Custom, Excise & Service Tax Tribunal
Certification Engineers ... vs Commr Service Tax- on 2 March, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
Service Tax Appeal No. 85965 of 2016
(Arising out of Order-in-Original No. 17 to 21/ST-VII/RK/2015-16 dated 30.11.2015
passed by Commissioner of Service Tax-VII, Mumbai)
M/s Certification Engineers International .....Appellant
Ltd., Mumbai
CBD Belapur Station Complex, Module No. D 101-106, First Floor,
Tower No.7, CBD Belapur, Navi Mumbai - 400614
VERSUS
Commissioner of Service Tax - VII .....Respondent
Mumbai
2nd Floor, MSEB Bldg. Estrella Battery Compound,
Dharavi, Mumbai - 400019
Appearance:
Shri Vinay Jain, Advocate for the Appellant
Shri Prabhakar Sharma, Authorized Representative for the Respondent
CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)
HON'BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL)
FINAL ORDER NO. A/86244/2023
Date of Hearing: 02.03.2023
Date of Decision: 02.03.2023
PER : M.M. PARTHIBAN
This appeal has been filed by Certification Engineers International Limited
(herein referred to as 'appellants' for short) with address at CBD Belapur
Station Complex, Module No. D 101-106, First Floor, Tower No.7, CBD Belapur,
Navi Mumbai - 400614, assailing the Order-in-Original No. 17 to 21/ST-
VII/RK/2015-16 dated 30.11.2015 (referred to as 'impugned order') passed by
Commissioner, Service Tax-VII, 2nd Floor, MSEB Building, Estrella Battery
compound, Dharavi, Mumbai-400063.
2. The brief facts of the case are that the appellants inter alia are engaged
in the business of certification, third party inspection and other related
technical work mainly for petroleum projects, including offshore platform and
other related facilities. During the audit scrutiny of the appellants' records by
the department, it was found that the appellants have carried out certification
work for M/s Oil & Natural Gas Commission (ONGC) in respect of a project for
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laying and commissioning of 12" pipeline from Sudan refinery to Sudan Port;
ONGC had sub-contracted the work of the said project to M/s Dodsal, Dubai.
The appellants had been engaged by ONGC with a view to ascertain as to
whether the norms and standards of quality and safety were maintained by
conducting inspection and certification of the said project. The audit wing of
the department found that the appellants have also provided such inspection
and certification services in respect of projects situated in India and outside
India to various clients. While the appellants have paid service tax in respect
of services rendered in relation to projects situated in India, in respect of
projects situated outside India, they did not pay service tax on the pretext that
services rendered abroad were not taxable. The department interpreted that
since the appellants have received the fees/charges in respect of their services
from ONGC and other clients in Indian Rupees, they are liable to pay service
tax. Accordingly, show cause proceedings were initiated against the appellants
as the services provided by them were covered by the definition of inspection
and certification services under Section 65(108) and such services are covered
under taxable category vide Section 65(105)(zzi) of the Finance Act, 1994.
Further, the department had also claimed that the appellants have suppressed
the fact of non-payment of service tax in respect of such services provided out
of India in the ST-3 returns, and for contravention of Rule 3(2) of Export of
Service Rules, 2005; Rule 6 of Service Tax Rules, 1994 and Section 68 of the
said Finance Act, 1994, had issued show cause notice dated 14.10.2009
demanding service tax for the period April, 2004 to March, 2009.
Subsequently, show-cause notices in the form of periodical statement of
demands were also issued by the department covering the period April, 2009
to March, 2013. The details of various SCNs issued to the appellants and
amounts confirmed are given in brief as below:
Sl. SCN No. and Date Amount of service Amount confirmed
No tax demanded in SCN in Order-in-Original
(in Rs.)
