Supreme Court - Daily OrdersCommr. Of Central Excise, Bhavnagar vs M/S Gujarat Maritime Board,Jafrabad on 22 July, 2015Author:R.F. NarimanBench:R.F. NarimanREPORTABLE
                               IN THE SUPREME COURT OF INDIA

                                CIVIL APPELLATE JURISDICTION

                              CIVIL APPEAL NOS.3347-3348 OF 2014


                         COMMISSIONER OF CENTRAL
                         EXCISE, BHAVNAGAR                       …APPELLANT

                                              VERSUS

                         M/S GUJARAT MARITIME BOARD,
                         JAFRABAD                              ...RESPONDENT



                                            JUDGMENTR.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 theGujarat Maritime Board Act, 1981(hereinafter

                         referred to as “GMB Act”). This authority administers andSignature Not VerifiedDigitally signed bySuman WadhwaDate: 2015.07.22operates minor ports in the State of Gujarat.       GMB17:03:10 ISTReason:entered into an agreement dated 28.2.2000 with Larsen &1Toubro 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 upto22007-2008 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 theFinance 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, on3an 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 particularSection 37of the Gujarat

Maritime Board Act andSection 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 the4service of wharfage and since what was collected was

actual wharfage charges in accordance with the schedule

of rates prescribed under theGujarat 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 entire

amount was a pure internal arrangement between GMB

and UCL with which revenue is not concerned. He further

assailed the findings of the Tribunal stating that the

finding that the ownership of the jetty vests in UCL is

contrary to the agreement between the parties and that

20% of wharfage levied and collected cannot be said to

be rental or licence fee but is wharfage charges collected

under the GMB Act for the service of allowing goods to be

landed at the said jetty. According to learned counsel, the

Gujarat Maritime Board was the owner and in control of

the said jetty throughout the term of the agreement and all

findings to the contrary by the Tribunal were incorrect.55.    Shri   P.P.   Tripathi,   learned    senior   advocate

appearing for the respondent countered all the aforesaid

submissions and supported the Tribunal judgment.According to learned counsel, the very basis for service

tax was absent in the present case as there is no service

rendered of any kind by his client the respondent on the

facts of the present case to UCL nor has UCL been

authorized by GMB to render any service mentioned inSection 37of the Act and that, therefore, the authority to

levy service tax was absent. He also argued that the 20%

of wharfage charges that was paid under the agreement

was really only a measure to calculate what is in fact

payable as licence fee and that, therefore, the agreement

read as a whole would lead to the conclusion that no

service was in fact rendered by the respondent and,

therefore, no service tax could be collected.6.    It is important first to advert to theFinance Act, 1994under which the charge is laid for service tax.Section

65(82)defines “port service” as under:-6“Port service” means any service rendered by
     a port or other port or any person authorized
     by such port or other port, in any manner in
     relation to a vessel or goods;”7.   Such service tax is leviable underSection 65(105)

(zn)which reads as follows:-“Taxable service” means any service provided or to
be provided-“(zn) to any person, by a port or any person
     authorized by the port, in relation to port
     services, in any manner;”


