The Customs, Excise andService Tax Appellate Tribunal (CESTAT) Hyderabad has clarified that the 15% retention on statutory port dues was only a reimbursement of overheads and taxes permitted under its concessionaire agreement with the Government of Andhra Pradesh, and this retention could not be treated as commission or consideration under Business Auxiliary Service (BAS).

The appeals arose from two orders of the Commissioner of Customs & Central Excise, Visakhapatnam, confirming service tax under Business Auxiliary Service (BAS) and Port Services for the periods 2006–2012 and 2012–2013.

The appellant, Kakinada Seaports Lt,d argued that the company mainly provides port services but also undertakes maintenance activities such as dredging, navigation aids, vessel traffic management, and upkeep of common facilities like roads, drainage, streetlights, and railway links. Under its concessionaire agreement with the Government of Andhra Pradesh (GOAP), the company was permitted to add 15% to actual expenditure to cover overheads and taxes.

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He stated that port dues are statutory charges collected from port users, kept in a dedicated fund for harbour maintenance, and already subject to service tax. Hence, there was no commission agent relationship to attract tax under Business Auxiliary Service (BAS)

On the other hand, the respondent argued that the appellant was carrying out improvement, maintenance, and survey works on behalf of the Government of Andhra Pradesh (GOAP). For these services, GOAP reimbursed actual costs plus an additional 15%, which the department viewed as a consideration chargeable under Business Auxiliary Service (BAS).

The tribunal noted that port dues are statutory levies already subjected to service tax, collected from port users, and applied toward port maintenance and development. The 15% retention was permitted under the concessionaire agreement to cover overheads and taxes, functioning more like a book adjustment than commission.

It was also observed that the company was the exclusive concessionaire operating the port on its own account, not on behalf of GOAP, and no additional payment was made by GOAP beyond port dues. Since the same service cannot be taxed twice, the retention could not be treated as consideration under Business Auxiliary Service (BAS) or Port Services.

After examining all the matters bench, Angad Prasad(judicial member)and A.K. Jyotishi(technical member )held that service tax was not leviable on the 15% retention, set aside the adjudicating authority’s orders.

Accordingly, both appeals were allowed.

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