Case Law Details
Port Department Vs Commissioner of GST & Central Excise (CESTAT Chennai)
CESTAT Chennai held that concession fee paid by KPPL to the Puducherry Port is payment for the right to develop/ operate/ maintain the port including project facility. Accordingly, classifying the activity of Build Operate Transfer contract u/s 65(105)(zzzq) of the Finance Act, 1994 ‘Support Services of Business or Commerce’ is unsustainable.
Facts- The Port Department, Government of Puducherry intended to develop a port at Karaikal in the Union Territory of Puducherry in the BOT format with private investments. They entered into an agreement, named ‘Concession Agreement For Development Of Karaikal Port Project’, with M/s. Marg Constructions Ltd (MCL). granting them the rights to develop / operate / maintain the Port including project facilities on a BOT basis. Subsequently, MCL transferred and assigned the project to their wholly owned subsidiary, namely M/s. Karaikal Port Pvt. Ltd. (KPPL) who would be the concessionaire for the Port project. KPPL were given the freedom for the levy, fixing and revising tariffs for various port services on the premises. In consideration for the grant of the said ‘concession’, a ‘concession fee’ was to be paid by KPPL to the Puducherry Port as a percentage of gross revenue generated by the concessionaire each year. The gross revenue included revenue generated by the concessionaire from the operation of the port or any other service in respect of vessels and cargo and all other revenues from the services within the port.
The impugned order held that the royalty / concession fee / lease charges received by the Port from KPPL represents the consideration received by the Port Department for providing services relatable to the taxable service defined u/s. 65(105)(zzzq) of the Finance Act, 1994 under the category of ‘Support Services of Business or Commerce’. Service tax of Rs.1,03,82,431/- was confirmed under the proviso to section 73(1) of the Finance Act, 1994 for the period from January 2007 to January 2012 along with appropriate interest. A penalty of Rs.1,03,82,431/- was also imposed u/s. 78 of the Finance Act, 1994.
Conclusion- The ‘concession fee’ paid by KPPL to the Puducherry Port as a percentage of gross revenue generated by the concessionaire each year is also not a payment for any support services of business or commerce given by the Port Department to KPPL. It is basically a payment for the rights to develop / operate / maintain the Port including project facilities. We are accordingly of the view that the impugned order has erred in classifying the activity of the BOT contract under sec. 65(105)(zzzq) of the Finance Act, 1994 and that the levy must fail.
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