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Supreme Court has held that wharfage charges collected by Gujarat Maritime Board are not covered under “port services” and hence not chargeable to service tax. As per section 65(105)(zn) of the Finance Act, 1994 taxable services include any service provided or to be provided to any person, by a port or any person authorized by the port, in relation to port services, in any manner.
Case No. :
Civil Appeal Nos 3347-3348 of 2014
Facts of the Case:
It was alleged that service tax was payable on wharfage charges by GMB collected by them from their licensee UCL under the taxable category of “port services”. The revenue authorities initiated investigation against GMB for under-valuation and short payment of service tax. Ultimately, a show cause notice dated 6.3.2009 was issued to collect 80% of service tax payable on wharfage charges which was not paid by the assessee. By the order in original dated 16.7.2009, the Commissioner, Central Excise held that it was clear that the nature of service provided, which was wharfage, was squarely covered under the head “port services” as defined in the Finance Act, 1994. The amount of rebate/concession granted in wharfage charges amounting to 80% allowed to the licensee should, therefore, be included for purposes of calculation of service tax. Equally, the amount that was demanded on account of lease rent for waterfront usage was also confirmed, together with interest and penalty, which was imposed on the assessee. On appeal, CESTAT reversed the Commissioner’s order holding that no service at all was rendered by the Gujarat Maritime Board in relation to any vessel and, therefore, no amount was payable by way of service tax. Equally, on an analysis of the agreement between GMB and UCL, it was held that 20% of wharfage charges which was payable under the agreement was really payable as licence fee/rental and, therefore, the balance 80% being of the nature of licence fee/rental and not being of the nature of payment for services rendered would equally render the payment bad in law.
Appellant’s Contentions:
Respondent’s Plea:
Excerpts from the Judgment: … though GMB is the owner of the jetty under the said agreement, yet for providing the service of allowing a vessel to berth at the said jetty, it is necessary for GMB itself to keep the said jetty in good order. Wharfage charges are collectible because they are in the nature of fees for services rendered. The expenses that are defrayed by the Board for the maintenance of the jetty is sought to be collected as wharfage charges. This amount would necessarily include all amounts that are spent for keeping the said jetty in good condition including dredging so that vessels can berth alongside the jetty. It is clear that so far as jetties operated by the Board are concerned, the Board itself defrays such expenses. It is only in cases like the present where the jetty is primarily meant for loading and unloading goods belonging to a particular private party that repair and maintenance expenses are to be borne by the private party and not by the Board. It is in this circumstance that we find that there is no service, therefore, rendered by GMB to UCL There is no doubt on a reading of the agreement that it is the Board itself that charges or recovers wharfage charges from the licensee - UCL and does not authorize UCL to recover such charges from other persons. This being the position, it is clear that no service is rendered by a port or by any person authorized by such port and, therefore, the very first condition for levy of service tax is absent on the facts of the present case. So far as the direct berthing facilities provided for captive cargo is concerned, the lease rent charged for use of the waterfront also does not include any service in relation to a vessel or goods and cannot be described as “port service”. This being so, it is unnecessary to go into any of the other contentions raised by both parties. To the extent that the impugned judgment is in conformity with our judgment, it is upheld. The appeals of the revenue are, therefore, dismissed accordingly Download Full Judgment Click Here >>
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