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TMI Blog2024 (3) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... ially, it is part of the work which was undertaken by them towards the development of shipyard facilities at Kakinada Port - The nature of work described in the RA Bills, as also from the terms of agreement, it is obvious that those activities cannot be covered but for construction, repair, alteration or renovation of any of the specified structures viz., wharves, quays, docks, stages, jetties, piers and railways. Thus, on strict construction of Notification No. 11/2011, exemption is not admissible in the facts of the case. There are no force in this line of argument as the notification issued declaring certain areas within a Customs station as Customs area is for the limited purpose as envisaged in the Customs Act and that in itself cannot declare that space as a deemed port or otherwise. A Customs area within a port is a specified area but the entire Customs area cannot become port, if it is not otherwise a port, in terms of definition of port in the Statute. Thus, on this count also, the appellants have no case. Dredging services or not - services rendered were dredging for approach channel, repair berth and floating dry dock - HELD THAT:- It is obvious that as long as these act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... floor areas for consideration of Rs.7.85 Crores. iv) Hard surfacing including concrete flooring for workshop areas for consideration of Rs.26.69 Crores. 2. These services were found classifiable under Works Contract Services (WCS) and liable to service tax. However, since the appellant has not discharged the service tax during the period 01.04.2011 to 30.06.2012, SCN dt.06.05.2014 was issued demanding, inter alia, an amount of Rs.5,87,01,760/- under proviso to Sec 73(1) of the Finance Act under dredging service and Rs.7,80,32,800/- under WCS. It was also proposed to appropriate the amount of Rs.5,87,01,760/- and Rs.2,00,00,000/- already paid by the appellant towards their liability under respective categories of service. 3. Briefly stated, the department relied on the following documents as indicated in Para 18 of the SCN, which are reproduced for ease of reference: a) Copy of letter of award bearing No. SKL/NEC/Shipyard/2011-12 dt.04.04.2011 entered by M/s Sembmarine Kakinada Ltd, Kakinada with M/s Navayuga Engineering Company Ltd, Kakinada and Contract Agreement dt.06.04.2011 between M/s Sembmarine Kakinada Ltd and M/s Navayuga Engineering Company Ltd. b) RA Bill No. 01 dt.12.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether the services covered under RA Bill No. 01 dt.12.03.2012, issued by the assessee to M/s Sembmarine Kakinada Ltd, are taxable under the category of WCS or not; ii) Whether the services covered under RA Bill No. 02 03 dt.12.03.2012 31.12.2012 respectively, issued by the assessee to M/s Sembmarine Kakinada Ltd, are taxable under the category of Dredging service or not; iii) Whether the provisions under Sec 75, 76, 77 78 are attracted in the case or not. 7. In so far as the first issue is concerned, the Original Authority observed that the appellants have not contested the nature of the activity falling under WCS and also the fact that they had not opted for composition scheme for payment of service tax. He, however, examined the claim of the appellant under Exemption Notification Nos. 11/2011, 25/2007 25/2012. Notification No. 25/2012 was not found applicable, inasmuch, as the service rendered and bill raised were well before 01.07.2012 i.e., date from which the notification became effective. As far as the Notification No. 25/2007 is concerned, the said exemption is for specified services provided to any person by any other person in relation to construction of port or other po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infrastructure facilities at Kakinada port on public-private partnership model with M/s Kakinada Seaport Ltd (KSPL) and in turn KSPL entered into a Memorandum of Understanding with M/s Sembawang Shipyard Pvt Ltd, Singapore (Sembawang for short) for establishment of ship building activity in Kakinada port. They invited attention to G.O.M.s. No. 50 dt.30.10.2010 issued by the Principal Secretary to the Government of Andhra Pradesh to the effect that ship building facility had to be constructed within the existing port land and submerged land which is to be reclaimed. M/s Sembawang and the appellant entered into an Agreement dt.06.04.2011 for development of shipyard facility, which got subsequently amended on 24.02.2014. According to the terms of the Agreement, the scope of work included, inter alia, land and land development as well as marine infrastructure development. These works included construction of securing dolphins approach platform for floating dry dock facility and other related activities as well as new building facilities, which involved hard surfacing including concreting for drains and access, trenches, pits, shed connecting concrete roads, parking area and ramps othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction of dolphins approach platform, hard surfacing for drains, trenches, pits, concrete road, parking areas, etc., as it is applicable for construction of wharves, quays, docks, jetties, etc., within a port and no other construction is exempted under the said notifications. He has relied on the judgment of Apex Court in the case of CC (Import) vs Dilip Kumar Co. [2018 (361) ELT 577 (SC)] in support of the strict interpretation of notification. He has further argued that the argument of the appellants that all constructions, facilities constructed in a port or any Customs notified area are exempt from service tax is not correct appreciation of exemption provided in Notification No. 11/2011. On the argument of the appellant that they have created a new port facility is not correct as the Contract entered into by the appellant is for construction of shipyard and not for the construction of port. In fact, reliance has been placed on the Ministry of Ports, Shipping and Waterways, Government of India Annual Reports 2020-21 which clearly indicates that Sembmarine Kakinada Ltd is only a shipyard involved in ship preparing activities. Further, the terms shipyard has been defined by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cility is very much part of the Kakinada port has also been examined. This MO does not in any way supports the argument that the ship building is essentially part of the port, rather it gives an impression that ship building facility is also to emerge nearby, which can work in tandem with the existing port at Kakinada. Therefore, these are two distinct and standalone infrastructure, though having some common features. 16. The notifications claimed by the appellant have been examined in the impugned order by the Original Authority in detail. In so far as Notification No. 25/2012 is concerned, since the service rendered and bills raised by the assessee were well before 01.07.2012, in respect of RA Bill No. 01, the same notification is obviously not applicable to the appellant. As regards Notification No.25/2007 dt.22.05.2007, which exempts commercial or industrial construction service or services provided in relation to execution of works contract in relation to construction of port or other port, but specifically excludes services of completion and finishing, repair, alteration, renovation, restoration, maintenance or repair provided in relation to existing port or other port. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the effect that the services rendered were dredging for approach channel, repair berth and floating dry dock, in terms of discussion in the foregoing paragraphs, it is obvious that as long as these activities were being in relation to construction of shipyard, these activities will also not be entitled to exemption either under Notification No. 25/2007 or under 11/2011. 20. As regards limitation, the appellants have not been able to bring anything concrete on record to suggest that they were under any bonafide belief regarding non-payment of service tax, whereas, the department has been able to clearly establish that they were collecting service tax but neither paying the same nor reflecting the same in their ST3 Returns, or claiming any specific exemption notification for exemption. The fact that appellants have argued that in terms of agreement dt.06.04.2011, clause 70.4, they were aware about exemption from service tax and cess and yet they collected service tax, further, indicating their determinate disregard to statutory obligations. Thus, on this count also, the extended period of limitation has been rightly invoked. We also find that the Original Authority has not imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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