Custom, Excise & Service Tax Tribunal
M/S Mineral Exploration Corporation ... vs Commissioner Of Central Excise, Nagpur on 19 November, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. ST/189/08 & ST/22/09 (Arising out of Order-in-Original No. 13/ST/2008/C dated 26.5.2008 passed by the Commissioner of Central Excise & Service Tax, Nagpur). For approval and signature: Honble Shri Anil Choudhary, Member (Judicial) Honble Shri P.S. Pruthi, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== M/s Mineral Exploration Corporation Ltd. Appellant Vs. Commissioner of Central Excise, Nagpur Respondent Appearance: Shri Ashok Chandak, C.A. with Shri Shailendra Jain, C.A. for Appellant Shri D. Nagvenkar, Addl. Commissioner (AR) for Respondent CORAM: SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) SHRI P.S. PRUTHI, MEMBER (TECHNICAL) Date of Hearing: 18.11.2014 Date of Decision: 18.11.2014 ORDER NO. Per: P.S. Pruthi
The appellants are in appeal against the impugned Order-in-Original in which demand of Service Tax has been confirmed of Rs.4,36,88,734/- along with appropriate interest and penalties under Sections 76, 77 and 78 of the Finance Act, 1994.
2. The facts are that the appellant is Public Sector Undertaking (PSU) unit owned 100% by the Government of India. They undertake two kinds of activities. First, they provide exploration report based on survey and detailed expression of mineral deposit for which they get grant in aid from the Govt. of India. This is called preliminary exploration. The second activity is exploration work in respect of which they provide detailed survey and exploration reports on contractual basis to various clients. On the second activity, Service Tax is paid by them.
2.1 As regards the first activity, these reports are kept by them and may be sold to private users later, on payment of fees on which Service Tax is also being paid. The demand of Service Tax has been confirmed only on the reports prepared by them on the basis of exploration work and the activity undertaken has been classified by Revenue under the Scientific and Technical Consultancy Services.
3. Heard both sides.
4. The contention of the appellant is that they carry out work in the national interest to know the location of mineral deposit so as to bridge the gap between the initial discovery and the detailed exploration of mineral deposits. On the basis of their work, they prepared detailed reports which are retained by them. The expenses involved in this activity are reimbursed by the Govt. of India in the form of Grant-in-Aid, which is reflected in their Annual Reports as well as outcome budget of the Ministry of Mines. They showed the Annual Reports for the financial years ending on 31st March of every year. The Annual Report, at Schedule (L) under the head Income from Work; reflects the income on the activities under various sub-heads such as drilling, mines, geology etc. 4.1 The contention of the learned Counsel is that no service has been rendered by the appellant to the Government because they are merely undertaking work on basis of 100% reimbursement of expenses involved in the work. He also stated that the department has wrongly classified the activity under the Scientific or Technical Consultancy Services, whereas their activity is more akin to the Service in relation to Survey and Exploration of minerals falling under Section 65(105)(zzv), which came into force on 10.9.2004. According to him, the demand relating to the period prior to 10.9.2004 is clearly time barred. He also states that initially, on the asking of the department, they had paid Service Tax upto 31.3.2002. However, later on the advice of their Ministry i.e. Ministry of Mines, they discontinued the payment of Service Tax as activity undertaken by them is not a service under the Service Tax law.
5. Heard the learned AR. While reiterating the finding of the adjudicating authority, he emphasized that there is an element of service involved in the activity undertaken by the appellant for the Government. According to him, raising of bills by the appellant and reflecting the receipt of income thereof in the balance-sheet, indicates that there has been consideration for the services provided. He also draws attention to Department of Revenues Circular F.No. B-11/1/2001-TRU dated 9.7.2001, where the following points were clarified in respect of consultancy provided by Department, PSU, Public funded Research Institution: -
Point raised for clarification Clarification Many public funded research institutions receive grants or aids from the Government for conducting research /project work. Whether such activities would be covered under the levy?
In the facts of this case, no service is rendered to any one. Hence the question of payment of service tax does not arise. However, if they render service to anyone on payment basis, service tax will be payable on such services.
Whether the service tax will be leviable on consultancy provided to government departments, public sector undertakings?
If scientific or technical consultancy is provided to a government department for which consultation fees are received, then service tax would be applicable.
6. We have carefully considered the rival contentions.
6.1 In our view, the three central questions, which need to be answered, are
(i) Whether the service provided by the appellant is covered under Scientific and Technical Consultancy Services or under Survey and Exploration of Mineral Service.
(ii) Whether the activity undertaken on the basis of 100% Grant-in-Aid received by the appellant from the Govt. constitutes a service provided to the Government.
(iii) Whether, if the service is considered to be provided, any consideration was received by the appellant from the Government of India for the service provided.
6.2 As regards the first issue, we have noted the definition of the services in contention. They are reproduced below for convenience: -
"Scientific or technical consultancy" means any advice, consultancy or scientific or technical assistance rendered in any manner, either directly or indirectly, by a scientist or a technocrat or any science or technology institution or organization, [to any person], in one or more disciplines of science or technology. Survey and exploration of mineral means geological, geophysical or other prospecting, surface or sub-surface surveying or map making service, in relation to location or exploration of deposits of mineral, oil or gas. It is quite obvious that keeping in mind the activities undertaken by the appellant, the service is classifiable under the Survey and Exploration of Mineral Service. The question which arises is whether the activity before 10.9.2004 i.e. prior to introduction of the Survey and Exploration Service would be covered under the Scientific or Technical Consultancy Service. The definition of this taxable service is a service provided by a Scientist or a Technocrat or any Scientific or Technical Institution or Organization. It is clear that the appellants are not a Scientific & Technical Institution or Organization. If we were to accept otherwise, every company which undertakes technical consultancy as many companies do will fall under this definition, which is obviously not correct. Therefore, we hold that the activity undertaken by the appellant is covered under the Survey and Exploration of Mineral services for the entire period.
6.3 Coming to the issue whether any service has been provided by the appellant, we are convinced by the argument of the learned Counsel that when the activity is undertaken by them on the basis of 100% grant received from the Government and the grant is totally expended on the expenses involved under various activities as reflected in the balance sheet, it cannot be said that any service has been provided. For any service, there has to be a service provider, a service receiver and consideration. In the present case, the records show that no consideration has been paid by the Government to the appellant for undertaking the work of Survey and Exploration of Mineral and preparation of the detailed reports thereof. What has been received from the Government is only the reimbursement of the actual expenses involved. Boards Circular (supra) also clarifies that if Scientific or Technical Consultancy Service is provided to the Government Department for which consultation fees are received, then Service Tax would be applicable. In the present case it has not been shown by the Revenue that any consultation fee has been received by the appellant. It is also not a matter of dispute that the reports prepared by the appellant on the basis of Grant-in-Aid received are kept with them. As and when the situation or opportunities arise, these reports may be sold to clients or customers on payment of charges and Service Tax is paid on such charges. Clearly there cannot be duplication of Service Tax payment. If the Revenues contention is accepted that the Service Tax should be paid by the appellant for preparation of Consultancy Report and again when the reports are sold to parties for consideration. Therefore, we hold that there has been no service provided by the appellant to the Ministry of Mines.
6. Having decided the matter on merits, there is no requirement of taking up the issue of cum-duty payment and time limitation and penalties. Accordingly, the adjudication orders are set aside and the appeals are allowed with consequential relief, if any.
(Dictated and pronounced in Court)
(Anil Choudhary) (P.S. Pruthi)
Member (Judicial) Member (Technical)
Sinha
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