Further, underSection 67of the said Act, the value of any

taxable service shall be the gross amount charged by the

service provider for such service provided or to be

provided by him.8.   The relevant provisions of theGujarat Maritime

Board Actare as follows:-“35. Power to permit erection of private
     wharves, etc. within a port subject to
     conditions:(1) No person shall make, erect or fix within
     the limits of a port or port approaches any
     wharf, dock, quay, stage, jetty, pier, place of7anchorage, erection or mooring or undertake
any reclamation of foreshore within the said
limits except with the previous permission in
writing of the Board and subject to such
conditions, if any, as the Board may specify.(2) If any person makes, erects or fixes and
wharf, dock, quay, stage jetty, pier place of
anchorage, erection or mooring or undertakes
reclamation of foreshore in contravention of
sub-section (1) the Board may, by notice
require such person to remove it within such
time as may be specified in the notice and if
the person fails so to remove it the Board may
cause it to be removed at the expense of that
person.37. Scales of rates for services performed
by Board or other person:-(1) The Board shall from time to time frame
a scale of rates at which and a statement of
the conditions under which any of the services
specified hereunder (except the State
charges) shall be performed by itself or any
person authorized underSection 32at or in
relation to the port or port approaches-(a) transshipping of passengers or goods
between vessels in the port or port
approaches;(b) stevedoring, landing and shipping of
passengers or goods from or to such vessels,
to or from any wharf, quay jetty, pier, dock,
berth mooring stage, or erection, land or
building in the possession or occupation of the8Board or at any place within the limits of the
port or port approaches;(c) cranage or porterage of goods on any
such place;(d) wharfage, storage or demurrage of
goods on any such place;(e) any other service in respect of vessels,
passengers or goods excepting the services in
respect of vessels for which fees are
chargeable under theIndian Port Act, 1908(15 of 1908).(2) Different scales of rates and conditions
may be framed for different classes of goods
and vessels and for different ports.32. Performance of services by Board or
other person:-1)   The Board shall have            power   to
undertake the following services:-(a) stevedoring, landing, shipping or
transshipping passengers and goods between
vessels in port and the wharves, piers, quays,
or docks belonging to or in the possession of
the Board;(b) receiving,        removing,      shifting,
transporting, storing or delivering goods
brought within the Board’s premises;(c) carrying passengers within the limits of
the port approaches, by such means and
subject to such restrictions and conditions as9the State Government may think fit to impose;and(d)    piloting, hauling, mooring, re-mooring,
hooking or measuring of vessels or any other
service in respect of vessels.(2) The Board may, if so requested by the
owner, take charge of the goods for the
purpose of performing the service or services
and shall give a receipt in such form as the
Board may specify.(3) Notwithstanding anything contained in
this section, the Board may authorize any
person to perform any of the services
mentioned in sub-section (1) on such terms
and conditions as may be agreed upon.(4) No person authorized under sub-section
(3) shall charge or recover for such service
any sum in excess of the amount leviable
according to the scale framed underSection
37,38or 40.(5) Any such person shall, if so required by
the owner perform in respect of the goods any
of the services and for that purpose take
charge of the goods and give a receipt in such
form as the Board may specify.(6) The responsibility of any such person for
the loss, destruction or deterioration of goods
of which he has taken charge shall, subject to
the other provisions of this Act, be that of a
bailee underSection 151,152and161of the
Indian Contract Act, 1872 (IX of 1872).10(7) After any goods have been taken
     charge of and a receipt given for them under
     this section, no liability for any loss or damage
     which may occur to them shall attach to any
     person to whom a receipt has been given or to
     the matter or owner of the vessel from which
     the goods have been landed or transshipped.9.   Since a large part of the arguments on both sides

