CESTAT Quashes Service Tax Demand On Amount Received For Vessels To Dredging Corporation

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has quashed the service tax demand on the amount received for the charter or hire of vessels by the Dredging Corporation of India (DCI).

The bench of Sulekha Beevi C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that the charter or hire of vessels would at best fall under Supply of Tangible Good Services and not under dredging services. The demand for service tax on the amount received by the assessee or appellant upon the charter-hire agreement under the category of dredging services cannot be sustained and requires it to be set aside.

The appellant or assessee is in the business of providing dredging services. During the course of the audit, it was noted by the Department that the appellant had not paid service tax on dredging services provided to Dredging Corporation of India (DCI) for Sethu Samudram Project and Dhamra Port Company Ltd., and also on certain services imported by them.

The appellant provided dredgers and equipment on charter hire or lease to the DCI for the Sethu Samudram Canal Project. The appellant’s responsibility is limited to providing the dredger or equipment on lease to DCI. The appellant has been remitting service tax on the charter hire charges under the category ‘Supply of Tangible Goods for Use’ under Section 65(105)(zzzzj) from May 16, 2008, when the taxable category of supply of tangible goods for use was introduced in the Finance Act, 1944.

The issue raised was in respect of the demand for service tax under the category of dredging services on the charter, hire, or lease of dredgers provided to DCI for the Sethu Samudram Canal Project.

The appellant contended that the appellant has been paying service tax on charter hire charges under the category of supply of tangible goods falling under Section 65(105)(zzzj) with effect from May 16, 2008. The activity of the charter of dredgers cannot fall under dredging services. The very same issue was considered by the Tribunal in the earlier period of litigation, and it was held to be not taxable under dredging services.

The appellant submitted that Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, read with Section 68(2) and Section 66A of the Act and Rule 3 of the Import Rules, provides that in cases where services are provided from outside India and such services are received in India, then the recipient of services would be liable to pay service tax provided the respective conditions are fulfilled.

The tribunal held that the demand for service tax under the category of dredging services for the amount received by the appellant for soil stabilization and land reclamation services cannot be sustained.

Counsel For Appellant: Raghavan Ramabadran

Counsel For Respondent: Anandalakshmi Ganeshram

Case Title: M/s. International Seaport Dredging Limited Versus Commissioner of GST and Central Excise

Case No.: Service Tax Appeal Nos. 40452 and 40453 of 2013

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