COMMISSIONER OF CENTRAL EXCISE, BHAVNAGARversusM/S GUJARAT MARITIME BOARD, JAFRABAD

                     [2015]8S.C.R.187


 COMMISSIONER OF CENTRAL EXCISE, BHAVNAGAR                          A
                               v.
      MIS GUJARAT MARITIME BOARD, JAFRABAD
           (Civil Appeal Nos. 3347-3348 of2014)
                                                                    B
                        JULY22, 2015
           [A. K. SIKRI AND R. F. NARIMAN, JJ.]
         Gujarat Maritime Board Act, 1981- s. 37- Finance
Act, 1994 - s. 65(82) - Service tax payable on wharfage             c
charges - Agreement between State Maritime Board and
Company UCL, whereby licence granted to UCL to construct
and use jetty for landing of goods and raw materials
manufactured by UCL -Allegation that service tax payable
on wharfage charges by Maritime Board collected by them             D
from their licensee-UCL under the taxable category of 'port
services' - Tribunal holding that no service was rendered by
Maritime Board in relation to any vessel and thus, no amount
payable as service tax - Interference with - Held: Not called
for - No service was rendered by Maritime Board to UCL              E
under the agreement-Agreement was entered allowing UCL
to construct a jetty and thereafter, maintain it at its own cost-
Board itself charges or recovers wharfage charges from UCL
and does not authorize UCL to recover such charges from
other persons - No service is rendered by a port or by any          F
person authorized by such port and, thus, the first condition
for levy of service tax is absent-As regards, direct berthing
facilities provided for captive cargo, lease rent charged for
use of waterfront also does not include any service in relation     G
to a vessel or go9ds and cannot be described as "port
service".

       Dismissing the appeals, the Court

       HELD: 1.1 The agreement makes it clear that it is H
                              187
188          SUPREME COURT REPORTS                   (2015) 8 S.C.R.


A an agreement entered into u/s. 35 of the Gujarat Maritime
  Board Act allowing the licensee-UCL to construct a jetty
  and thereafter, maintain it at its own cost. It is not the
  Gujarat Maritime Board but the Licensee-UCL who keeps
  the said jetty in such condition that it is capable of
B enabling vessels to berth alongsid~ itto load and unload
  goods. Thus, no service is rendered by Gujarat Maritime
  Board to UCL under the agreement. The rebate in
  wharfage charges of 80% is a condition imposed
  statutorily under Section 35 of the said Act. It is not
C correct to say that it is in the nature of lease rent or
  licence fee, inasmuch as a separate licence fee is
  payable under the agreement. [Para 11) [207-B-D]

         Black's Law Dictionary, Seventh Edn - referred to.
D
               1.2 The submission 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
E     the Schedule of rates, cannot be accepted. Though
      Gujarat Maritime Board 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 Gujarat Maritime Board itself to keep the said jetty in
F     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
G     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
H     defrays such expenses. It is only in cases like the instant
      where the jetty is primarily meant for loading and
   COMMNR. OF CENTRAL EXCISE, BHAVNAGAR v.                       189 .
      GUJARAT MARITIME BOARD, JAFRABAD

unloading goods belonging to a particular private party A
that repair and maintenance expenses are to be borne
by the private party and not by the Board. It is in this
circumstance, there is no service, therefore, rendered
by Gujarat Maritime Board to UCL. [Para 12] [207-F-G;
208-C-F]                                                 B

        1.3 Section 32 sub-se~tions (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. It cannot be said           C
that such authority !s given under the self-same
agreement. The authority given to perform any of the
services must first and foremost be under terms and
conditions as may be agreed upon by the Board and
the private person. Further, under s. 32(4), it is the private    D
person who is then authorized to charge or recover any
sum in respect of such service rendered. This was
conspicuously absent in the agreement. There is no
doubt on a reading of the agreement that it is the Board
itself that charges or recovers wharfage charges from             E
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,          F
the very first condition for levy of service tax is absent
on the facts of the instant case. So far as the direct
berthing facilities provided for captive cargo are
concerned, the lease rent charged for use of the
waterfront also does not include any service in relation          G
to a vessel or goods and cannot be described as "port
service". [Para 14] [209-A-F]
      CIVILAPPELLATEJURISDICTION: CivilAppeal Nos.
3347-3348 of 2014.
      From the Judgment and Order No. A/10931-10932/              H
190         SUPREME COURT REPORTS                     [2015] 8 S.C.R.


