IMPORTANT POINTS
GMB allowing UCL to use waterfront by erecting wharves and maintaining them and doing its own loading and unloading for which lease rent is being charged. No service is rendered by GMB to UCL and hence no service tax is leviable.

Judgment

R.F. Nariman, J.

1. The issue raised in the present civil appeals is with regard to service tax payable on wharfage charges. The respondent -M/s Gujarat Maritime Board (hereinafter referred to as “GMB”) is a statutory body constituted under the Gujarat Maritime Board Act, 1981 (hereinafter referred to as “GMB Act”). This authority administers and operates minor ports in the State of Gujarat. GMB entered into an agreement dated 28.2.2000 with Larsen & Toubro which ultimately became M/s Ultratech Cement Limited (hereinafter referred to as “UCL”) whereby a licence was granted to 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. As the true construction of this agreement is the bone of contention between the parties, we will refer to it in a little detail hereafter.

2. It is alleged that service tax was payable on wharfage charges by GMB collected by them from their licensee UCL under the taxable category of “port services”. The revenue authorities initiated investigation against GMB for under-valuation and short payment of service tax. Ultimately, a show cause notice dated 6.3.2009 was issued to collect 80% of service tax payable on wharfage charges which was not paid by the assessee. This was for the period 1.10.2003 to 31.3.2006, the differential amount being a sum of Rs.1,67,45,620/-. A further amount of Rs.12,53,076/-was also demanded for the period 2003 October upto 2007-2008 on account of the 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. By the order in original dated 16.7.2009, the Commissioner, Central Excise held that it is clear that the nature of service provided, which is wharfage, is squarely covered under the head “port services” as defined in the Finance Act, 1994. The amount of rebate/concession granted in wharfage charges amounting to 80% allowed to the licensee should, therefore, be included for purposes of calculation of service tax. Equally, the amount that was demanded on account of lease rent for waterfront usage was also confirmed, together with interest and penalty, which was imposed on the assessee.

3. In appeal from this order, CESTAT by its judgment dated 1.8.2013 reversed the Commissioner’s order holding that no service at all was rendered by the Gujarat Maritime Board in relation to any vessel and, therefore, no amount was payable by way of service tax. Equally, on an analysis of the agreement between GMB and UCL, it was held that 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 would equally render the payment bad in law.

4. Shri Yashank Adhyaru, learned senior advocate appearing on behalf of the revenue has taken us through the Gujarat Maritime Board Act and the Finance Act, 1994. It is his contention that on a conjoint reading of the two Acts and in particular Section 37 of the Gujarat Maritime Board Act and Section 65(82) of the Finance Act, 1994, it is clear on a correct reading of the agreement between GMB and UCL that 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 argument, on a correct reading of the agreement, it was also argued that 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. It was further argued by learned counsel that the reason why only 20% of the wharfage charges was collected and not the