Wharfage charges recovered by port authority were not port services
Service Tax : Wharfage charges and lease rent recovered by port authorities cannot be regarded as ‘service’ in relation to ‘a vessel or goods’ and cannot be said to be a service provided by ‘port or person authorised by it’; hence, same is not liable to service tax under port services
SUPREME COURT OF INDIA
Commissioner of Central Excise, Bhavnagar
Gujarat Maritime Board
CIVIL APPEAL NOS. 3347-3348 OF 2014
JULY 22, 2015
Section 65(82) of the Finance Act, 1994
Period 1-10-2003 to June, 2008
■ The assessee Gujarat Maritime Board (‘GMB’) is a statutory body constituted under the Gujarat Maritime Board Act, 1981. This authority administers and operates minor ports in the State of Gujarat.
■ The assessee permitted UCL to construct and use a jetty for landing of goods and raw materials manufactured by UCL in their cement factory which was situate close to the said jetty at Pipavav port.
■ The Department argued that service tax was payable on wharfage charges collected by GMB from their licensee UCL under ‘port services’. The Department also did not allow deduction rebate/concession of 80 per cent allowed to UCL.
■ The department also demanded service tax on provision of direct berthing facilities provided for captive cargo of a ship size of 10,000 DWT and above on account of lease rent for use of the waterfront.
■ The Tribunal held that impugned transaction did not involve any service.
■ Service was rendered by GMB 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.
■ As an alternative, GMB had authorized UCL 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.
■ The reason why only 20 per cent of the wharfage charges was collected and not the entire amount was a pure internal arrangement between GMB and UCL with which revenue is not concerned.
■ The very basis for service tax was absent in the present case as there is no service rendered of any kind by the assessee on the facts of the present case to UCL nor has UCL been authorized by GMB to render any service mentioned in section 37 and that, therefore, the authority to levy service tax was absent.
■ 20 per cent of wharfage charges that was paid under the agreement was really only a measure to calculate what is in fact payable as licence fee and that, therefore, the agreement read as a whole would lead to the conclusion that no service was in fact rendered by the assessee and, therefore, no service tax could be collected.
■ The agreement between assessee and UCL makes it clear that it is the duty of the licensee, i.e., UCL to maintain the jetty in good order and condition during the tenure of the agreement. Further, it is UCL that is to provide all services at or around the jetty including dredging, navigation, water supply etc. This makes it clear that during the currency of the agreement it is not the Board but the licensee who keeps the said jetty in such condition that it is capable of enabling vessels to berth alongside it to load and unload goods. This being the position, no service is rendered by GMB to UCL under the agreement.
■ The agreement makes it clear that it is an agreement entered into under section 35 of the GMB Act allowing the licensee – UCL to construct a jetty and thereafter maintain it at its own cost. The rebate in wharfage charges of 80 per cent is a condition imposed statutorily under section 35 of the said Act. to say that it is in the nature of lease rent or licence fee, would not be correct inasmuch as a separate licence fee is payable under the agreement. But this would make no difference to the result of this case inasmuch as the very first condition that must be met under the definition of ‘port service’ is not met on the facts of the present case. [Para 11]
■ 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 there is no service, therefore, rendered by GMB to UCL. [Para 12]
■ As can be seen from section 32 sub-sections (3) and (4), the Board may authorize any person to perform any of the services mentioned in sub-section (1) of the said section which includes landing of goods at wharves. The authority given to perform any of the services must first and foremost be under terms and conditions as may be agreed upon by the Board and the private person. Further, under sub-section (4) of Section 32, it is the private person who is then authorized to charge or recover any sum in respect of such service rendered. This is conspicuously absent in the aforesaid 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 – 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. [Para 14]