage charges by EBTL to ESTL - the entire foundation of the case that 80% rebate given by GMB to EBTL on account of the capital expenditure incurred by the EBTL is not relevant for the transaction which is between EBTL and ESTL. Rule 3 of the Service Tax (Determination of Value) Rules, 2006 shall be applicable only in case were the value is not ascertainable. In the present case, the value for the service i.e. wharfage charges is clearly ascertained as per the invoice issued by EBTL to ESTL. Therefore, Rule 3 as whole not applicable in the facts of the present case. Without prejudice, even if clause (b) is applied, the cost of service to the respondent was only charged to ESTL therefore, the value of service charged by EBTL to ESTL is not less than the cost for such taxable service. In the present case, there is no dispute that the gross amount charged by EBTL to ESTL is equivalent to 20% of notified rate of wharfag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a Special Purpose Vehicle (SPV) Company with equity contribution from the group companies namely M/S. ESSAR STEEL INDIA LTD. (ESTL), M/S. ESSAR PORTS LTD., etc specially to develop terminal facility at Hazira, Port Magdalia which included construction of a 550 meters jetty. The respondent has been granted a license of GUJARAT MARITIME BOARD (GMB) to administer, develop, maintain and operate a captive jetty for the purpose of handling storage and transportation of cargo of M/S. ESSAR STEEL INDIA LTD. The license agreement between M/S. GMB and the respondent appear to reveal that Gujarat Maritime Board had agreed to give rebate of 80% of notified rates, on landing and shipping fees (known as wharfage charges) notified by the Ports and Transportation Department, Government of Gujarat under Schedule of Ports Charges with respect to such captive jetty of M/S. ESSAR STEEL INDIA LTD. in view of the cost of construction borne by the respondent as per the agreement dated 25.03.2010, it was noticed that the Gujarat Maritime Board is paying service tax on entire amount of wharfage charges as notified by the Government of Gujarat whereas, the respondent was paying service tax only on the 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson availing taxable service of Ports services in terms of the notifications issued by Gujarat Maritime Board from time to time under the authority of Gujarat Maritime Board Act, 1981 at specified rates mentioned in Schedule annexed thereto. It is only by virtue of clause 22 of the agreement dated 25.03.2010 between Gujarat Maritime Board and M/s. EBTL that in consideration of M/s. EBTL constructing the deep draft captive jetty or handling captive cargo of EBTL at its own cost. Initially, the Gujarat Maritime Board has agreed to grant rebate adjusted against the cost of constructing subject to the conditions stipulated therein. It is clearly mentioned therein that set off as aforesaid against the capital investment for construction of deep water captive jetty only (i.e. Cost of construction) and that whether such captive investment is recovered through such rebate, M/s. EBTL shall have to pay thereafter, such charges at normal rate as per schedule of Ports Charges. It is clearly provided under the said agreement dated 25.03.2010 that whatever rebate in concession is granted by Gujarat Maritime Board against the cost of construction is equivalent amount at the relevant time shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charges at the rate of 20% of the notified rates and on which service tax discharged by M/s. EBTL to M/s.ESTL have also passed on other value benefits discussed hereinabove to M/s. EBTL. The quantum of which cannot be ascertained hence, the value in this case is to be arrived other than resorting to clause (i) to Section 67(1) of the Act in other words, such gross amount charged in respect of taxable service of port services provided by M/s. EBTL to M/s. ESTL being not wholly consisting of money and the quantum of which is not ascertainable the same has to be arrived at in terms of Section 67(1) read with provision of Rule (3) of Service Tax (Determination of value) Rules, 2006. 2.4 In view of the above, the adjudicating authority has clearly erred in holding that there is no evidence of additional consideration or additional money flow from M/s. ESTL to M/s. EBTL. He submits that it is an admitted position that GMB normally charge charges as notified by the Government of Gujarat at specified rates, only had extended the benefit of rebate to the tune of 80% applicable wharfage charges they would normally charge to other port users only to M/s. EBTL in terms of their agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in the valuation of services provided by the Applicant. The demand raised in the notice ought to have been dropped on this ground also. 11.4 Without prejudice to the above it is submitted that a plain reading of the various clauses of the agreement dated 25.3.2010 clearly bring out that the Applicant had been granted a license under Section 35 of the GMB Act to construct and use 550 Mtrs of deep water captive jetty for handling of captive cargo at the demarcated site. For this purpose, a license fee of ₹ 10,000/- per annum was payable by it to GMB. As the jetty was constructed at the Applicant's own cost initially, GMB agreed that the jetty so constructed shall be mainly and initially as per terms of the agreement allowed to be used for the vessels belonging to the Applicant or chartered by it on preferential basis without any ousting priority. The agreement very specifically emphasized that the ownership of deep water captive jetty will vest in GMB and the Applicant shall have no right, title, interest or other proprietary right in respect of the jetty so built and the land on which it was constructed as it was specifically understood that the water front is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and proceeds of such levy are credited to the consolidated Treasury Fund of State of Gujarat. In view of this, the amount collected by GMB has to be considered as statutory levy only and cannot therefore be considered as a service liable to service tax. In view of this, the Applicant only assisted GMB in discharging its sovereign function and therefore no service tax was payable on the same. In support thereof, reference invited to the CBEC Circular No. 89/7/2006-ST dated 18.12.2006, Master circular dated 23.8.2007, FAQ dated 4.12.2008 issued by DGST and FAQ 2010 dated 1.9.2010 wherein it has been clarified that if a Government department (sovereign) / public authorities perform any mandatory or statutory function under the provisions of any law and collect any fees, such activity shall be treated as activity purely in public interest and will not be taxable. Applicant submits that on this ground also the demand ought to have been dropped. 