1 F. No. V/ST/Dn-V(Bel)/IAD/CEIL/2009/ 2,27,47,439 2,27,47,439
1411 dated 14.10.2009
2. F. No. V/ST/Dn-V(Bel)/IAD/CEIL/2009/ 3,21,401 3,13,332
1937 dated 12.10.2010
3. F. No. V/ST/Dn-V(Bel)/IAD/CEIL/2009/ 8,91,885 8,91,885
605 dated 27.09.2011
4. F. No. V/ST/Dn-V(Bel)/IAD/CEIL/2009/ 20,91,245 16,02,512
23534 dated 12.09.2011
5. F. No. ST/Dn-V(Bel)Certification/09-10/ 39,953 39,953
3805 dated 21.05.2014
In adjudication of the SCNs, the learned Commissioner besides confirmation of
adjudged demands imposed penalty on the appellants under Sections 76, 77 &
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78 ibid. Being aggrieved with the impugned order, the appellants have filed
this appeal before the Tribunal.
3. Learned Advocate appearing for the appellants stated that the appellants
were engaged by ONGC and other clients for carrying out inspection and
certification of various petroleum products, both in India and abroad. The
appellants had duly discharged the service tax on the consideration received in
respect of services rendered in India. However, the appellants were not
discharging any service tax on the consideration received in respect of such
services rendered for the projects outside India. In the specific case relating to
ONGC, the services were provided in respect of inspection and certification of
the project for laying and commissioning of 12" pipeline from Sudan refinery to
Sudan Port. As the services were performed outside India, the appellants were
of the view that no service tax is payable and accordingly, they did not
discharge the service tax. It is also submitted by the learned Advocate that the
appellants were indicating the fees/remuneration received in respect of
services rendered outside India as exempted service in the Service Tax
Returns filed by them. Further, the appellants were having regular
correspondence with the Department in the year 2005-06 pertaining to various
projects located outside India. However, the Department conducted audit of
their transactions only in June, 2009 and raised objection leading to issue of
SCN invoking extended period. Learned Advocate also claimed on the issue of
invoking extended period, that there was no suppression of any information or
fraud committed by the appellants and thus, demand of service tax beyond the
normal period of limitation is not sustainable. It is also claimed by the learned
Advocate that CBIC vide Circular No. 36/4/2001-CX dated 8.10.2001 has
clarified that the services provided beyond the territorial waters of India are
not liable to service tax. In support of their stand that in respect of services
performed outside India, no service tax is payable, he submitted the following
case laws:
(i) Greatship India Ltd. Vs. CST, Mumbai - 2015 (39) STR 754 Bom.)
(ii) Ishikawajma-Harima Heavy Industries Ltd. Vs. DIT, Mumbai -
2007-TlOL-03-SC-IT
4. Learned Authorised Representative appearing for the Revenue reiterated
the findings of the impugned order and stated that service tax is rightly
payable by the appellants inasmuch as the services provided by the appellants
are covered under taxable category in section 65(105)(zzi) ibid and in terms of
Export of Services Rules, 2005, the place of provisions of services shall be in
India and the appellants are not entitled to benefit of export of services as the
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fees were received in Indian currency and not in foreign exchange. Learned AR
also highlighted that though the value of exempted services were indicated by
the appellants in their service tax returns, it does not give the information
about type of services provided and the nature of transactions. Hence, he
stated that the extended period is rightly invoked in the impugned order.
5. Heard both sides and perused the records of the case.
6. In the impugned order, the learned Commissioner has stated that the
issue under dispute lies in the narrow compass of deciding whether the
services provided by the appellants are leviable to service tax or not. The
relevant paragraph No. 8 of the impugned order, for ease of reference is
extracted as below:
"8. Thus, the short point to be decided in this case is whether or not the
Inspection and Certification of various pipeline and petroleum related
projects executed by ONGC, which were situated outside India and in
respect of which the, consideration is received by the Noticee towards
such services provided, are leviable to Service Tax."
The learned Commissioner in the impugned order had confirmed the
adjudged demands and imposed penalties on the basis of following findings:
(i) Since the location of service recipient i.e., ONGC is situated in India,
consequently the place of provision of impugned inspection and
certification services carried out by appellants for ONGC is also taken
as provided in India.
