Brief of the Case
In the case of CCE v M/s Gujarat Maritime Board Hon’ble Supreme Court held that no service tax will be levied if the amount is collected under the wharfage charges which is prescribed under the Statute and doesn’t come under the ‘Port Services.
Facts of the Case
The Respondent is a statuary body. The authority administers and operates minor ports in the State of Gujarat. The Respondent entered into the agreement with a party due to which licence was granted to that party to construct and use a jetty for landing of goods and raw materials manufactured. It is alleged that service tax was payable on “wharfage” charges by the Respondent collected by them from their licensee under the taxable category of “port services”. The relevant period was 1/10/2003 to 31/3/2006. A further amount was also demanded on account of the provision of direct berthing facilities provided for captive cargo of a ship on account of lease rent for use of the waterfront.
Order by Commissioner
The Ld. Commissioner held that the nature of service provided, which is “wharfage”, is squarely covered under the head “port services” as defined in the Finance Act, 1994. Accordingly, the amount was confirmed along with interest and penalty.
Held by Hon’ble CESTAT
The Hon’ble Tribunal reversed the order of Commissioner by observing that no service at all was rendered in relation to any vessel. Also, the Hon’ble Tribunal further held that on an analysis of the agreement, 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.
Contention of the Revenue
The ld. Counsel for the Respondent submitted on a conjoint reading of Section 37 of the Gujarat Maritime Board Act and Section 65(82) of the Finance Act, 1994, it will be clear that the agreement between Respondent and the other party was the service rendered by the Respondent as owner of the jetty, the service being the provision of a space for landing of goods from vessels which are allowed to berth there. It was also submitted that the Respondent had authorized the other party to render the service of “wharfage” and since what was collected was actual wharfage charges in accordance with the schedule of rates prescribed under the Gujarat Maritime Board Act, it was in relation to goods that were loaded or off-loaded from vessels on the said jetty. It was further argued that 20% of the wharfage charges were only collected because of internal arrangement between the two. He further submitted that 20% of “wharfage” levied and collected cannot be said to be rental or licence fee but is “wharfage” charges collected under the GMB Act for the service of allowing goods to be landed at the said jetty. According to learned counsel, the Respondent was the owner and in control of the said jetty throughout the term of the agreement and all findings to the contrary by the Tribunal were incorrect.
Contention of the Assessee
The ld. Counsel of the Assessee submitted that the very basis for service tax was absent in the present case as there is no service rendered of any kind by the respondent on the facts of the present case to the other party nor they were authorized by the Respondent to render any service mentioned in Section 37 of the Act and therefore, the authority to levy service tax was absent. He also argued that the 20%of wharfage charges that was paid under the agreement was really only a measure to calculate what is in fact payable as licence fee.
Held by Hon’ble Supreme Court
The Hon’ble Apex Court after going through the whole Agreement framed a question of law that whether any service is provided by the Party in relation to vessel or goods. It was observed that it was the duty of licensee to maintain the jetty in good condition during the agreement. Further, it was the licensee to provide all services at or around the Jetty. It was not the Board but the Licensee who keeps the said jetty in such condition to enable vessels to berth alongside it to load and unload goods. Further, the Hon’ble Apex Court was agreed with the Ld. Counsel for the Respondent that no services were rendered by the Assessee to the licensee under the agreement. The agreement makes clear that it is an agreement entered into under the Statutory Act allowing the licensee to construct a jetty and thereafter maintain it at its own cost. Also, the rebate in wharfage charges of 80% is a condition imposed statutorily under Section 35 of the said Act. It was further observed that 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. Therefore, no service is rendered by the Respondent to the other part to the Agreement. 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 and does not authorize to recover such charges from other persons. Therefore, it was clear that no service was 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. Accordingly, the decision was in the favour of Revenue