B.S.V. Murthy, Technical Member - As per Agreement dated 19-3-1999 entered with the Government of Andhra Pradesh (hereinafter referred to as 'GOAP'), the "all weather deep water port" at Kakinada was leased out to the appellant. According to the relevant points in the Agreement, the appellant was to collect all the 'port dues' for the services rendered to port users and for undertaking this work, the schedule giving details of minimum guaranteed amount of income drawn by the appellant and share of the GOAP as percentage of income comes as part of the Agreement. While all the port dues collected by the appellant minus an amount payable by the GOAP was considered as a separate fund, the expenditure which are to be incurred by the appellant on various aspects of the port such as dredging of harbour, periodic hydrographic survey, etc., are required to be met out of the port funds so collected by a mutual understanding between the appellant and the GOAP. In a particular year, if the actual expenditure happened to be more than the amount so collected, such expenditure is to be born by the appellant. If any surplus, it is to be carried forward and used in the subsequent year. The Agreement also provides that the appellant is allowed an additional 15% which according to the department should suffer Service Tax once again. According to the impugned order, prior to 1-7-2010, this amount received by the appellant is to be treated as the realisation under the provisions of "Business Auxiliary Service". After 1-7-2010, the date from which the service rendered in ports other than major ports also came into Service Tax net, the department has proposed to collect the Service Tax under the head "other port service". Consequently, Service Tax to the extent of Rs. 84,40,687/- with interest has been confirmed. Penalty equal to the amount has also been imposed.

2. The learned counsel for the appellant after explaining the details of the Agreement and the nature of work carried out by the appellant, submits that it cannot be said that the appellant was rendering any service to the GOAP at all. He submits that whatever the services rendered by the appellant are maintenance of port and these services have already suffered Service Tax, when port dues are collected by the appellant from the port users. Therefore, he submits that same service cannot be taxed twice. He also submits that the appellant was that same service cannot be taxed twice. He also submits that the appellant was allowed to collect overheads and tax which they incurred when they were entrusted with the work of maintenance dredging, hydrographic surveys, etc. to other contractors and, therefore, this cannot be claimed as Service Tax.

3. The learned Additional Commissioner (AR) submits that this amount has been paid by the GOAF to the appellant for their function as a commission agent of the GOAP. He submits that the appellant was acting as an agent of the GOAP in rendering port maintenance in the form of maintenance, dredging, hydrographic surveys, etc. He also submits that it is evident from the Agreement that port dues were collected by the appellant in the name of the Government of Andhra Pradesh and the remuneration received @ 15% of the actual expenditure incurred are shown as income in their Balance Sheet. Further, this remuneration was in addition to the actual expenditure incurred which would go to show that the appellant was taking benefit as commission agent.

4. We have considered the submissions made by both sides in detail. We find that the issue is very complicated and it took quite some time to understand the nature of issue and the details of the Agreement and mechanism followed by the parties in the Agreement. It is not in dispute by any of the parties that an additional amount of 15% passed on by the GOAF to the appellant has suffered any Service Tax. The claim of the department is that prior to 1-7-2010, this has to be treated as one of the "Business Auxiliary Servi