(ii) The appellants had deputed their staff outside India only for
inspection of the equipment/structure and then the certification was
done and handed over to ONGC in India, who in turn used such
certification in the process of providing their output service. Thus the
services provided by the appellants were received and consumed by
ONGC in India and the provisions of Chapter V of the Finance Act,
1994 are applicable to the activity of the appellants.
(iii) The appellants were paid the consideration for rendering of services
by ONGC in Indian Rupees, and thus such services donot quality as
'export of services' for availing exemption from payment of service
tax.
(iv) The appellants are rendering inspection and certification services, as
defined in Section 65(108) of the Finance Act, 1994 and such services
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rendered to ONGC are taxable to service tax under Section
65(105)(zzi) ibid.
7. In order to appreciate the issues raised before us, particularly in
respect of scope of coverage of service tax legislation, taxability of services
provided by the appellants, whether it would amount to export of services or
not, it is necessary to refer the background of service tax levy, legal
provisions governing the scope of service tax as given under the Finance
Act, 1994. The Service Tax levy was first introduced in 1994, and the budget
speech of the Finance Minister while the presenting the Budget 1994-95
before the Lok Sabha clearly brings out the background of such legislation.
The relevant para is extracted below:
"87. Over the years, while attempts have been made to widen the base for
domestic indirect taxes, the services sector has not been subjected to
taxation. Yet this sector accounts for about 40% of our GDP and is showing
strong growth. There is no sound reason for exempting services from taxation,
when goods are taxed and many countries treat goods and services alike for
tax purposes. The Tax Reforms Committee has also recommended imposition
of tax on services as a measure for broadening the base of indirect taxes. I,
therefore, propose to make a modest effort in this direction by imposing a tax
on services of telephones, non-life insurance and stock brokers. The tax will be
charged at 5% on the amount of telephone bills, the net premium charged by
the insurance companies, and the brokerage or commission charged by the
stock brokers in relation to their services. These proposals will come into force
from a date to be notified later on."
The above text makes it clear, that service tax levy is a part of indirect
taxation and the government had proposed to levy for the first time
service tax on three specified services in the domestic services sector at
the rate of 5% adv. Chapter V of the Finance Act, 1994, contains the legal
provisions for imposition of Service Tax. The extent, commencement and
scope of service tax law and its application are given in Section 64, and
the same is extracted below:
"CHAPTER V
SERVICE TAX
Section 64. (1) This Chapter extends to the whole of India except the State of
Jammu and Kashmir.
(2) It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint.
(3) It shall apply to taxable services provided on or after the commencement
of this Chapter."
From plain reading of the above legal provisions, it transpires that the
service tax legislation apply to all territories for the time being comprised in
the territory of India, except the State of Jammu and Kashmir.
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Subsequently, in the year 2002, vide Notification No.1/2002-S.T. dated
01.03.2002, the levy of service tax was extended to the designated areas in
the Continental Shelf and Exclusive Economic Zone (CS & EEZ) of India. The
various changes in the legislative history on the scope of coverage of
services tax is extracted below:
Later, the phrase 'designated areas' was replaced with 'installations,
structures and vessels' in the CS & EEZ of India vide Notification
No.21/2009-S.T. dated 07.07.2009.
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Further, the purpose and the areas in the CS & EEZ were specified for the
purpose of levy of service tax vide Notification No.14/2010-S.T. dated
27.02.2010.
