Brief Facts of the Case s2
BRIEF FACTS OF THE CASE
M/s. Hazira Port Pvt. Ltd., having their registered office at 101-103, “Abhijit-II”, Mithakali Circle, Ahmedabad-380006 (hereinafter referred to as “M/s HPPL”) are registered with the Service Tax Department vide Service Tax Registration No. AAACH 9142 D ST001 under the category of Port Service.
2. M/s HPPL vide their letter dated 20.04.2011 informed that they have entered into a concession agreement in the year 2002 with Gujarat Maritime Board (GMB) and Government of Gujarat (GOG) in relation to Hazira Port under which the company has been vested with the right to develop, construct, operate and maintain Hazira Port. As per the terms of the concession agreement, the Company shall develop and construct Hazira Port in phases. Accordingly, in Phase 1A, the Company constructed LNG cargo port and is at present operating and maintaining the same.
2.1 Further they informed that under the above agreement, M/s HPPL granted sub-concession of their right to develop Bulk General Cargo Terminal (BGCT) to M/s Adani Hazira Port Pvt. Ltd (herein after referred to as “M/s AHPPL ”) and for the purpose M/s AHPPL paid them US$ 5 Million during the F.Y. 2010-11.
2.2 They further informed that since the sub concession of right to develop Bulk General Cargo Terminal, in their bona-fide belief, is not falling into any existing categories of taxable services, M/s HPPL has not paid service tax on the consideration M/s HPPL has received for sub concession of right to develop BGCT to M/s AHPPL .
3. The range office vide letter dated 03.05.2011 requested M/s HPPL to submit a copy of sub-concession agreement with M/s AHPPL .
3.1 M/s HPPL vide their letter dated 12.07.2011 submitted the following documents:
i copy of Concession Agreement entered into by and between M/s HPPL, GMB and GOG.
ii. copy of Addendum to Concession Agreement entered into by and between M/s HPPL, M/s GMB and GOG.
3.2.1 Concession Agreement entered into by and between M/s HPPL, GMB and GOG:-
The Department of Post & Fisheries, GOG , announced a Build, Own, Operate, Transfer (“BOOT”) policy for private sector participation in the development of the State’s port vide its Government Resolution dated 29th July 1997. Pursuant to the BOOT policy, GMB seeks to develop port facilities in Gujarat by entering into arrangements with the private sector for the design, financing, building and operation of ports in Gujarat and is keen to develop the Port of Hazira with private sector participation on a BOOT basis together with certain related LNG assets.
GMB issued the Global Notice for Expression of Intention of Interest for Development of Green Field Site Port Facilities in Gujarat State on 29 August 1997, inter alia, inviting bids for the project, in the name of Hazira Port Project (including an option to develop the LNG facilities in conjunction with the development of the Port), and through a process of competitive bidding selected on 12 November 1999 a consortium led by Shell Gas BV, a company incorporated under the laws of the Netherlands and having its registered office at 30 Carel Van Bylandtlaan, Den Haag, The Netherlands, to develop, operate and maintain the Port on a BOOT basis, together with the related LNG Facilities.
GMB awarded a letter of Intent (LOI) dated 12th November, 1999 to Shell Gas BV to develop, operate and maintain the Port and also to develop LNG facilities and related assets in conjunction therewith. In accordance with the bid and the terms of award, Shell Gas BV has in turn established two subsidiaries in Gujarat namely Hazira Port Private Limited (M/s HPPL) and M/s Hazira LNG Private Limited (M/s HLPL) for the purpose of implementing these tasks.
GMB further agreed to grant a concession to the M/s HPPL under Gujarat Maritime Board Act and the Gujarat Infrastructure Development Act for the development, construction, financing, ownership, operation and maintenance of the Contracted Assets as part of the Port on a BOOT basis, and also agreed to allow M/s HLPL to develop the LNG facilities and related assets in conjunction therewith, on the terms set out herein. Gujarat Maritime Board has also agreed, pursuant to two agreements for lease of even date herewith, to lease the leased premises to Hazira Port Pvt. Ltd for the purpose of development of the contracted Assets and the port under the concession Agreement by way of a separate lease agreement and to enter into an additional lease agreement relating to the LNG facilities site with M/s HLPL.
