9911796707
TMI Blog2025 (1) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... found that as far as ITC of repairs and maintenance of vessels is concerned it would not be available to the respondent since the vessels per se [DSV and SPV] are not being used for transportation of goods. The respondent therefore will not be eligible for availing ITC on input services in respect of repairs and maintenance received by them. ITC in respect of hiring services of SPV - HELD THAT:- In terms of the proviso beneath section 17 (5) (b) (i), ITC is available on hiring of SPV, where an inward supply of such goods or services is used by a registered person for making an outward taxable supply of the same category of goods/service or as an element of taxable composite or mixed supply; that the services procured are not merely those of hiring of vessels but those of operation and maintenance of said vessels. It is an undisputed fact that hiring service was not used for making an outward supply of the same category of service. Further nothing has been produced to contend that the hiring service was used by the respondent for making an outward taxable supply of services which is an element of a taxable composite or mixed supply. There is no explanation forthcoming as to how the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 990s as a captive port for RIL s refinery project; that the respondent (then known as Reliance Ports and Terminals Ltd.) entered into a long term contract with RIL on 26.3.2007 under which they were obliged to set up new facilities as described in Schedule 1 to enable it for provision of services described in Schedule 2 of the said long term contract; that since they provide port and terminal handling services which includes loading and unloading of cargo, transportation of cargo from the vessels berthed in the sea to the port, berthing facilities to the vessel, storage facilities etc., the services be treated as a composite supply of Port and waterway operation services (excluding cargo handling) such as operation services of ports, docks, light houses, light ships etc. classifiable under heading 996751; that they recover throughput charges from RIL and discharge applicable GST on the invoices issued to RIL. 5. The respondent s case is that Single Point Moorings [SPMs] are located mid-sea as Very Large Crude Carriers ( VLCCs ) which transport crude oil and other feedstock need a very deep draught to drop anchor, which is not possible at Sikka jetty. Hence, VLCCs berth alongside su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 21.07.2018 Sr. No. 17 of the annexure to the Agenda makes it clear that the said amendment seeks to only restrict credit in respect of vessels for personal use such as yachts, sailboats etc.: the use of these services is to enable transportation of goods and therefore the bar under section 17 (5) (aa) ibid is not applicable; that in order to ensure the legislative objective behind amendment of section 17, ibid, it is necessary to interpret the expression for transportation of goods as for the purpose of transportation of goods so as to give it the meaning as was intended by the Legislature; that the input services pertaining to operation and maintenance of DSV and hiring, operation and maintenance of SPV are required for transportation of goods and thus are eligible credits which are not blocked by provisions of section 17 (5) (aa) of the CGST Act; that section 17 (5) (aa) ibid does not require that the vessels are to be used directly for transportation of goods for eligibility of credit; that as per proviso to the section 17 (5) (b) (i), ITC would be available on leasing, renting or hiring of vessels if such vessels are further used for making taxable supplies of same category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andling services which includes loading and unloading of cargo transportation of cargo from the vessels berthed in the sea to the port, which was held by the GAAR as a composite supply of port and waterway operation services having SAC code 996751; that the nature of services is outside the ambit of composite supply; it is also not forthcoming from the invoices, that the service they are providing falls under the composite supply; that the ITC is even otherwise not available since the DSVS and SPVs are not used for transportation of goods in terms of section 17 (5) (aa) (ii), ibid; that they had misrepresented before GAAR that DSV Relsagar was owned by them when the contract clearly states of it being owned by M/s. RII: that having mis-represented before GAAR the ruling dated 29.10.2021 becomes null and void ab initio in terms of section 104. ibid. 12. The respondent in their counter dated 18.10.2022 to Revenue s appeal, stated as follows: that it is impossible to transport crude oil, other feedstock or finished products without the operation of DSVs; that section 17 (5) is required to be harmonized with section 16 (1); that even applying the strict rule of interpretation as espous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services included maintenance and operation of facilities; that facilities as defined in schedule I includes DSVs; that the operation and maintenance of DSVs was an element of the outward supply of port and terminal handling services; that the aforementioned arguments also apply to the SPVs: that the services procured are not merely of hiring of SPVs but also of operation and maintenance which