Lastly, by amendment brought through the Finance Act, 2012, with effect
from 01.07.2012, the interpretation clauses provided for the meaning of
India, by inserting Section 65B containing various phrases including clause
(27) providing the meaning of 'India' for the purpose of service tax. The
extract of the said interpretation clause is as below:
"(27) "India" means,--
(a) the territory of the Union as referred to in clauses (2) and (3) of article
1 of the Constitution;
(b) its territorial waters, continental shelf, exclusive economic zone or any
other maritime zone as defined in the Territorial Waters, Continental Shelf,
Exclusive Economic Zone and other Maritime Zones Act, 1976;
(c) the seabed and the subsoil underlying the territorial waters;
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(d) the air space above its territory and territorial waters; and
(e) the installations, structures and vessels located in the continental shelf
of India and the exclusive economic zone of India, for the purposes of
prospecting or extraction or production of mineral oil and natural gas and
supply thereof;"
8. It transpires from the plain reading of Section 64 of the Finance Act,
1994 that the legislation relating to service tax covers the economic
activities in the nature of service, undertaken within the territory of India,
except Jammu & Kashmir, and those activities in territorial waters, CS & EEZ
and other specified areas of CS & EEZ for specified purposes. Thus, as a
corollary, it could be inferred that any activity of service undertaken abroad
or outside India, will not be covered under the scope of Finance Act, 1994
for levy of service tax. Therefore, we are of the view that once this
fundamental position is brought out clearly in the preamble portion of the
Finance Act, 1994, the rest of the provisions providing for export of services
either under the Rules or notification issued thereunder, would only serve
the purpose of delegated legislation explaining the finer aspects in respect of
only those services that are covered under the scope of service tax
legislation. These would not in any case apply in respect of the services
which are not within the scope of service tax legislation and thus are not
liable to pay service tax. The legal provisions under Section 94 ibid,
providing the Central Government the powers to make rules also supports
our view as above. The relevant portion of the said section is extracted
below:
"SECTION 94. Power to make rules. --
(1) The Central Government may, by notification in the Official Gazette,
make rules for carrying out the provisions of this Chapter.
(2) In particular, and without prejudice to the generality of the foregoing
power, such rules may provide for all or any of the following matters,
namely :-
(a) collection and recovery of service tax under sections 66 and 68;
........
(f) provisions for determining export of taxable services;"
Plain reading of the Section 94(2)(f) makes it clear that the emphasis is on the power to make rules in respect of export of 'taxable services' and not all services. Once the services provided outside India is not covered under the scope of service tax legislation, then there is no way that such services could be extended with the Rules that have been made for taxable services.9
ST/85965/2016
9. It is an undisputed fact that the inspection and certification services were rendered by the appellants to ONGC, in respect of laying and commissioning of pipeline from Sudan refinery to Sudan Port, in the country of Sudan which lies in Northern Africa. It is not the case of the revenue that the inspection and certification services of pipeline laid in Sudan, was rendered by the appellants sitting from India, as the impugned order very clearly states in paragraph No. 10 that the appellants had deputed their staff/engineers for inspection of the equipment, structure located overseas. In fact, the Central Board of Excise & Customs had clarified the taxability of services provided beyond India in its Circular No. 36/4/2001 dated 08.10.2001. The same is extracted below:
"Service Tax Circular No. 36/4/2001 F. No. 137/2/2000 CX.4 Government of India Ministry of Finance Department of Revenue (Central Board of Excise & Customs) New Delhi, the dated 8.10.2001 Subject - Extension of Service Tax to, designated areas in the Continental Shelf and Exclusive Economic Zone of India-Clarification -Reg.
Sir/Madam, I am directed to say that question has arisen whether services provided outside the limits of the Indian territorial waters are liable to Service Tax or not.
The matter has been examined. At present the levy of service tax extends to the whole of India except the State of Jammu and Kashmir. The expression "India" includes the territorial waters of India. Indian territorial waters extend up to twelve nautical miles from the Indian land mass. ''Chapter V of the Finance Act which governs the levy of the Service Tax has not extended the levy to designated areas in the Continental Shelf and the Exclusive Economic Zone of India (as has been done in case of Central Excise vide Notification No.l66/87-CE dated 11.6.87 and in case of Customs by Notification Nos. 11/87-Cus. dated 14.1.87 & 64/97-Cus. dated 1.12.97). It is, therefore, clarified that the services provided beyond the territorial waters of India are not liable to Service Tax as provisions of Service Tax have not been extended to such areas so far.
Trade and field formations may be advised accordingly."