GMB has been reimbursed by M/s HPPL for the cost associated with the Engineering Pre-feasibility study for the Development of Ports in Gujarat which was undertaken by Rendel Palmer and Tritton in association with the Metallurgical & Engineering Consultants (I) Ltd. in November 1996.
3.2.2 Addendum to Concession Agreement entered into by and between Hazira Port Pvt. Ltd, GMB and GOG:-
The Parties entered into a concession agreement on 22 April 2002 which was supplemented by an addendum executed on 22 June 2004 between the Parties (such concession agreement as supplemented by such addendum, the “Concession Agreement”) in relation to the Port, under which M/s HPPL has been vested with the right and has the obligation to develop, construct, own, operate, and maintain the Contracted Assets on a Build, Own Operate and Transfer basis, on the terms set out in the Concession Agreement.
The Parties have agreed under the Concession Agreement that M/s HPPL will develop the port in phases i.e. Phase 1A, Phase 1B, and other subsequent phase in accordance with the terms of the Concession Agreement. M/s HPPL has developed and is operating Phase 1A of the Port.
M/s HPPL in accordance with Clause 8.14 of the Concession Agreement has identified the Bulk/General Cargo Operator to procure the development, implementation, operation and maintenance of the Bulk/General Cargo Terminal(s) pursuant to the terms of the Concession Agreement M/s HPPL has approached GMB for its approval of the Bulk/General Cargo Operator.
GMB vide its letter dated 22 March 2010, has conveyed its approval for M/s AHPPL to be appointed as the Bulk/General Cargo Operator as a sub-concessionaire, in accordance with Clause 8.14 of the Concession Agreement, subject, inter alia, to M/s HPPL entering into his Addendum with GMB and the GOG (as the confirming party).
Under Clause 8.14 of the Concession Agreement, GMB and M/s HPPL had agreed that with respect to Phase 1B, that they shall separately agree on all matters related to the basis of implementation of Phase 1B including criteria for determining capacity, precise construction periods and milestones, throughput and scope, cargo handling capacity, responsibility for obtaining further clearance and other relevant matters.
M/s HPPL has obtained environmental clearance from the Ministry of Environment and Forest, Government of India for the development of the multi cargo facilities vide letter dated 26 June 2003 and amended subsequently vide letter dated 19 February 2007.
Accordingly, the parties have decided to enter into this Addendum to inter alia incorporate the details of implementation of Phase 1B and subsequent phases of the Bulk/General Cargo Terminal(s).
4. The range office vide letter dated 06.02.2012 requested M/s HPPL to submit the details of facilities to be provided to M/s AHPPL by M/s HPPL for the amount of US$ 5 Million paid by M/s. AHPP Limited.
4.1 M/s HPPL vide their letter dated 10.02.2012 informed that M/s HPPL decided not to go for development and operation of BGCT at Hazira Port and took a decision that they shall be grating sub concession of their right to develop BGCT to M/s AHPPL as per the provision of the agreement entered in to in year 2002 with GMB and GOG and for that purpose it was paid US$ 5 Million equivalent to Rs. 23,35,00,000/- from M/s AHPPL and they produced the copy of Bulk/ General Cargo Terminal Agreement.
4.2 Bulk/ General Cargo Terminal Agreement entered between Hazira Port P Ltd., Adani Hazira Port Pvt. Ltd and Gujarat Maritime Board:
M/s GMB, M/s HPPL and the GOG have further agreed under the Concession Agreement that M/s HPPL, subject to the completion of the first phase, will identify a suitable third party operator or operators acceptable to GMB to procure the development, implementation, operation and maintenance of the Bulk/General Cargo Terminal(s) and associated facilities at the port.
M/s HPPL has identified M/s AHPPL to procure the development, implementation, operation and maintenance of the Bulk/General Cargo Terminal(s) at the port. GMB has approved M/s AHPPL to procure the development, implementation, operation and maintenance of the Bulk/General Cargo Terminal(s) at the port under this Agreement pursuant to the Concession Agreement.
M/s HPPL has agreed to grant to M/s AHPPL , right to design, construct, operate and maintain the Bulk/General Cargo Terminal(s) (Phase 1B) and M/s AHPPL has undertaken the obligation to construct certain assets and associated facilities at the port subject to the terms and conditions of this Agreement.
GMB, as the confirming party, agrees to the agreements between M/s HPPL and M/s AHPPL set out in this Agreement.
