Customs, Excise and Services Tax Appellate Tribunal (CESTAT): A Division Bench of Anil Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member), allowed an appeal in order to find out that whether the appellant were liable to pay Service Tax under the Head “Franchise Services” on their activity of granting license to third party-crane operators for providing their crane (wheel mounted) in the Port area for providing services of loading and unloading, etc. with the help of the crane have collected license fee from the crane operators.
Appellant being a statutory body, a Port Trust, operating in the major Port at Mangalore are registered with the Service Tax Department. Section 42 of the Major Port Trust Act, 1963 provides that the Board “Port Trust” shall have the power to undertake services including – notwithstanding anything contained in this section, Board may, with the sanction of the Central Government authorities engage any person to perform any of the services mentioned in sub-section 1, on such terms and conditions as may be agreed upon. It appeared to Revenue that this activity of the appellant- granting of license to operate the crane in the Port area to the licensee, such license fee is chargeable to Service Tax under the Head “Franchise Services”. Accordingly, SCN was issued invoking the extended period of limitation; penalties were imposed under Sections 78, 76 & 77 read with Rule 7(c). Thus, the instant petition was filed.
The Counsel for the appellant, Bhanu Murthy put forth the cases of Vishakhapatnam Port Trust v. CCE, 2019 (27) GSTL 244 (Tri. Hyd) where it was held that license fee and Royalty received by Port Trust towards licensing others to perform certain functions within port area is not liable to Service Tax under the Head “Franchise Services” and Cochin Port Trust v. CCE, 2011 SCC OnLine CESTAT 4248.
The Tribunal while allowing the appeal relied on the judgment of Cochin Port Trust and held that the matter was no longer res integra and the same had been decided in favour of the assessee in the mentioned case by Kerala High Court quoting that:
“The amounts paid by IGTPL to CPT is only in respect of the right conferred on the IGTPL to carry out the port services; for provision of which the users of the port would pay a fee. In such circumstances, definitely the Revenue earned by IGTPL will be taxed under the Finance Act, 1994 specifically under sub-clause (lxxxii) of Section 65. It is a percentage of that, which the IGTPL pays to CPT, in lieu of surrendering their rights to carry out and provide port services in the subject terminals. There is no port service by the CPT to IGTPL. We hence find the order of the Tribunal to be perfectly in order.”
[New Mangalore Port Trust v. C.C.E. & S.T., 2020 SCC OnLine CESTAT 166, decided on 31-08-2020]
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