However, the department had attempted to bring such services under service tax levy on the basis that these services are not covered under the Export of Services Rules, 2005 inasmuch as the service recipient ONGC is situated in India, and certification is given to ONGC situated in India, payment of services have been received in Indian currency and thus the 10 ST/85965/2016 appellants are liable to pay service tax. We find that neither the department had produced any evidence or documents to support the above allegations, nor the impugned order brings out clearly these in the findings to conclude that the services rendered by the appellants have been rendered within India, to bring these under the scope of taxable services and to demand service tax thereon. Thus, we are of the considered view, that there is no need to examine the aspects concerning Export of Services Rules, 2005, in view of the above discussions and the specific clarification issued by the CBEC as above.
10. In this regard, we find that the Co-ordinate Bench of this Tribunal in the case of M/s Aban Infrastructure Pvt. Ltd. Vs. The Commissioner of GST & Central Excise, Chennai reported in 2023-VIL-175-CESTAT-CHE-ST have decided the issue of applicability of service tax on activities undertaken outside India by holding that demand of service tax cannot be sustained in respect of services carried out in non-designated area. The relevant paragraphs of the above order are extracted below:
"11. The territorial application of the service tax and the commencement of its application from 01.07.1994 and the change brought forth in the application w.e.f. 07.07.2009 has been discussed in the case of Reliance Industries Vs Commissioner of Service Tax, LTU Mumbai - 2013-TIOL-1900 CESTAT-MUM. The relevant para of the said decision is reproduced as under:
"3. The contention of the appellants is that during the relevant period, the pre-construction and for construction services in respect of which refund has been claimed were provided and consumed in such areas of CS & EEZ to which the provisions of the Finance Act 1994 had either not been extended, or if extended, were exempted under the IOS Rules 2006. The Lower Authorities have failed to take note of the fact that till 01.07.2012, the Service Tax Legislation did not apply to the entire CS and EEZ of India, but to only some parts thereof and that it was only with effect from 01.07.2012 that the coverage became wide enough to cover the pre-construction and for construction services rendered anywhere in the CS and EEZ of India. It was submitted that the lower authorities have failed to appreciate that the amendments brought about with effect from 27.02.2010 (by issue of Notification No.14/2010-ST dated 27.02.2010 and Notification No.16/2010- ST dated 27.02.2010) had to be construed contextually in the light of the following legislative history concerning the territorial coverage of the Act.
(i) With effect from 01.07.1994 (but till 01.03.2002), the provisions of Chapter V of the Finance Act, 1994 did not apply to any area in the CS and EEZ of India. During this period the provisions of the Act applied to the "whole of India except the 11 ST/85965/2016 State of Jammu & Kashmir". In the absence of a statutory definition of "India", the meaning of "India" in terms of Section 3(28) of the General Clauses Act was required to be applied which defined "India" as "all territories for the time being comprised in the territory of India". The "territory of India" according to Article 1 of the Constitution of India is the sum total of the territories of the States; the union territories;
and such other territories as may be acquired. Interpreting Article 1 of the Constitution of India, the Bombay High Court in the case of Commissioner of Customs Vs. Nobel Asset Co. reported in 2008 (230) ELT 22 has held that the CS and EEZ of India is not a part of the "territory of India." The CBEC has also recognized this position and stated so in Circular No.36/4/2001-ST dated 08.10.2001 as extracted in Para 3(c) above
(ii) With effect from 01.03.2002, (but till 07.07.2009) the provisions of the Act, were extended beyond the territorial waters of India but only to the designated areas in the CS & EEZ of India. These designated areas to which the Act was extended were the platforms and structures specified in Notification No.S.O.429(E) dated 18.07.1986 and Notification No.S.O.643 (E) dated 19.9.1996 issued by the Ministry of External Affairs.
(iii) With effect from 07.07.2009 (but till 27.02.2010) the provisions of the Act, were extended further by issue of Notification No.21/2009 dated 07.07.2009 to "installations, structures and vessels in the CS & EEZ of India".
