Whether port services provided upto 2007 and storage and warehousing services related to agriculture produce are taxable?

PJ/Case Law/2016-17/3344

Case:- ASHOK INTERNATIONAL Versus COMMISSIONER OF C. EX., VISAKHAPATNAM-II

Citation:- 2016 (43) S.T.R. 430(Tri. - Hyd.)

Brief Facts:-M/s. Ashok International is in appeal against order-in-original No. 48/2008(PVR), dated 31st October, 2008 of Commissioner of Customs & Central Excise, Vishakapatnam-II that has confirmed tax and cess of Rs. 1,12,56,799/- for rendering ‘port services’ during the period 1st July, 2003 to 31st March, 2007 and Rs. 4,62,125/- for rendering ‘storage and warehousing services’ along with interest besides imposing penalties.

Appellant’s Contention:-Appellant contests the levying of tax under the head ‘port services’ on the ground that Section 65(81) and Section 65(82) of Finance Act, 1994 are intended to tax service rendered by a port or person authorized by a port in relation to vessels or goods whereas the appellant is in the business of cargo handling, stevedoring and storage. Admitting that they are licenced to handle certain activities within a port area, they contend that they are not a port and that the licence issued to them is not an authorization within the meaning of Section 65(82) and that insofar as Kakinada Port is concerned, they were merely accorded permission to operate in the port area. Decisions of the Tribunal in Shreeji Shipping v. Commissioner of Central Excise & Service Tax, Rajkot [2014 (36)S.T.R.569 (Tri.-Ahmd.)], Commissioner of Service Tax, Ahmedabad v. NOVA Enterprises [2015 (38)S.T.R.1012 (Tri.-Ahmd.), M/s. Velji P & Sons (Agencies) (P) Ltd. v. Commissioner of Central Excise, Bhavnagar [2007 (8)S.T.R.236 (Tri.-Ahmd.)], Homa Engineering Works v. Commissioner of Central Excise, Mumbai [2007-TIOL-769-CESTAT-MUM = 2007 (7)S.T.R.546 (Tribunal)] were cited. The decision of the Tribunal in M/s. VBC Exports Ltd. v Commissioner of Central Excise, Vishakapatnam [2008-TIOL-874-CESTAT-BANG = 2008 (10)S.T.R.613 (Tribunal)], holding that stevedoring is ‘cargo handling service’ not liable to tax in relation to exports was also cited.

Respondent’s Contention:-

Reasoning Of Judgment: The demand pertains to the period between 2003 and 2007 and the definition of ‘port service’ in Section 65(82) of Finance Act, 1994 relevant to the period is -
‘means any service rendered by a port or other port or any person authorised by such port or other port, in any manner, in relation to a vessel or goods’
and it was only with effect from 1st July, 2010 that it was amended to -
‘any service rendered within a port or other port, in any manner’
‘Port’ in this definition as per Section 65(81) is a major port and ‘other port’ as per Section 65(76) is a minor port under the Central Government or a State Government respectively.
With the change in definition in 2010, the scope of activities covered by Section 65(105)(zn) and Section 65(105)(zzl) of Finance Act, 1994 altered substantially to include services other than those that were statutorily or conventionally rendered by a port authority, by whatever name called.
It would appear that the amendment was intended to tax all services rendered in a port and to eliminate the rigour of separate classification of each and every type of taxable service within a port. Thus, from July, 2010, the omnibus entry could extend to all services rendered by anyone legitimately operating within a port. Conversely, the umbrella coverage did not exist during the period of dispute in this panel. The appellant is not a ‘port’ under the Major Port Trusts Act, 1963 or ‘other port’ under Indian Ports Act, 1908. Therefore, the test of taxability of service rendered by appellant would rest on whether these are activities rendered normally by a port and which the port has in turn authorised them to perform.
Ports are statutorily required to handle goods and vessels; to that extent they provide a safe harbour for ships with berths for holding them fast. These are generally presented as pilotage and berth hire. In relation to goods, ports provide space for storage - either in the open or in covered godowns - and ports collect wharfage. Handling of cargo is not a part of the core activities of the port. Even if the port authority in a major port does handle it, it is performed through the Dock Labour Board which is an official stevedore.
It would, therefore, appear that ports licence entities to interact with them and with others in relation to vessels and cargo, steamer agents, stevedores, ship chandlers, etc., which are not in the nature of authorisation to perform such activities that the port otherwise undertakes.
In Shreeji Shipping v. Commissioner of Central Excise & Service Tax, Rajkot [2014 (36)S.T.R.569 (Tri.-Ahmd.)], this Tribunal considered various decisions including others cited on behalf of the appellant and arrived at the conclusion that the taxable entry supra does not cover activities such as stevedoring.
In the matter of tax on ‘storage and warehousing service’ allegedly rendered by the appellant, learned counsel drew our attention to the decision of the Hon’ble High Court of Kerala in Kerala State Industrial Enterprise Ltd. v. Commissioner of Central Excise, Customs & Service Tax, Kochi [2012 (28)S.T.R.574 (Ker.)] to the effect that tax is exempted on such services as are related to export cargo. The appellant aggregates agriculture produce for exports.
12.Turning to the definition of ‘storage and warehousing’ in Section 65(102) of Finance Act, 1994, we find, that it specifically excludes service in relation to agriculture produce. On this count, too, the demand of tax on the service rendered by the appellant is untenable.
13.The appellant handles cargo which involves loading, unloading and transporting. Moreover, such handlers are often required to provide space for aggregation and security of cargo till they are ready to be moved to the vessels carrying these. The ‘storage and warehousing’ that is intended to be taxed is a specialised field that has for long held a vital position in commodity logistics. Such warehousekeepers are recognised in law as transit custodians with enacted responsibility and rights over the goods. Even to the extent of according the right of transfer of ownership through the transfer of warehouse receipt. The storage space provided by the appellant does not fall within that category but is one of renting of space. The demand of tax, therefore, is not sustainable.
14.For the above reasons, the impugned order is set aside and appeal is allowed.

Decision:-Appeal allowed.
Comment:- The analogy of the case is that the port services rendered during 2003 to 2007 by the appellant were not taxable at that time and amendment in 2010 cannot be held to be retrospective in nature. Storage and warehousing services provided by the appellant is specifically related to agriculture produce which is not included in definition of storage and warehousing’ in Section 65(102) of Finance Act, 1994. And thus both these services are not taxable for the subject period.
Prepared By: - Rakshay tater

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PJ/Case Law/2016-17/3344

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