revolved   around    the   agreement    dated   28.2.2000,

between GMB and UCL, it would be important to advert to

the various provisions of the agreement. The agreement

begins as follows:“THE ARTICLES OF AGREEMENT made at
     Gandhinagar on this day 28 th February, two
     thousand between the GUJARAT MARITIME
     BOARD, a Board constituted under theGujarat Maritime Board Act, 1981–(Gujarat
     ActNo.XXX of 1981) having its office at Opp.
     Air force station, ‘Chh’ Road, Sector No.10-A,
     Gandhinagar, hereinafter referred to as the
     “BOARD” (which expression shall unless it be
     repugnant to the context or meaning thereof
     mean and include its successors and assigns)
     of the one part and Larsen & Toubro Limited
     having its Registered Office at L&T House,
     Ballard Estate, Mumbai – 21, hereinafter
     referred to as the “LICENSEE’ (which
     expression shall unless it be repugnant to the11context or meaning thereof mean and include
its successors and assigns) of the other part;WHEREAS the Licensee approached the
Board for permission for construction and use
of a Captive Jetty at Port Pipavav in the State
of Gujarat on a license basis for the purpose
of handling, storage and transportation of
raw-materials for manufacturing and finished
products that are manufactured by the
Licensee and for the purpose of the Board as
well;AND WHEREAS the Board and the Licensee
have already entered into License agreement
which is modified and this license Agreement
in modification of previous Agreement is
entered into by and between the Board and
the Licensee as appearing hereinafter;AND WHEREAS in consideration of the
Licensee constructing a Captive jetty as
aforesaid at its cost initially to be adjusted
against the Rebate, that may be granted by
the Board, the Board as empowered underSection 35of the Gujarat Maritime Board Act,
1981 granted to the Licensee a license or
permission for construction/use of the captive
Jetty on the said port at the place aligned,
demarcated, provided and approved by the
Board upon the terms and conditions specified
herein on Build, transfer, Operate and
Maintain basis;NOW IT IS AGREED BY AND BETWEEN
THE PARTIES HERETO AS FOLLOWS:12(c) ‘PORT CHARGES’ would mean port
charges specified in schedule of port charges,
notified by government/Board under theIndian
Ports Act, 1908/Gujarat Maritime Board Act,
1981and allied legislations/regulations from
time to time.(e) ‘CAPTIVE JETTY’ would mean a Jetty
constructed for landing and shipping by a port
based industry, located in Gujarat for landing
and shipping of their Captive Industry Raw
Materials for manufacturing or their finished
products that are manufactured by the
Licensee, from the constructed Jetty for that
specific industry.2. The Board has granted permission to the
licensee for continuing with construction and
use of the Captive Jetty at the site
demarcated on the plan, a layout of which has
been annexed to this agreement.3. The Licensee shall pay and continue to pay
for the license granted under this Agreement a
license fee of Rs.10,000/- (Rupees Ten
Thousand only) per annum to the Board
regularly on or before the 30th day of April
every year during the currency of this
agreement.12. The ownership of the structure so
constructed vests in the Board and the
Licensee shall have no right, title, interest or
other proprietary right in respect of such
structure or in respect of the land on which the
structure is constructed, it being specifically
understood that water-front is the sovereign
right of the Government.1313. The Licensee may however obtain a loan
at its own risk and cost, on the basis of rights
granted to him under this agreement and is
entitled to create a charge or lien on its rights
or property only on the basis of investment
made by it for construction i.e. to say taking
into consideration the extent of investment
made by it in the construction;PROVIDED that and it is agreed that the cost
can be divided for the purpose of obtaining
finance for the Jetty construction, it being,
however, clearly understood that the
water-front is a sovereign right of Government
and the right of the Licensee is limited only for
the purpose of mortgage or hypothecation to
the extent of investment made by it and its
right to concur in the event of transfer or take
over of the entire project to which the Jetty is
attached, subject, however, to the prior
approval of the Board for transfer of license.
The Licensee shall not be allowed to transfer
the jetty separately as the same is directly
connected to the project to which the Captive
Jetty is allowed to be constructed.PROVIDED further that whatever rebate and
concession is granted by the Board against