A     WZB/AHD/2013dated01.08.2013oftheCESTAT, West Zonal
      Bench, Ahmedabad, 0-20, New Mental Hospital Compound,
      Meghani Nagar, Ahmedabad-380016 in A No. ST/403/2011
      & ST/384/2009.

B            YashankAdhyaru, Rupesh Kumar, B. K. Prasad, forthe
      Appellant.

              Paras Tripathy, Gursharan Virk, Hemantika Wahi, Jesal
      for the Respondent.
c            The Judgment of the Court was delivered by

             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 B9ard
D (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
E & 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
F 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
G 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
H
  service tax payable on wharfage charges which was not paid
   COMMNR. OF CENTRAL EXCISE, BHAVNAGAR v. GUJARAT                    191
      MARITIME BOARD, JAFRABAD [R. F. NARIMAN, J.]


by the assessee. This was for the period 1.10.2003 to                  A
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            B
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"           C
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
                                                                       D
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 E
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 F
was really payable as licence fee/rental and, ther.efore, 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 G
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 H
Section 65(82) of the Finance Act, 1994, it is clear on a correct
192       SUPREME COURT REPORTS                   (2015) 8 S.C.R.


A   reading of the agreement between GMB artd 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
B · 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
C was further argued by learned counsel that the reason why only
    20% of the wharfage charges was coll~cted 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
0
    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 GMBAct forthe service
E 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.
F
          5. 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
G 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 in Section 37 of the Act and that, therefore, the
  authority to levy service tax was absent. He also argued that
H the 20% of wharfage charges that was paid under the
   COMMNR. OF CENTRAL EXCISE, BHAVNAGAR v. GUJARAT                193 ·
      MARITIME BOARD, JAFRABAD [R. F. NARIMAN, J.]


agreement was really only a measure to calculate what is in A
fact payable as licence fee and tnat, 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.
                                                                   B
       6. It is important first to advert to the Finance Act, 1994
under which the charge is laid for service tax. Section 65(82)
defines "port service" as under:-

   "Port service" means any service rendered by a port or          c
   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 under Section
65(105)(zn) which reads as follows:-
                                                                   D
       "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;"         E

Further, under Section 67 of 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
~~m.                                                               F
       8. The relevant provisions of the Gujarat Maritime Board
Act are as follows:-

   "35. Power to permit erection of private wharves, etc.
   within a port subject to conditions:                            G

  (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 of anchorage, erection or mooring or
  undertake any reclamation of foreshore within the said           H
194       SUPREME COURT REPORTS                    [2015) 8 S.C.R.


A     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,
B     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
C     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: -
D
      (1) The Board shall from time to tfme 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 under Section 32 at or in relation to
E
      the port or port approaches-

      (a) transshipping of passengers or goods between
      vessels in the port or port approaches;

F     (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 the Board or
      at any place within the limits of the port or port
G     approaches;

      (c) cranage or porterage of goods on any such place;

      (d) wharfage, storage or demurrage of goods on any
H     such place;
COMMNR. OF CENTRAL EXCISE, BHAVNAGAR v. GUJARAT               195
   MARITIME BOARD, JAFRABAD [R. F. NARIMAN, J.]


(e) any other service in respect of vessels, passengers        A
or goods excepting the services in respect of vessels for
which fees are chargeable under the Indian Port Act,
1908 (15of1908).

