Terminal Handling Charges May Fall under ‘Port Services’: CESTAT Remands Export Refund Dispute for Verification [Read Order]

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that terminal handling charges may qualify as ‘port services’ under section 65(105)(zm) of the Finance Act, 1994 and remanded the matter to the original authority for verification of the service provider's authorization by the port.

General Export Enterprises, the appellant, had claimed a refund of Rs. 11,43,104 towards service tax paid on input services used for the export of goods between July 2008 and December 2008. The refund was sought under Notification No. 41/2007-ST, which allows a refund of service tax paid on specified services used for export.

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The adjudicating officer rejected the claim on the ground that the invoices reflected services like ‘business auxiliary,’ ‘support service of business,’ or ‘custom house agent service,’ and not ‘port services’ as required by the notification. The Commissioner (Appeals) upheld this decision, leading to the present appeal.

The appellant’s counsel argued that the tax was paid on ‘terminal handling charges,’ which are part of port operations, and that the label given by the service provider should not determine the eligibility for a refund. They argued that the authorities failed to verify the actual nature of the service and merely relied on the invoice description.

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The revenue submitted that the refund was rightly denied because the services claimed were not classified as ‘port services’ on the invoices, as required by the exemption notification.

The two-member bench of C.J. Mathew (Technical Member) and Ajay Sharma (Judicial Member) observed that terminal handling charges, if levied by persons authorized by the port, would fall within the definition of ‘port services.’

The tribunal held that the service classification by the provider could not be the sole basis for the denial of a refund without examining whether the service was, in substance, port-related and provided by an authorized entity.

The tribunal set aside the order of the Commissioner (Appeals) and remanded the matter to the original authority to verify the service provider’s authorization, then reassess the refund claim. The appeal was allowed by way of remand.

To Read the full text of the Order CLICK HERE

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