Customs, Excise and Gold Tribunal - Tamil Nadu
Cms (India) Operations And Maintenance ... vs Cce on 9 June, 2006
Equivalent citations: [2007]13STT213
ORDER P.G. Chacko, Member (J)
1. The appellants are M/s. CMS (India) Operations & Maintenance Company (P) Ltd., (hereinafter referred to as 'O&M Contractor'). Under an agreement entered into between them and M/s. ST - CMS Electric Company (P) Ltd. (hereinafter referred to as 'owner'), they were required to run an electric power generating plant (250 MW) of the owner. This agreement was executed in 1999. The plant became operational on commercial basis in October 2002. The O&M Contractor was required to run the plant during the pre-operating period also. They are running the plant ever since then. The entire plant and machinery belongs to the owner. The primary fuel (lignite, which is supplied by M/s. Neyveli Lignite Corporation Ltd. under a "fuel supply agreement" between that Corporation and the owner) and LSHS (secondary fuel) required for the generation of power in the above plant is supplied by the owner. The O&M Contractor, with their manpower, operates and maintains the plant in terms of the O&M agreement of 1999. They receive a lump sum amount every month from the owner as consideration for the entire job undertaken by them. After examining the provisions of the O&M agreement and allied agreements and after considering the details furnished by the appellants upon requisition, the Department came to the conclusion that the appellants were rendering taxable services to the owner during 2000 - 2003. According to the Department's perception regarding the nature of the job done by the appellant under the O&M agreement, there were three broad aspects of the job done by the appellants during the aforesaid period, namely:
(i) To generate electricity and provide the same to Tamil Nadu Electricity Board on behalf of the owner pursuant to a 'power purchase agreement'
(ii) To analyse, load, unload, handle and store lignite and supervise transportation; and
(iii) Otherwise operate, maintain and administer the plant in accordance with the project documents.
Upon this broad categorization, the Department took the view that the appellants were rendering the following services to the owner:
(a) Management Consultancy Service
(b) Consulting Engineer's Service
(c) Clearing & Forwarding Agent's Service The amount received by the appellants from the owner during the aforesaid period was taken as the 'gross' value for all these services and a demand was raised accordingly. This demand was contested by the party. In adjudication of the dispute, the original authority demanded service tax amounting to over Rs. 94.00 lakhs from the appellants and imposed on them penalties under various provisions of the Finance Act, 1994, one of these penalties amounting to over Rs. 1.80 crores. This decision of the original authority was affirmed by the Commissioner (Appeals) in an appeal filed by the assessee. Hence the captioned appeal and the present application for waiver of predeposit and stay of recovery in respect of the amounts of tax and penalties.
2. We have heard both sides elaborately. The definitions of 'management consultant', 'management consultant's service', consulting engineer' and consulting, engineers service', 'clearing & forwarding agent' and 'clearing & forwarding agent's service' were placed before us and analyzed threadbare. Learned Counsel for the appellants has endeavoured to show that, on the facts of this case, no part of the job done by the appellants under the O&M agreement would constitute any of the aforesaid services. It is claimed that the work done by the O&M Contractor was a job work simplicitor done for the owner, which did not amount to any taxable service. Referring to the Department's plea of management consultancy, it is submitted that no service whatsoever was done by the appellants, directly or indirectly, in connection with the management of any "organization". According to him, the power generating plant by itself or in combination with its operators would not become an "organization". With reference to the consulting engineer's service allegedly done by the appellants, learned Counsel submits that the engineers of the appellants were themselves operating the plant and were not rendering any service meriting the description 'consulting engineers service', to the owner. Thus engineers were serving the appellants only. Regarding the third category of services, learned Counsel submits that the appellants were generating electricity and supplying the same to TNEB at the behest of the owner and were not clearing and forwarding anything. In this manner, learned Counsel has endeavoured to rule out the above services from the scope and ambit of the O&M agreement. It is also submitted that the amount collected by the appellants from the owner as "management fee" has not been split up by the Revenue for the purpose of levy of tax, though they have sought to vivisect the contract for the purpose of levying service tax under more than one heads, which is not sustainable in law. In this connection, reliance has been placed on the Tribunal's decision in Larsen & Toubro Ltd. v. CCE, Cochin 2004 (60) RLT 505. Learned Counsel also referred to the Tribunal's decision in Rolls Royce Indus. Power (I) Ltd. v. CCE, Vishakhapatnam , wherein the job undertaken by the company under a similar agreement was examined and it was held that the contractor could not be held to have rendered consulting engineer's service to the owner of the power plant. Learned Counsel has also challenged the demand of tax on the ground of limitation. He has shown us some correspondences between the appellants and the Department, which indicates that the nature of the job done by them for the benefit of the owner was, by and large, known to the Department.
3. Learned SDR, on her part, has taken us to the various provisions of the O&M agreement. It is her contention that, as there are provisions in the agreement obligating the appellants to recommend review of the terms of a collateral agreement between the owner and EPC Contractor, who had engineered and commissioned the power plant, an element of "consultancy." was involved in the transaction. It is also pointed out that the consideration for the job done by the appellants was received as "management fee" and this nomenclature would throw some lighten the nature of the services rendered by the appellants to the owner. It is also submitted that the appellants, in terms of the above agreement, had a big role to play in the procurement and transportation of lignite from the Neyveli Lignite Corporation's yards. According to learned SDR, the facts pertaining to this aspect of the contract would reasonably constitute "clearing and forwarding agent's service". Touching the limitation issue, learned SDR submits that, by virtue of the amended provisions of service tax, it is open to the Department to collect service tax for a period upto five years, irrespective of whether the Department was aware of material facts. It is also submitted that it was up to the assessee to provide the break-up of the lump sum amount collected from the owner for the services rendered by them.
4. After giving careful consideration to the submissions, we are of the view that the Revenue has not come out clearly with a good case for demanding service tax from the appellants. We have perused the provisions of the agreement placed before us and have also considered the facts supplemented by the appellants through their counsel today. Admittedly, the demand is under three different heads. For levy of service tax under each head, there should be a gross value on which service tax would be levied. In the instant case, there is no break-up of the amount so as to enable us to find out as to what is the gross value for each of the three services. In other words, the quantum of tax levied on the individual services is uncertain. This uncertainty is discernible from the findings recorded by the authorities also. In the circumstances we are unable to hold that the appellants do not have a prima facie case against the demand of tax. In the circumstances, without further examining the limitation issue, we grant waiver of predeposit and stay of recovery in respect of the amounts of tax and penalties. Further, having regard to the high stake involved in the case, we are inclined to dispose of the appeal itself as early as possible. The appeal is therefore posted for final hearing on 8th August 2006, the date suggested by the counsel for the appellants.
(Dictated and pronounced in open Court)