the cost of construction, the equivalent
amount at the relevant time shall be utilized by
the Licensee in repayment of loan so that at
the end of the period of this agreement when
the Licensee may not have right of rebate
under this agreement, then the construction is
free of any liability in respect of such loan.
PROVIDED further that the Bank or financial
institution granting loan to the licensee shall
not have any right against the Board.14PROVIDED further that in the event of a
declaration of War in the Country or any
Emergency or on account of national security
or any other circumstances, the Board is
entitled to exercise all rights in such kinds of
situation and emergency. The Bank or
financial institutions shall not be entitled in
such event to exercise any right under loan
documents even in respect of such
construction. The Licensee shall obtain "No
Objection Certificate" of the Board for the loan
and for the terms and conditions on which the
loan is sanctioned, and shall be bound to see
that the relevant Clauses in pursuance of this
Agreement       are incorporated       in loan
documents.15. The Board may, in order to decide the
safety of the structure or for any other
purpose, carry out inspection every six
months from the date of issue of the
Completion Certificate. The Licensee shall
carry out maintenance and repairs to the
structure at its own cost, whenever so directed
by the Board upon inspection. No alteration or
extension of the Jetty shall be done without
prior permission of the Board in writing
PROVIDED that this clause shall not preclude
the Board from carrying out inspection at any
time, instead of every six months.16. The Licensee shall at its own cost repair
and maintain the jetty in good order and
condition to the satisfaction of the Board
during the tenure of this agreement and on the
failure of the Licensee to do so, the Board
shall be entitled, but not bound, to do so at the
cost of licensee. This condition however,
does not entitle the Licensee to refrain from
carrying out repair or maintain the Jetty in
good order and condition and it is further15agreed that non-performance by Licensee
shall be considered as a breach of condition
of this agreement.17. In consideration of the Board permitting
the Licensee to construct the Captive Jetty at
its own cost initially, the Board hereby agree
that the Jetty to be so constructed by the
Licensee shall mainly and initially as per the
terms of this agreement, allowed to be used
for the vessels belonging to the Licensee or
chartered by the Licensee, on preferential
basis, without any ousting priority and subject
to Steamer Working (Priority) Rules as may
be amended from time to time and subject to
all other rules and regulations and the
legislations prevailing at the relevant time and
subject also to the further conditions of this
agreement.18. It is agreed that subject to the priority right
of the Licensee for user of Jetty under the
preceding clause, it is further agreed that the
Jetty shall when the same is not in use by the
Licensee, be open to use by the Board for
itself or for the traffic being regulated by the
Board for the purpose of embarking or
disembarking their ships, boats, tugs, etc. and
for loading and discharging cargo.             The
Licensee or its Agents shall not by any act of
commission or omission, restrict the use of the
Jetty and back up area by the Board except
when it is actually used by the Licensee for
the purpose provided for in this agreement.PROVIDED that this clause shall not be
construed to mean that Licensee has any
ownership or transferable right in the property
and the Licensee is not entitled to levy any
charges or compensation from the Board.1621. It is agreed that subject to what has been
stated herein, the Licensee shall be liable to
pay all the port charges and all other dues
payable by the Licensee to the Board, and the
Licensee shall not be eligible to get any other
rebate or concession except that which is
mentioned in Clause 22 and 24.22. It is agreed that in consideration of the
Licensee constructing the Jetty at its own cost
initially, the Board has agreed to grant rebate,
to be adjusted against the cost of
construction, as under:A. The Licensee shall have to pay
landing/shipping fees (popularly known as
wharfage charges) @ 20% of the actual
landing and shipping fees specified in the
Schedule of Port Charges prescribed for
Captive Jetty. The landing and shipping fees
shall be calculated for this purpose as per the
schedule of landing and shipping fees, as may
be revised or amended from time to time. This
concession shall be called 'REBATE' and it
will be set off as aforesaid against the Capital
Investment (cost of construction as mentioned