11.8 Applicant submits that matter was purely revenue neutral as ESTL, our own group company was entitled to the entire credit of service tax paid by us. In view of this, no demand for service tax could have been raised as held by the Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges on an identical ground that the service tax was paid on concessional rate granted to us by GMB and not on the full rate. This very clearly establishes that the copy of the agreement dated 25.3.2010 entered into by us with GMB along with all its enclosures was submitted to the department and clause 22 which is subject matter of the present dispute was very much in knowledge of the Department as similar short levy in respect of GMB was pointed out earlier. In view of this, the very basis on which suppression has been alleged on the Applicant does not survive and the extended period cannot therefore be invoked. In view of this, it was submitted that the entire demand is time barred and the proceedings are liable to be dropped. Reliance was also placed on the Supreme Court decision in the case of CCE Vs. Pragati Concrete Products reported in 2015-TIOL-223-SC-CX wherein it has been held that no suppression can be alleged when the unit has been audited several times. The impugned order however does not contain any finding in this respect. 11.11 Applicant submits that even otherwise it could not have any intention to evade service tax as ESTL, to whom the service was rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that as per the strict interpretation of Section 67(1)(ii) which applies only in a case where if the consideration is not wholly or partly consisting of money but in addition to that some other consideration is flowing from the service recipient to the service provider. 4.2 In the present case, admittedly the respondent raised invoices for services charge for wharfage charges under Port Service at the rate of 20% of the notified rate as per GMB, however, other than this there is no other amount flowing in the form of money or in any form from ESTL to EBTL therefore, the case of the respondent does not fall under clause (II) of Section 67(1) of the Finance Act, 1994. It is pertinent to note that the entire case of the revenue is that there is a capital expenditure incurred by EBTL and on that account 80% rebate was given by GMB. The transaction which is under question in the present case is not between GMB and EBTL but it is between EBTL and ESTL, in this transaction the capital expenditure incurred by the EBTL is not relevant for the purpose of charging wharfage charges by EBTL to ESTL. Therefore, in our view the entire foundation of the case that 80% rebate given by GMB to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the gross amount charged by EBTL to ESTL being sole consideration will alone be liable to service tax and no any other amount which is otherwise not existing. 4.3 It is also the contention of the revenue that in normal course the GMB charge the wharfage charges at normal notified rate but in the present case, they charged only 20%. In this regard, we find that transaction is an independent transaction between two parties, the one transaction may vary from the other transaction. There is no provision in the service tax law particularly when the gross value in the present case is ascertained to apply a comparable value of a similar service but of a different transaction therefore, even though there is a different charges by GMB to two different parties that cannot be a reason to apply normal notified rate in the present case. For this reasons also revenue s contention to enhance the value from 20% to 100% is not sustainable. We find that the adjudicating authority has relied upon the judgment of Hon ble CESTAT in the case of GUJARAT MARITIME BOARD V/s. CCE- BHAVNAGAR- 2015 (38) STR 776 (Tri.-Ahmd.) the same is reproduced below:- 6. We have considered the submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not discharged the Service Tax liability i.e. the appellant has charged a lump sum amount from M/s. UCL for a particular kind of ship approaching the said port as waterway fees. 7.1 The contention of the Department is that the Service Tax should have been discharged by appellant on ₹ 100/- under wharfage charges and also on the water fees collected by them. The entire issue in this case is upto the year June 2008. At the outset, we would like to record that both sides have relied upon the various case laws and we have given due consideration to them. 8.1 The term Port service is defined during the relevant time as under in terms of Section 65(82) of Finance Act, 1994. Port service means any service 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. 8.2 From the perusal of the definition of port service which was in existence prior to 1-7-2010, it can be seen that a service could be considered as a port service if it satisfied following two conditions :- (i) Service should have been rendered in relation to a vessel or goods. (ii) Serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GMB to M/s. UCL Ltd. amounts to renting of immovable property. 8.8 The terms immovable property has been defined in S. 3(26) of General Clauses Act, 1897 which reads as under : Immovable property shall include land, benefits to arise out of land and things attached to the earth or permanently fastened to anything attached to the earth. 8.9 In the present case, GMB has allowed M/s. UCL Ltd. to use their waterfront. 