(2) Different scales of rates and conditions may be            B
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                c
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        D
possession of the Board; -

(b) receiving, removing, shifting, transporting, storing or
delivering goods brought within the Board's premises;
                                                               E
(c) carrying passengers within the limits of the port
approaches, by such means and subject to such
restrictions and conditions as the State Government may
think fitto impose; and
                                                               F
(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         G
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           H
196         SUPREME COURT REPORTS                   [2015] 8 S.C.R.


A       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
B       the amount leviable according to the scale framed under
        Section 37, 38 or 40.

        (5) Any such person shall, if so required by the owner
        perform in respect of the goods any of the services and
c       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
D
        Act, be that of a bailee under Section 151, 152 and 161
        of the Indian ContractAct, 1872 (IX of 1872).

        (7) After any goods have been taken charge of and a
        receipt given for them under this section, no liability for
E       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.

F             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:

G       "THE ARTICLES OF AGREEMENT made at
        Gandhinagar on this day 28'h February, two thousand
        between the GUJARAT MARITIME BOARD, a Board
        constituted under the Gujarat Maritime Board Act, 1981
        -(GujaratAct No.XXX of 1981) having its office at Opp.
H       Air force station, 'Chh' Road, Sector No.10-A,
 COMMNR. OF CENTRAL EXCISE, BHAVNAGAR v. GUJARAT                  197
    MARITIME BOARD, JAFRABAD [R. F. NARIMAN,.J.]


Gandhinagar, hereinafter referred to as the "BOARD"               .A
(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             B
to as the "LICENSEE' (which expression shall unless it
be repugnant to the context or meaning thereof mean
and include its successors and assigns) of the other part;

WHEREAS the Licensee approached the Board for                      C
permission for construction and use of a Captive Jetty at
Port Pipavav in the State of Gujarat on a license basis
forthe purpose of handling, storage and transportation
of raw-materials for manufacturing and finished products
that are manufactured by the Licensee and for the                 ·D
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 Agreement1n modification of              E
previous Agreement is entered into by and l?etween 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    F
to be adjusted against the Rebate, that may be granted
by the Board, the Board as empowered under Section
35 of 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             G
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 BETWE!=N THE PARTIES
                                                                   H
HERETO AS FOLLOWS:
198      SUPREME COURT REPORTS                     [2015) 8 S.C.R.


A     (c) 'PORT CHARGES' would mean port charges
      specified in schedule of port charges, notified by
      governmenUBoard under the Indian Ports Act, 1908/
      Gujarat Maritime Board Act, 1981 and allied legislations/
      regulations from time to time.
B
      (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
c     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
D     atthe 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
E
      the Board regularly on or before the 30th day of April
      every year during the currency ofthls agreement.

      12. The ownership of the structure so constructed vests
      in the Board and the Licensee shall have no right, title,
F     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.
G     13. 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
H
 COMMNR. OF CENTRAL EXCISE, BHAVNAGAR v. GUJARAT                 199
    MARITIME BOARD, JAFRABAD [R. F. NARIMAN, J.]


consideration the extent of investment made by it in the          A
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         B
 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         C
 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.                                   D

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           E
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           F
granting loan to the licensee shall not have any right
against the Board.

PROVIDED further that in the event of a declaration of
War in the Country or any Emergency or on account of             G
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          H
200       SUPREME COURT REPORTS                     [2015] 8 S.C.R.


A     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 th is Agreement
      are incorporated in loan documents.
B
      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
C     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
D     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
E     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. further agreed that
F     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
G     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
H     subject to Steamer Working (Priority) Rules as may be
COMMNR. OF CENTRAL EXCISE, BHAVNAGAR v. GUJARAT               201
   MARITIME BOARD, JAFRABAD [R. F. NARIMAN, J.]


amended from time to time and subject to all other rules       A
and regulations and the legislatioris 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     B
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,          C
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           D
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      E
charges or compensation from the Board.

21. 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          F
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         G
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
                                                               H
202      SUPREME COURT REPORTS                    (2015] 8 S.C.R.


