BHORUKA STEEL LTD. Vs. COMMISSIONER OF SERVICE TAX

JUDGEMENT

(1.) IN the impugned order, learned Commissioner has demanded Service Tax of over Rs. 61 lakhs from the appellants under Section 73 of the Finance Act, 1994 with interest thereon under Section 75 of the Act. He has also imposed penalties on them under various provisions of the said Act. The present application seeks waiver of predeposit and stay of recovery in respect of the amounts of tax and penalties. The demand is for the period 16.07.2001 to 31.03.2004 and the same is in respect of "Port Services" as defined under Section 65(82) of the above Act. Port service, so defined, means "any services rendered by a port or other port or any person authorised by such port or other port, in any manner, in relation to vessel or goods". The appellants were licensed by the Madras Port Trust to undertake stevedoring activities within the port area during the above period. These activities were required to be performed only by a person authorised by the Port Trust within the port area. Admittedly, the appellants were so authorised under the above licence. The demand of Service tax is on the gross amount received by the appellants from their clients for the said activities which arc ancillary to the unloading of cargo from ship to on the dock. Such unloading of cargo from ship was done by the Port Trust with the help of workers provided by the Dock Labour Board (DLB, for short) and on the gross amount covering such activity, the DLB was paying Service Tax. The demand in the present case is in respect of activities performed by the appellants subsequent to the unloading of cargo from ship. These activities include heaping, high staking the cargo, intercarting the cargo unloaded off the vessel from one site of the wharf to another site within the harbour etc. For providing of such services, the appellants collected various charges viz. intercarting charges, intercarting -tipper hire charges, labour charges, pay loader charges, pay loader hire charges, pay loader/supervision charges, proclaim charges etc. from their clients. The present demand of tax is on the gross value of all these charges.

(2.) THE appellants are contesting the above payment mainly on the ground that, for the activities undertaken by them, Service tax was already paid by the DLB during the period 2001 -02 and, therefore, the demand for the said period is a duplication. For the remaining period upto 31.03.2004, the appellants had been duly paying Service Tax on the gross amount received by them from their clients during the said period. In support of this case of the appellants, learned Counsel has referred to the relevant provisions of Section 65 of the Finance Act, 1994 as also of the Major Port Trust Act, 1963. Reliance has also been placed on the Board's Circular dated 09.07.2001, wherein it was clarified that the Dock Labour Board of the port provided services of labour for handling of goods and further that only those 5 charges which were specified in para 2.1 of the circular constituted taxable value of port services. Learned Counsel has also relied on the circular dated 26.06.2002 of the Board, issued in relation to Paradip Port. In that circular, the Management Committee constituted by the Port Trust as per the orders of the Hon'ble Supreme Court, under the "Paradip Port, Clearing Forwarding and Handling Workers (Regulation of Employment) Scheme, 1994" was held to be the person authorised by the port for rendering Port Services and it was clarified that the said committee was liable to pay Service Tax under the Head 'Port Services'. Learned Counsel has also relied on Stay Order of the West Zonal Bench of the Tribunal reported in 2006 (1) STR 19 (Tri. -Mum.), wherein the activities of repairing, chipping, cleaning and painting of the vessels at Mazagaon Docks were held not to be an extension of services specified under Section 42 of the Major Port Trust Act and accordingly the party was held to have prima facie case against the demand of Service Tax on such services.

(3.) AFTER careful consideration of the submissions, we do not think that the appellants have established prima facie case against the demand of Service Tax. It, however, appears that for the period after 2001 -02, the appellants claim to have paid Service tax correctly and the Commissioner is demanding a differential amount of tax, amounting to nearly Rs. 10 lakhs. For the previous period (2001 -02), they are hotly contesting tax liability. Prima facie, a contradiction inheres in the stand taken by the assessee in respect of the period 2001 -02 vis -a -vis the subsequent period. The activities undertaken by them were admittedly undertaken under the stevedore licence issued by the Port Trust. We have seen this licence on record. It is an admitted fact that only persons licensed by the Port Trust can undertake any operation whatsoever within the port area. Again, it is not in dispute that the unloading of cargo from vessel to on dock was an activity undertaken by the Port Trust themselves by making use of labour employed by the DLB and that, in respect of such activity, the Board paid Service Tax. The primary question is whether the stevedoring activities undertaken by the appellants were comprised within the activities for which DLB paid Service Tax? The answer is a big 'no'. It is on record that the stevedoring activities were activities performed subsequent to unloading of cargo from, vessel, on to dock. Clearly these are activities ancillary to the main activity undertaken by the Port Trust and, therefore, prima facie, the licence issued by the Port Trust to the appellants should he held to be one authorising "port services" taxable under Section 65 of the Finance Act, 1994. This liability cannot be contested on the strength of anything contained in Section 42 of the Major Port Trust Act. That provision lays down the various functions of the Port Trust. The Port Trust is authorised by the Act to undertake such functions by themselves or through duly authorised persons. Such persons are liable, under the Act to discharge not only specified functions but also those ancillary functions which are required to complete the main functions. Apparently, the view taken by learned Commissioner with, regard to the nature of the activities undertaken by the appellants is acceptable.