in Clause 24) made by the Captive Jetty
holder, and the same shall be calculated in a
prescribed format. Once the Capital
Investment is recovered through the Rebate,
the Captive Jetty holder shall have to pay
thereafter, landing and shipping fees at the
normal rate as per the Schedule of Port
Charges in force from time to time prescribed
for captive jetty.B. The Licensee shall also be entitled, as in
the normal case to a concession in payment
of   landing/shipping   fees   for    coastal
transportation of the cargo from one port
under the Board to another port under the17Board @ 25% and from one port under the
Board to another Indian Port or vice-versa @
15% or at the rate as may be applicable from
time to time.C. No Rebate will be given in respect of any
other charges to be levied underIndian Ports
Actand underGujarat Maritime Board Act.
The parties shall have to pay all the port
charges at the rates specified in Schedule of
Port Charges in force from time to time.25. In case the direct berthing facilities
provided for captive cargo (ship size calling at
jetty of 10,000 DWT and above) an amount of
Rs.25.00 Lakhs (Rupees Twenty Five Lakhs
only) per annum will be charged as lease rent
for waterfront and way leave facility
compensation.28. The Licensee shall provide all the
services at or around the Jetty including
dredging, navigation, water supply, fire fighting
equipments, electricity, telephone, Very High
Frequency (VHF) sets of HF sets and such
other services and facilities which may be
required at or around the Jetty and also such
other services and facilities which the Board
may require the Licensee to keep available at
or around the Jetty. If the Licensee does not
provide all or any of the aforesaid facilities, the
Board may at its own discretion provide such
facilities at the cost and risk of the Licensee
and shall recover such costs from the
Licensee. The decision of the Board regarding
the amount of cost incurred for such services
shall be treated as final.34. If the Licensee commits breach of any of
the terms and conditions of this agreement or
of any Rules, Regulations or Notifications as18may be in force from time to time, the Board
shall be entitled to give notice the Licensee to
remove such breach within a period of 15
days from the date of notice and Port
Authorities can temporarily suspend operation
of captive port facility. If the said notice is not
complied with, the Board shall give another
Notice to terminate this agreement if the said
breach is not complied with within a period of
further 15 days and that on the expiry of such
period of 15 days, the agreement shall
automatically be deemed to have been
terminated without further notice. Upon such
termination of the agreement, the Board shall
be entitled to take control or otherwise
dispose off all or any part of the Jetty that may
have been constructed, as well as the site
thereof in such manner and may give the
same to such person or party as may be
decided by the Board and the Licensee shall
not be entitled to any compensation, nor shall
the Licensee have then a right in respect of
the superstructure or the land/sea on which
the Jetty was constructed, provided that even
if the cost of construction of the Jetty is not
adjusted against the aggregate of the amount
of rebate availed off by the Licensee, the
Licensee shall not be entitled to any refund.
In case of any dispute or difference by and
between the Licensee and the Board, the
same shall be referred to the Arbitration of
Secretary of the Government in Ports and
Fisheries Department and it shall be held in
accordance with the provisions of theIndian
Arbitration and Reconciliation Act, 1996or any
statutory modification or re-enactment thereof
for the time being in force.36. The agreement shall remain in force for
a period of twenty five years or till such time19as the aggregate of ‘REBATE’ availed off by
      the party equals the amount of the
      construction of the Jetty whichever is earlier
      from the date of commissioning of Jetty.
      PROVIDED further that even after aggregate
      of rebate availed of by the Licensee equals
      the amount of construction of Jetty, the
      Licensee will be allowed to use the Jetty for
      captive purpose subject to full payment of full
      wharfage charges so long as the project of the
      Licensee for which the permission is granted
      exists or continues to exist, i.e., continues to
      function.It is agreed and understood by the Licensee
      that out of the terms ‘Jetty’ the terms
      applicable for the purpose of this Agreement
      may be retained in this Agreement and other
      words/terms not applicable may be deleted.”10.   A reading of the agreement as a whole would lead