8.10 In Anand Behera v. State of Orissa - AIR 1956 SC 17, it was held by the Supreme Court that the right to catch and carry away of fish in specific sections of lake for a specified future period amounted to a licence to enter on the land coupled with the grant to catch and carry away the fish and was regarded as a benefit that arose out of the land as immovable property . In Lakshman Gowroji Nakhawa v. Ramji Antone Takhwa - AIR 1921 BOM 93, it was held that right of fishing was immovable property . Several fishery was held to be immovable property in Ram Bysack v. Nurumuddin - 1893 ILR 20 CAL 446. In Shibu Haldar v. Gupi Sundari Dasya - ILR 24 CAL 449, it was held that suit for the rent of the fishery was a suit for immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following manner : gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment, and any amount credited or debited, as the case may be, to any account, whether called Suspense account or by any other name, in the books of account of a person liable to pay Service Tax, where the transaction of taxable service is with any associated enterprise. The gross amount charged is the value with reference to which tax is payable, provided the provision of service is for a consideration in money. The expression money is defined in Section 67 to read as under : money includes any currency, cheque, promissory note, letter of credit, draft, pay order, traveler s cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value. 9.2 A reading of the above provisions makes it evident that the levy of Service Tax in the Finance Act, 1994 is with reference to the amount actually paid for the services. This is akin to the concept of transaction value which is now the method of valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment or deduction. The gross amount charged is the assessable value only when the provision of service is for a consideration in money. In the present case, Revenue s contention is that the service rendered by GMB was not entirely covered by a consideration in money and that there was an additional consideration which flowed to it in the form of benefits which it would derive from the capital expenditure incurred by the user industry for developing the seafront, which would become GMB s property. In this context, one needs to examine whether the expenditure incurred by the user industry can at all be considered as consideration flowing from the user industry to GMB . 9.4 The capital expenditure incurred by M/s. UCL cannot constitute consideration flowing from M/s. UCL to GMB for the reason that such expenditure was not incurred at the desire and request of GMB but was incurred by the end user for own benefit without there being a stipulation for such amount to be incurred. The Privy Council in the case of Raja of Venkatagiri v. Sri Krishnayya, - 1948 PC 150, interpreted the words at the desire of the promisor appearing in Section 2(d) of the Contract Act, 1872 held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition can be made to the assessable value on account of such contingent benefit. Since the provisions of the Finance Act, 1994 do not contain any machinery provision to determine the present value of such future or contingent benefit, any addition on this account would be an arbitrary one. The question of adding the value of full capital expenditure as additional consideration is in any case absurd as most of the benefits from such capital expenditure would have accrued to the user industry during the concession period and would not be to the account of GMB. In other words, the capital expenditure incurred by the user industry is an expenditure incurred by the user industry in its own benefit and it is clear on the intention of the two parties that GMB would have been entitled only to a contingent benefit at the end of the concession period and the value of that contingent benefit cannot be quantified particularly in the absence of a machinery provision to that effect in the Finance Act, 1994 or in the rules framed thereunder. In this regard, the judgement of the Supreme court in the case of B.C. Srinivas Shetty is relevant, which provides that where a taxing statute does not pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed with consequential relief, if any. As per the revenue, the above judgment is distinguishable for the reason that it was in respect of services provided by GMB to the appellant who had developed, maintained and operated the Port by investing their own capital and considering the limited nature of service rendered by GMB to the respondent, the rebate was correctly held to have been allowed by GMB. We find that in the present case, the service transaction is between the EBTL ESTL whereas, the revenue has heavily relied on the agreement between GMB and EBTL. In our view, since there is no such conditions, which exists between GMB and EBTL, exists in the transaction between EBTL ESTL, the case of the respondent is on a better footing as compared to the judgment given in GUJARAT MARITME BOARD case (supra). In the said judgment the similar issue was involved that whether service tax should be chargeable on 100% of notified rate or on 20% (after giving rebate of 80%) therefore, the judgment of GUJARAT MARITIME BOARD (supra) is squarely applicable in the present case. 4.4 In view of the above and concurring with the findings of the learned Commissioner, we are of the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was signed on 25.3.2010 after which the operations were commenced. The commencement of the operation was in the knowledge of the department as successive EA-2000 audits were conducted in March 2011, June July 2012 for the period 2010-11 and 2011-12 wherein copies of the agreements dated 25.3.2010 entered into with GMB were duly furnished. In fact, the audit report dated 7.9.12 conveyed to the respondent by Jurisdictional Superintendent vide his letter dated 1.2.2013 had in Para 1 specifically referred to clause 22 of the License Agreement dated 25.3.2010 with GMB and had pointed out similar short payment of service tax on part of GMB on wharfage charges on an identical ground that the service tax was paid on concessional rate granted to them by GMB and not on the full rate. These establish that the copy of agreement dated 25.3.10 entered into by the respondent with GMB along with all its enclosures was submitted to the department and clause 22 which is subject matter of the present dispute was very much in the knowledge of the department as similarly short levy in GMB was pointed out earlier. In view on this fact the invocation of the longer period for demand is absolutely i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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