M/s HPPL and M/s AHPPL have also agreed the terms upon which and the manner in which M/s AHPPL will design, build, own, operate and maintain its assets and facilities at the port, subject to and in accordance with the terms and conditions of this Agreement.
4.3 In view of the above, it appears that GMB and GOG agreed to grant a concession to M/s HPPL for the development, construction, financing, ownership, operation and maintenance of the contracted assets as part of the port on a BOOT basis.
4.3.1 Further as per addendum to the concession agreement M/s HPPL has identified M/s AHPPL to be appointed as the Bulk/General Cargo Operator to procure development, implementation, operation and maintenance of Bulk/General Cargo Terminal(s).
4.4 Accordingly summons was issued on 22.02.2012 to M/s HPPL to give statement and produce the following documents.
1. Copy of lease land agreement & possession agreement between Gujarat Maritime Board & M/s HPPL dated 19.07.2007.
2. Copy of sub lease of licensee land & possession agreement between Hazira Port Pvt. Ltd and Adani Hazira Port Pvt. Ltd.
3. ESCROW agreement between Hazira Port Pvt. Ltd and Adani Hazira Port Pvt. Ltd.
4. Details of facilities provided by the Hazira Port Pvt. Ltd to Adani Hazira Port Pvt. Ltd.
5. List of facilities provided by M/s GMB .
6. Copy of Development guarantee.
7. Copy of construction guarantee.
8. Details of amount received from M/s Adani Hazira Port Pvt. Ltd.
5. Statement of Shri Sujal Shah, Manager, Taxation of M/s. Hazira Port Pvt. Ltd was recorded on 02.03.2012. Shri Sujal Shah has in his statement interalia stated that they entered into concession agreement with GMB on 22.04.2002 for development of port under BOOT Policy as provided in the agreement.
5.1 On being shown concession agreement between GMB, GOG and M/s HPPL, he stated that they have entered into a concession agreement in the year 2002 with GMB and GOG in relation to Hazira Port under which they have been vested with the right to develop, construct, operate and maintain Hazira Port. As per the terms of the concession agreement, they have to develop and construct in phases. Accordingly, in Phase 1A, the Company constructed LNG cargo port and at present operating and maintaining the same.
5.2 He further stated that under the terms of the concession agreement the company has right to develop BGCA on its own or it can identify independent third party developer to procure, develop, operate and maintain BGCA by granting sub-concession of its rights. Accordingly the company took a decision to grant sub-concession of its right to develop BGCT to M/s AHPPL in accordance to the terms of concession agreement.
5.3 He was shown the following Clauses of different agreements:
Clause 8.14 (a) of the concession agreement:
“it is the intention of the Licensee, subject to the provisions of this Clause 8.14 and the agreement of the Licensor and Licensee on the detailed contents of the DPR pursuant to Clause 8.13 and the terms of any Bulk/General Cargo Agreement pursuant to sub-clause 8.14(c) below, to procure the development, construction, completion and operation of one or more Bulk/General Cargo Terminals (for handling Bulk/General Cargo) located at the Port, within the Port Limits, together with all necessary facilities, equipment and assets connected therewith (together the ‘Bulk/General Cargo Terminals’).”
Clause 8.14 (d) of the concession agreement:
“The Licensee may award a sub-concession to a Bulk/General Cargo Operator with the approval of the Licensor (where such approval is required under Clause 8.6) in respect of development, construction, operation and maintenance of any Bulk/General Cargo Terminal.”
Sub-clause C of Addendum to the Concession Agreement dated 25.11.2010
“The Licensee in accordance with clause 8.14 of the Concession Agreement, has identified the Bulk/General Cargo Operator (as defined hereunder) to procure the development, implementation, operation and maintenance of the Bulk/General Cargo Terminal(s) pursuant to the terms of the concession agreement the licensee has approached the Licensor for its approval of the Bulk/General Cargo Operator.”
Sub-clause (D) of Addendum to Concession Agreement dated 25.11.2010
“The Licensor vide its letter dated 22 March 2010, has conveyed its approval for AHPPL to be appointed as the Bulk/General Cargo Operator as a sub-concessionaire, in accordance with Clause 8.14 of the Concession Agreement, subject, inter alia, to the licensee entering into this Addendum with the Licensor and the GOG (as the Confirming Party).”