to the following conclusions:A.    The agreement is a licence agreement

      entered into underSection 35of the Gujarat

      Maritime Board Act under which a licence or

      permission for construction and use of a captive

      jetty in Pipavav Port is entered into on a Build,

      Transfer, Operate and Maintain basis on certain

      conditions.20B.    A licence fee of Rs.10,000/- per annum is

payable by the licensee to the Board for the

currency of the agreement unless terminated earlier.
C.    The ownership of what is constructed vests in

the Board together with the landing on which it is

constructed and the waterfront.D.    The jetty is constructed for the project to

which it is attached, namely, the cement factory of

UCL. The licence granted to UCL is, therefore, a

non-transferable one.E.    The Board is entitled to carry out inspection

every six months so that it can direct the licensee to

maintain and repair the structure at its own cost,

maintenance of the said jetty in good order and

condition being that of the licensee alone, a breach

of which is considered as a breach of the

agreement.F.   The jetty is to be used mainly for the goods of

the licensee and when not in use by the licensee

can be used by the Board itself.G.   That in consideration of          the   licensee

constructing the jetty at its own cost, the Board has

agreed to grant rebate to be adjusted against the21cost of construction of the jetty by paying 20% of

wharfage charges specified in the schedule of

charges      prescribed   for   captive   jetties.   This

concession is to be called a rebate and to be set off

against the cost of construction of the said jetty.Once the entire cost of construction is recovered

through the rebate, the licensee will have to pay

thereafter    wharfage charges at the full rate

prescribed in the schedule of port charges for

captive jetties.H.    For direct berthing facilities provided for

captive cargo in ships which call at the jetty of

10,000       DWT   and    above,     an    amount      of

Rs.25,00,000/- will be charged as lease rent for

waterfront use.I.   It is the licensee UCL that will provide all

services at or around the jetty including dredging,

navigation, etc. and if this is not done then the

Board may on its own provide such facilities at the

risk and cost of the licensee UCL.J.    The licence is terminable on breach of the

terms and conditions of the agreement or of any22infraction of law. Upon such termination, the Board

      shall be entitled to take control or otherwise dispose

      of all or any part of the jetty that may have been

      constructed.K.    The period of the agreement is to be 25 years

      from the date of commissioning of the jetty or such

      time as the rebate availed of by the party equals the

      construction cost of the jetty whichever date is

      earlier. However, even after the rebate and the

      construction cost square off, the licensee will be

      allowed to use the jetty for captive purposes subject

      to full payment of wharfage charges so long as the

      project of the licensee – i.e. the cement plant of the

      licensee continues to function.11.   The question which arises on a reading of the said

agreement is, therefore, whether any service is rendered

by GMB or by any person authorized by GMB in relation

to a vessel or goods. The agreement makes it clear that

it is the duty of the licensee, i.e., UCL to maintain the jetty

in good order and condition during the tenure of the23agreement. (See: clauses 15 and 16 set out above).Further, it is UCL that is to provide all services at or

around the jetty including dredging, navigation, water

supply etc. (See: clause 28 of the agreement).         This

makes it clear that during the currency of the agreement it

is not the Board but the Licensee who keeps the said jetty

in such condition that it is capable of enabling vessels to

berth alongside it to load and unload goods.           This

being the position, we agree with Shri Tripathi, learned

senior counsel on behalf of GMB that no service is

rendered by GMB to UCL under the agreement. The

agreement makes it clear that it is an agreement entered

into under Section 35 of the GMB Act allowing the

licensee - UCL to construct a jetty and thereafter maintain

it at its own cost.    We may add that the rebate in

wharfage charges of 80% is a condition imposed

statutorily underSection 35of the said Act. To say that it

is in the nature of lease rent or licence fee, would not be

correct inasmuch as a separate licence fee is payable

under the agreement. (See: clause 3 of the agreement).24To that extent we agree with Shri Adhyaru, learned senior

advocate appearing on behalf of revenue that the

CESTAT does not seem to be correct in this behalf. But

this would make no difference to the result of this case

inasmuch as the very first condition that must be met

under the definition of “port service” is not met on the

facts of the present case.12.   Shri Adhyaru argued relying upon the definition of

“wharf” and “wharfage” in Black’s Law Dictionary, Seventh

Edition that all that is necessary is that a wharf be

provided by the Board. The very provision of such wharf

would entitle the Board to levy a fee which is nothing

other than wharfage charges collected under the

Schedule of rates mentioned hereinabove. To appreciate

this argument we set out the definition of ‘wharf’ and

‘wharfage’ from Black’s Law Dictionary as under:-Wharf. A structure on the shores of
      navigable waters, to which a vessel can be
      brought for loading or unloading.Private wharf. One that can be used
      only by its owner or lessee.25Public wharf. One that can be used by
      the public.Wharfage 1. The fee paid for landing,
      loading, or unloading goods on a wharf. 2.
      The accommodation for loading or unloading
      goods on a wharf.We are afraid that we are unable to agree with Shri