(iv) With effect from 27.2.2010, (but till 01.07.2012), the Act was further extended by issue of Notification No. 14/2010-ST to the areas specified in column (2) to the table to the said Notification, albeit for the purpose specified in column (3) of the said table.
v) With effect from 01.07.2012, the Service Tax legislation was further extended to the whole of CS & EEZ of India by inserting a statutory definition of "India" in Chapter V of the Finance Act, 1994. The said definition of India reads thus :
"India" means;
(a) The territory of the Union as referred to in clauses (2) and (3) of article 1 of the Constitution;
(b) its territorial waters, continental shelf, exclusive economic zone or any other maritime zone as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976);
(c) the seabed and the subsoil underlying the territorial waters;
(d) the air space above its territory and territorial waters;
and
(e) the installations, structures and vessels located in the continental shelf of India and the exclusive economic zone of 12 ST/85965/2016 India, for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof;"
12. Undisputedly, the repair, and maintenance work has been carried out in the non-designated area. From the discussions made above, the demand cannot sustain and requires to be set aside which we hereby do. The impugned order is set aside. The appeal is allowed with consequential relief, if any, as per law."
11. We also find that while examining the scope of coverage of service tax legislation under Chapter V of the Finance Act, 1994 in the case of Greatship (India) Ltd. Vs. Commissioner of Service Tax, Mumbai-I reported in 2015 (39) S.T.R. 754 (Bom.), the Hon'ble Bombay High Court had decided that the service tax demand against the appellants is not justified. The relevant paragraphs of the said judgement are extracted below:
"26. As has been discussed hereinabove, in view of the provisions of the Maritime Zones Act, though the sovereignty of India extends over the territorial waters, insofar as the continental shelf and exclusive economic zone of India is concerned, by virtue of the provisions of sub-section (6) of Section 6 and sub-section (7) of Section 7, a fiction is created that such of the areas would be deemed to be a part of India for the purposes of such enactments which are extended to those areas by the Central Government by issuing notification. It would thus be clear that insofar as continental shelf and exclusive economic zone is concerned, unless a notification is issued in exercise of powers under sub-section (6) of Section 6 and sub-section (7) of Section 7 of Maritime Zones Act, the areas in the continental shelf and exclusive economic zone cannot be considered to be the area where the sovereignty of India extends. Only upon issuance of such notification, the areas which are so notified will be deemed to be the areas of India, in respect of which the notification is issued. Only then the provisions of the statute concerned would be applicable to such areas.
27. It is further to be noted that even the Department was also aware of the said situation. It will be relevant to refer to the Service Tax Circular No. 36/4/2001 dated 8.10.2001 :-
"DEPARTMENT CLARIFICATION Services provided outside the limits of Indian territorial waters not liable to Service Tax - At present the levy of service tax extends to the whole of India except the State of Jammu and Kashmir. The expression "India" includes the territorial waters of India. Indian territorial waters extend up to twelve nautical miles from the Indian land mass. Chapter V of the Finance Act which governs the levy of Service Tax has not extended to the levy to designated areas in the Continental Shelf and the Exclusive Economic Zone of India ( as has been done in case of Central Excise vide Notification No. 166/87- C.E., dated 11-6-87 and in case of Customs by Notification Nos. 11/87-Cus., dated 14-1-87 & 64/97-Cus., dated 1.12.97). It is, therefore, clarified that the services provided beyond the territorial waters of India are not liable to Service Tax as provisions of Service tax have not been extended to such areas so far.13
ST/85965/2016 (Source : Service Tax Circular No. 36/4/2001, dated 18- 10-2001)"
It would thus be clear that the Department itself was aware that unless a notification was issued under the provisions of Maritime Zones Act, then the provisions of Chapter V of Finance Act which governs the levy of Service Tax could not be made applicable to any area in the continental shelf and exclusive economic zone of India.