the GAAR took note of; that what 17 (5) (b) (i) blocks is credit on renting, hiring or leasing services not operation maintenance or security and patrolling; that even if it is assumed that the services in question are hiring, schedule 2 to the agreement stipulates that the respondent shall provide infrastructural facilities including floating craft for fighting pollution control barges; that provision of SPVs was an element of outward supply of port and terminal handling services; that SPVs used for operation and maintenance of infrastructure is no ground to deny the benefit of ITC; lastly, the statement that DSVs were owned by the respondent was inadvertently made on account of a bona fide mistake: that there was no mala fide intention nor misrepresentation which necessarily requires an ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit shall not be available in respect of the following namely:- [(a) :- (aa) vessels and aircraft except when they are used- (i) for making the following taxable supplies, namely:- (A) further supply of such vessels or aircraft; or (B) transportation of passengers; or (C) imparting training on navigating such vessels; or (D) imparting training on flying such aircraft; (ii) for transportation of goods; (ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa): Provided that the input tax credit in respect of such services shall be available- (i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein; (ii) where received by a taxable person engaged- (I) in the manufacture of such motor vehicles, vessels or aircraft: or (II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;] (b) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and maintenance; that the SAC code was 998717 which pertains to maintenance repairs, and 996751 which pertains to port waterway operation services [excluding cargo handling]; that the substance of the contract does not limit scope of services to SAC 998717; that the input service is essential to enable transportation of goods from SPM to storage tanks that they are integral to the outward supply. 22. Revenue in their appeal before us has stated that ITC cannot be conferred by stretching the scope of the statute; that the nature of the service is blocked under section 17 (5), ibid; that the input service received is with respect to repair and maintenance of vessel, which the impugned order enlarged to confer the benefit; that section 17 (5) clearly blocks credit if the vessel is not used in the manner specified under clause (a) (aa). 23. The respondent s counter to Revenue s appeal is mentioned in detail in paragraph 12 above and is not being repeated for the sake of brevity. 24. As far as ITC on services procured for the operation and maintenance in respect of vessels is concerned, what needs examination is whether in the present case ITC is eligible on the input service the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r imparting training on navigating such vessels nor is it being used for imparting training on flying such aircraft. However, it was the respondent s contention before GAAR and before us that they are used for transportation of goods. 27. We find that the impugned order dated 29.10.2021 at para 33 state thus...... As already discussed in the aforementioned paragraphs of this Ruling, we find no merit to term and limit the services supplied by the Contractors to M/s Sikka as merely hiring/ renting of vessels, for the services are for the Operation and Maintenance of Vessels to perform and enable, inter alia, i. Transportation/ discharge of cargo; ii. security patrolling services. The second question before the GAAR was specifically relating to the eligibility of ITC in respect of hiring of vessel ie SPV [security patrol vehicle]. While the impugned order did not give any specific findings with regard to the blocked credit in respect of section 17 (5) (b) (i), ibid, it held that there was no merit to term and limit the services supplied by contractors to the respondent as hiring/renting of vessels, despite the fact that the ruling sought was on the eligibility of hiring of SPVs. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V] are not used for transportation and therefore, we hold that as far as input service of hiring is concerned, the ITC is blocked for the respondent. 31. The respondent s next argument is that in terms of the proviso beneath section 17 (5) (b) (i), ITC is available on hiring of SPV, where an inward supply of such goods or services is used by a registered person for making an outward taxable supply of the same category of goods/service or as an element of taxable composite or mixed supply; that the services procured are not merely those of hiring of vessels but those of operation and maintenance of said vessels. It is an undisputed fact that hiring service was not used for making an outward supply of the same category of service. Further we find that nothing has been produced before us to contend that the hiring service was used by the respondent for making an outward taxable supply of services which is an element of a taxable composite or mixed supply. There is no explanation forthcoming as to how the input hiring service of SPV was an element of the taxable output service operation and maintenance either as a composite or a mixed supply. 32. To summarize, we hold that the ITC is b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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