Adhyaru for the reason that though GMB is the owner of

the jetty under the said agreement, yet for providing the

service of allowing a vessel to berth at the said jetty, it is

necessary for GMB itself to keep the said jetty in good

order. Wharfage charges are collectible because they are

in the nature of fees for services rendered. The expenses

that are defrayed by the Board for the maintenance of the

jetty is sought to be collected as wharfage charges. This

amount would necessarily include all amounts that are

spent for keeping the said jetty in good condition including

dredging so that vessels can berth alongside the jetty. It

is clear that so far as jetties operated by the Board are

concerned, the Board itself defrays such expenses. It is

only in cases like the present where the jetty is primarily26meant for loading and unloading goods belonging to a

particular private party that repair and maintenance

expenses are to be borne by the private party and not by

the Board. It is in this circumstance that we find that there

is no service, therefore, rendered by GMB to UCL.13.   The other limb of Shri Adhyaru’s argument is that in

any case UCL is a person authorized by GMB within the

definition of “port service” and that, therefore, in any case

the Section would be attracted as there is no doubt that

wharfage charges are a payment for services rendered in

relation to a vessel or goods.14.   As can be seen fromSection 32sub-sections (3)

and (4), the Board may authorize any person to perform

any of the services mentioned in sub-section (1) of the

said Section which includes landing of goods at wharves.We asked Shri Adhyaru to show us where such authority

is given and his reply was only that it was given under the

self-same agreement referred to hereinabove.        We are

afraid that we are unable to agree with Shri Adhyaru. The

authority given to perform any of the services must first27and foremost be under terms and conditions as may be

agreed upon by the Board and the private person.Further, under sub-Section (4) ofSection 32, it is the

private person who is then authorized to charge or

recover any sum in respect of such service rendered.This is conspicuously absent in the aforesaid agreement.There is no doubt on a reading of the agreement that it is

the Board itself that charges or recovers wharfage

charges from the licensee - UCL and does not authorize

UCL to recover such charges from other persons. This

being the position, it is clear that no service is rendered

by a port or by any person authorized by such port and,

therefore, the very first condition for levy of service tax is

absent on the facts of the present case. So far as the

direct berthing facilities provided for captive cargo is

concerned, the lease rent charged for use of the

waterfront also does not include any service in relation to

a vessel or goods and cannot be described as “port

service”.   This being so, it is unnecessary to go into any

of the other contentions raised by both parties. To the28extent that the impugned judgment is in conformity with

our judgment, it is upheld. The appeals of the revenue

are, therefore, dismissed accordingly.……………………J.
                                 (A.K. Sikri)


                                 ……………………J.
                                 (R.F. Nariman)
New Delhi;July 22, 201529ITEM NO.1A                 COURT NO.12                SECTION III
(for Jt.)
                S U P R E M E C O U R T O F       I N D I A
                        RECORD OF PROCEEDINGSCivil Appeal   No(s).   3347-3348/2014

COMMR. OF CENTRAL EXCISE, BHAVNAGAR                   Appellant(s)

                                   VERSUS

M/S GUJARAT MARITIME BOARD,JAFRABAD                   Respondent(s)

Date : 22/07/2015 These appeals were called on for pronouncement
                   today.For Appellant(s)        Mr. Arijit Prasad,Adv.Mr. B. Krishna Prasad,Adv.For Respondent(s)       Ms. Gursharan Virk,Adv.Ms. Jesal Wahi,Adv.Ms. Hemantika Wahi,Adv.Hon'ble Mr. Justice Rohinton Fali Nariman pronounced the
judgment of this Court comprising of Hon'ble Mr. Justice A.K.Sikri
and His Lordship.The appeals of the Revenue are dismissed in terms of the
signed judgment.(SUMAN WADHWA)                       (SUMAN JAIN)
            AR-cum-PS                          COURT MASTERSigned Reportable judgment is placed on the file.