COMMISSIONER OF CENTRAL EXCISE, BHAVNAGAR versus M/S GUJARAT MARITIME BOARD, JAFRABAD
[2015] 8 S.C.R. 187, Supreme Court of India, 2015
Outcome: Dismissed (Dismissed)
Segment: Ratio
[2015]8S.C.R.187 
COMMISSIONER OF CENTRAL EXCISE, BHAVNAGAR 
A 
v. 
MIS GUJARAT MARITIME BOARD, JAFRABAD 
(Civil Appeal Nos. 3347-3348 of2014) 
JULY22, 2015 
[A. K. SIKRI AND R. F. NARIMAN, JJ.] 
B 
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] 
D 
Black's Law Dictionary, Seventh Edn - referred to. 
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 
c 
Appellant. 
Paras Tripathy, Gursharan Virk, Hemantika Wahi, Jesal 
for the Respondent. 
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 
0 
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 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. 
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 
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:-
"Taxable service" means any service provided or to be 
provided-
"(zn) to any person, by a port or any person authorized by 
B 
c 
D 
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: 
(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 
G 
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. 
D 
E 
F 
G 
37. Scales of rates for services performed by Board or 
other person: -
(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 
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 the Board 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 
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 
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 as the State Government may 
think fitto 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 
c 
D 
E 
F 
G 
H
196 
A 
B 
c 
D 
E 
F 
G 
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SUPREME COURT REPORTS 
[2015] 8 S.C.R. 
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 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 
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 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 
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'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. 
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 
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 
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 
HERETO AS FOLLOWS: 
F 
G 
H
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 
c 
D 
E 
F 
G 
H 
(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 
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 
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, 
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. 
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
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
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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 
B 
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 
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 
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 
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 
E 
F 
G 
H
202 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
(2015] 8 S.C.R. 
(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 the Board @ 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 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. 
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.
COMMNR. OF CENTRAL EXCISE, BHAVNAGAR v. GUJARAT 
MARITIME BOARD, JAFRABAD [R. F. NARIMAN, J.] 
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 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 
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 
203 
A 
c 
D 
E 
F 
G 
H
204 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2015] 8 S.C.R. 
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 the Indian Arbitration and 
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 
'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
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. 
D 
E 
F 
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 
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 
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 
B 
owner or lessee. 
Public 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 
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 
0 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 
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.