A     (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
B     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
c     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.
D
      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 the Board @ 25% and
E     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
 F    charges to be levied under Indian Ports Act and under
      Gujarat 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 tima to time.

G     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.
H
  COMMNR. OF CENTRAL EXCISE, BHAVNAGAR v. GUJARAT                 203
     MARITIME BOARD, JAFRABAD [R. F. NARIMAN, J.]


  28. The Licensee shall provide all the services at or            A
  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       c
  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            D
 and conditions of this agreement or of any Rules,
 Regulations or Notifications as may 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             E
 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
                                                                   F
 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     G
 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            H
204         SUPREME COURT REPORTS                     [2015] 8 S.C.R.


A       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
B       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 the Indian Arbitration and
c       Reconciliation Act, 1996 or 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 time as the aggregate of
D       '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
E       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
F       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
G       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
H
 COMMNR. OF CENTRAi., EXCISE, BHAVNAGAR v. GUJARAT            205
    MARITIME BOARD, JAFRABAD [R. F. NARIMAN, J.]


under Section 35 of the Gujarat Maritime Board Act under A
which a licence or permission for construction and use of a
captive jetty in Pipavav Pciit is entered into on a Build,
Transfer, Operate and Maintain basis on certain conditions.

B. A licence fee of Rs.10, 0001- per annum is payable by       B
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 lapding on which it is constructed     c
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.
                                                               D
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 E
agreement.

F.   The jetty is to be use.d mainly for the goods of the
licensee and when not in use by the licensee can be used
by the Board itself.                                          F

·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 the cost of construction of the jetty
 by paying 20% of wharfage charges specified in the G
 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 H
206         SUPREME COURT REPORTS                   [2015] 8 S.C.R.


A      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
B      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
c      if this is not done then the Board may cin 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 any infraction of law. Upon
       such termination, the Board shall be entitled to take control
D
       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
E      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
F
       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
G 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 the agreement. (See: clauses
H 15 and 16 set out above). Further, it is UCL that is to provide
  all services at or around the jetty including dredging, navigation,
   COMMNROF CENTRAL EXCISE, BHAVNAGAR v. GUJARAT                    207
     MARITIME BOARD, JAFRABAD [R. F. NARIMAN, J.]


water supply etc. (See: clause 28 of the agreement). This            A
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        B
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 u~der 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          C
wharfage charges of 80% is a condition imposed statutorily
under Section 35 of 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). To that extent we agree viith Shri      D
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          E
under the definition of "port service" is not met on the facts of
the present case.

         12. ShriAdhyaru argued relying upon the definition of
"wharf" and "wharfage" in Black's Law Dictionary, Seventh F
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 G
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.
                                                                    H
208       SUPREME COURT REPORTS                    [2015] 8 S.C.R.


A         Private wharf. One that can be used only by its
       owner or lessee.

           Public wharf. One that can be used by the public.

B
           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
C 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
0
  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
E 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
  primarily meant for loading and unloading goods belonging to
F 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.

G         13. The other limb of ShriAdhyaru'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
H vesselorgoods.
    COMMNR. OF CENTRAL EXCISE. BHAVNAGAR v. GUJARAT                  209
       MARITIME BOARD, JAFRABAD [R. F. NARIMAN, J.]


         14. As can.be seen from Section 32 sub-sections (3) A
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 B
referred to hereinabove. We are afraid that we are unable to
agree with ShriAdhyaru. The authority given to perform any of
the services must first and foremost be under terms and
conditions as may be agreed upon by the Board and the private
person. Further, under sub-Section (4) of Section 32, it is the C
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
                                                                    0
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 E
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 F
so, it is unnecessary to go into any of the other contentions
raised by both parties. To the extent that the impugned
judgment is in conformity with ou( judgment, it is upheld. The
appeals of the revenue are, therefore, dismissed accordingly.
                                                                      G
Nidhi Jain                                      Appeals dismissed.