28. For the first time, the 2002 Notification was issued under the provisions of the Maritime Zones Act on 1.3.2002 thereby extending provisions of Chapter V of Finance Act to the designated areas in the continental shelf and exclusive economic zone of India as declared by the Notification of the Government of India in the Ministry of External Affairs dated 18.7.1986 and 19.9.1996 with immediate effect. It would thus be seen that for the first time from 1.3.2002, the areas in respect of which the notifications were issued in 1986 and 1996 were brought under the purview of the service tax. However, the notification only extended the applicability of service tax to the areas which were covered under the said notifications of 1986 and 1996. Even after issuance of 2002 notification, the provisions of Chapter V of the said Act did not apply to the other areas in the continental shelf and exclusive economic zone of India which were not covered by the said notifications.
29. The 2009 July Notification brought an amendment by which the words beginning with "designated areas in the continental shelf" and ending with the words "with immediate effect" were substituted by the words "installations, structures and vessels in the continental shelf of India and the exclusive economic zone of India". As such, by virtue of the said notification, the service tax provisions were made applicable to installations, structures and vessels in the said continental shelf and exclusive economic zone of India. Thus, by virtue of this amendment, the services provided to installations, structures and vessels in the continental shelf of India and exclusive economic zone of India, whether covered under the areas under the 1986 or 1996 notification came under the tax purview.
Prior to that, only such of installations, structures and vessels in the continental shelf of India and exclusive economic zone of India were under the tax net, if they were in the areas as notified in 1986 and 1996 notifications. However, the July, 2009 Notification removed the said restrictions and the service tax provisions were made applicable to the installations, structures and vessels in the continental shelf of India and the exclusive economic zone of India, irrespective of the fact, as to whether they were in the areas which were covered by the notifications of 1986 and 1996 or not.
30. Vide 2010 Notification, the Govt. of India in supersession of the 2002 Notification, extended the provisions of Chapter V of the Finance Act, 1994 to the areas specified in column 2 of the Table in the continental shelf and exclusive economic zone of India, for the purposes as mentioned in column 3 of the said Table. Sr. No.1 of the Table would show that in respect of whole of continental shelf and exclusive economic zone of India, any services provided for activities pertaining to construction of installations, structures and vessels for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof have been brought under the tax net. It would further be 14 ST/85965/2016 seen from Sr. No.2 of the table, that insofar as the installations, structures and vessels within the continental shelf and exclusive economic zone of India constructed for the purpose of prospecting and extraction or production of mineral oil and natural gas are concerned, any service provided or to be provided by or to such installations, structures and vessels and for supply of any goods connected with the said activity has been brought in the tax net. It would thus be seen that the 2010 Notification extensively expands the tax net. Sr.No.1 of the table brings services provided for all activities pertaining to construction of installation, structures and vessels for the purpose of prospecting or extraction or production of mineral oil and natural gas and supply thereof under the tax net. Perusal of Sr. No.2 of the Table would reveal that insofar as installations, structures and vessels within the continental shelf and exclusive economic zone of India constructed for the purpose of prospecting or extraction or production of mineral oil and natural gas are concerned, any services provided or to be provided by or to such installations, structures and vessels and for supply of any goods connected with the said activity has been brought under the tax net. A comparison of the 2002 Notification, as amended in 2009 and Sr.No.2 of Table of the 2010 Notification would reveal that whereas under the earlier Notification, the services provided to the installations, structures and vessels were under the tax net, the subsequent notification brought all services, whether provided or to be provided by or to such installations, structures and vessels. The comparison would show that insofar as the installations, structures and vessels are concerned, though the 2002 Notification as amended in 2009, covers only the service to the installations, structures and vessels, by way of 2010 Notification, the services to or by the installations, structures and vessels have been brought into the tax net.
xx xx xx xx xx
42. In view of settled legal position, we find that the 2010 Notification cannot be said to be clarificatory in nature, but it brings about substantive change in law. Whereas the 2002 Notification as amended by 2009 Notification is applicable only to the services rendered to installations, structures and vessels, the 2010 Notification widens the tax scope and amongst various other services also brings into the service tax net the services rendered to or by the installations, structures and vessels.
