By TIOL News Service

MUMBAI, MAY 01, 2014: THE issue to be decided in this appeal is whether the "Onshore Terminal" developed by M/s Reliance Industries Ltd at Pedda Gadimoga Village, near Kakinada, Andhra Pradesh could be considered to be as "Transport Terminal" for the purpose of exclusion from levy of service tax under the category of "Commercial and Industrial Construction Service" as defined in section 65(25b) of the FA, 1994.

The appellant has been saddled with a Service Tax liability by the adjudicating authority consequent upon arriving at a conclusion that 'Onshore Terminal' does not fall in the exclusion list given in the definition of 'Commercial & Industrial Construction Service'.

They are, therefore, in appeal before the CESTAT.

The scope of the term "Transport Terminal" is not defined under the Finance Act, 1994 or the Rules made there under.

The function of the "onshore terminal" and the facilities available at the onshore terminal were listed in detail by the Bench.

The main contention of the appellant is that the facility on the onshore terminal only receives gas from deep-sea and thereafter distributes through pipelines to various destination throughout the country. Since at the onshore terminal the gas is received and thereafter sent to various places the facility is nothing but transport terminal. The main contention was that the term 'Transport Terminal' cannot be restricted to bus terminal or truck terminal. Gases and liquid also gets transported through pipelines and therefore any terminal where the gases/liquid are received and thereafter distributed through pipelines is to be considered as 'transport terminal'.

It is also submitted that transport of gas through pipelines is one of the transport services which is chargeable to service tax and, therefore, the said terminal has to be considered as transport terminal. In view of the fact that the definition of Commercial and Industrial Construction Service excludes transport terminal, no duty is leviable on the said service used for construction of transport terminal. Furthermore, the contention of the adjudicating authority that the transport terminal should be owned by the public authority is not envisaged in the definition and there is no law envisaging such a proposition.

The Bench observed that the term 'transport terminal' is not defined in the Finance Act, 1994 or any other authority source. After adverting to an Article 'The Geography of Transport Systems' by Dr. Jean Paul Rodrigue and Dr. Brian Slack, the Bench observed -

++ From the above Article as also the generally understood meaning of the transport terminal would be a facility where passengers or fright are assembled or dispersed. In fact Airport, railway stations and port are different type of transport terminal. At the airport passenger and freight get assembled and thereafter as per their destination passengers and freight are distributed. Similar is the position in respect of port which are mainly used for the transport of freight. Similarly in every city one would find transport terminals where the people assemble to go to different places by buses and also arrive from different places. Similarly there are truck terminals in cities where freight is assembled from different places within the city from different organizations, thereafter freight is distributed as per different destination and dispersal to different destinations. In the present case there is no arrival from different destination and dispersal to different destination. Movement of gas is unidirectional and is fixed. Here there is just one item. There is no arrival of freight. Extracted fluid is received. Processed dry gas is sent to distribution pipeline-Recovered MEG is processed and again pumped to sub-sea facility. TEG is used in the OT for processing. We find that the said Article speaks about various transport terminals but does not talk of transport terminal for gases. Thus, in our view, the concept of transport terminal is relevant for transportation by air, sea, road and not for transporting gases through pipelines.

++ Even the owner calls the facility as 'Onshore Terminal' and does not call it 'Transport Terminal'. We have no hesitation in holding that the facilities available at the onshore terminal at Gadimoga cannot be termed as 'Transport Terminal'.

++ In the impugned order, a view has been taken that the transport terminal should be owned by public authority and this has been disputed by the appellant. As far as this aspect is concerned, in our view, there is no requirement that the transport terminal should be owned by a public authority alone. However, since we have held that the onshore terminal at Gadimoga cannot be considered as transport terminal, this argument though in favour of the appellant does not help in the present situation.

++ Applying the principle of "Ejusdem Generis" as well as "Noscitur of sociis" as the term transport terminal is preceded by airports, railways etc. and therefore transport terminals would imply similar thing, which in the present situation would be relating to bus and truck terminals. Other words bridges, tunnels, dams are all belongs to infrastructure facilities.

In the matter of an Order-in-Appeal passed by the Commissioner (Appeals) where he has taken a view that the said facilities are transport terminals, the Bench noted that it is understood that the order has been challenged by Revenue and is pending before the Tribunal. Noting that decision of the Commissioner (Appeals) is not binding on the Tribunal, the Bench also did not consider it appropriate to discuss the case laws cited by both sides on the ground that they relate to proceedings at the stay stage.

In the matter of invocation of extended period and imposition of penalty, the Bench observed-

++ The appellant was of the view that immediately on receipt of mobilization advance the service tax is required to be paid and there have been exchange of letters between the appellant and their client about the same. However, later on instead of collecting the service tax from the customers, started requesting a comfort letter from their client which was also not received by them. Under the circumstances, it is a clear cut case where the appellant knew their service tax liability but still chose not to collect and pay, but started asking comfort letter. This is clear cut suppression of facts, contravention of provision of service tax law with willful intention and therefore the extended period is rightly invoked. Penalty under Section 76, Section 77 and Section 78 of the Finance Act, 1944 has also been correctly imposed.

The appeal was dismissed.

(See 2014-TIOL-679-CESTAT-MUM)