Sea Shipping Services Vs Commissioner of C.E. & S.T (CESTAT Ahmedabad)
The case concerns the taxability of amounts collected by the appellant for supply of water to vessels and whether such activity constitutes a taxable “port service” under the Finance Act, 1994 or a non-taxable sale of goods. The appellant, registered under various service categories including port services, issued debit notes to customers for reimbursement of water supply charges amounting to ₹66,25,250 but did not pay service tax on these amounts. A show cause notice dated 24.09.2014 was issued proposing recovery of service tax of ₹6,82,400 along with interest and penalties. The adjudicating authority confirmed the demand and imposed penalties under Sections 77 and 78, which was upheld by the Commissioner (Appeals), leading to the present appeal.
The appellant contended that the demand was time-barred as it pertained to 2009–10 and 2010–11 and was based on records already available in the public domain, with no suppression of facts. It argued that the activity involved sale of water, which is exempt from VAT under the Gujarat VAT Act, and therefore could not be treated as provision of service. The appellant further claimed that the amounts recovered were reimbursements of actual costs and not service charges, and thus should be excluded from taxable value under Rule 5(2) as it acted as a “pure agent.” It also submitted that supply of water was exempt from service tax with effect from 01.07.2010 under Notification No. 31/2010-ST and that prior interpretation of taxability was incorrect. The appellant relied on case laws to argue that sale of water is not subject to service tax.