It can thus be seen that the present transaction, which is in the nature of providing services by the vessels of the appellant for the purpose of prospecting mineral oil and as such is a service consumed by the seabed of Continental Shelf of India would come in the tax net only after 2010 Notification came into effect. We are of the considered view that the said service cannot be said to be a service rendered to the installations, structures and vessels. Not only this, but the Respondent also in the order-
in-original has noted that the appellant is discharging applicable service tax on the services received by installations, structures and vessels in the Continental Shelf and Exclusive Economic Zone of India but was not discharging the service tax on services consumed by the seabed of Continental Shelf of India.
15ST/85965/2016
43. Since we have held that the transactions involved in the present case is not taxable under the Notification of 2009, and as such, the demand of tax would not be sustainable, we do not find it necessary to go into the question as to whether since the contract was prior to the Notification dated 7.7.2009, the demand for tax could be made or not.
44. In that view of the matter, we answer the substantial questions of law as under :-
Question (a) The learned Tribunal erred in holding that the transactions involved in the present case falls under Notification No.21/2009-ST dated 7.7.2009 issued under the provisions of clause (a) of sub-section (6) of Section 6 and clause (a) of sub-section (7) of Section 7 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976.
Question (b) As a consequence of answer to question (a), it is held the learned Tribunal has erred in upholding the tax demand against the Appellant.
Question (c) In view of answers to questions (a) and (b) holding that the demand for tax against the appellant was not justified, we do not find it necessary to go into the said question.
45. Appeal is, accordingly, allowed in terms of prayer clause (b).
However, in the facts and circumstances, no order as to costs."
12. We find that the department had firstly issued the show cause notice dated 14.10.2009 invoking extended period for demanding service tax for the period April, 2004 to March, 2009 and subsequently issued four periodical statements of demand for recovery of service tax for the period April, 2009 to March, 2013. The appellants have claimed that the extended period of limitation cannot be invoked for the reason that the facts were known to the department. In this regard, we find that in the impugned order at para 18, the learned Commissioner has stated that there is no dispute about the fact that the department came to know about non-payment of Service Tax on the said Inspection and Certification service provided by the appellants to ONGC in the year 2005. It is also on record that even though the appellants had claimed that the value of exempted services were indicated in their Service Tax returns, the learned Commissioner had went ahead and confirmed the adjudged demands for extended period on the ground that those declarations made by the appellants does not give the information about the type of services provided and the nature of transaction and that the facts of non-payment of service tax on the impugned services to ONGC was suppressed from the department till the investigations were initiated by DGCEI. In this regard, we find that the impugned order at para 4 have recorded that a number of correspondences 16 ST/85965/2016 have been exchanged between the appellants and the department on various dates viz., 12.01.2005, 27.01.2005, 27.04.2005, 05.05.2005, 10.06.2005, 26.10.2005, 08.11.2005, 16.11.2005, 01.12.2005, 03.02.2006, 06.02.2006 26.02.2006, 12.04.2006, 08.05.2006 and 17.05.2006. We find from the gist of the subject given about these correspondence in the impugned order, that copies of various documents including Balance Sheet, Profit & Loss accounts, Annual Reports, Income tax returns, Tax Audit reports, contract with ONGC, value of services, business activity profile etc. have been submitted by the appellants to the department. Considering the above factual position, particularly when all the relevant details have been furnished by the appellants to the department, we are of the view that the impugned order in confirmation of adjudged demands in respect of extended period cannot be sustained in law.
13. In view of the above discussions and findings recorded in the preceding paragraphs and on the basis of the decisions in the higher judicial forum, we are of the considered view that the impugned order of lower authorities in confirming the service tax demands and imposition of penalty on the appellants are not sustainable in law and therefore the appeals filed by the appellants deserve to be allowed.
14. In view of the above, we set aside the impugned order passed by the Commissioner, Service Tax-VII, Mumbai Zone, and allow the appeal of appellants with consequential relief, if any.
(Operative portion of the order pronounced in Court) (S.K. Mohanty) Member (Judicial) (M.M. Parthiban) Member (Technical) Sinha