TMI Blog2020 (9) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... by Mr Mondal, evidence of such is not available; nevertheless, it would appear that the contention arising from the delivery, and the handing over, having occurred outside the country was not considered before crystalizing the demand. Furthermore, it is claimed that two other taxable activities would, in terms of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, not be leviable to tax as these were performance-based and to be taxed accordingly. These appear to be pleadings made for the first time ever. Naturally, these need to be attended to before the appellate jurisdiction can decide on the correctness, or otherwise, thereof. Imposition of various penalties - HELD THAT:- The adjudicating authority itself appears to have been uncertain of the provision under which tax levy arose; attribution of more certainty to the appellant company does not appear to be equitable. In such circumstances, it is difficult to conclude, with absolute sureness, that intent to evade taxes was manifest in the actions of the appellant company. No evidence to the contrary is adduced in the show cause notice. The site of the revamp, far beyond the territorial water ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , M/s Sarku Engineering Services SDN BHD of Malaysia, entered into turnkey contract on 22nd February 2006 with M/s Oil Natural Gas Corporation Ltd for the revamp of 26 platforms at Mumbai High South field , on acceptance of bid of ₹ 326.83 crores, and project office closed, as intimated to Reserve Bank of India in letter dated 18th October 2013, on completion. Two show cause notices were issued to them on 22nd October 2014 for recovery, under section 73 of Finance Act, 1994, of ₹ 9,19,07,863 as tax dues arising from rendering of erection, commissioning or installation service between April 2009 and March 2012 under the said contract as well as ₹ 2,88,93,108 that was alleged to have been wrongly availed as CENVAT credit and of ₹ 18,23,00,608 allegedly due as deemed provider, under section 66A of Finance Act, 1994, on services provided from outside India to the appellant. 2. Both the notices were disposed of by common order-in-original no. 18-19/ST-VII/RS/2015 dated 28th August 2015 of Principal Commissioner of Service Tax, Mumbai-VII which is now impugned for us on several grounds. Revenue is in appeal against the invoking of second proviso to secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax compliance cannot alter the liability of the recipient of output service under statute and submits that decision of the Hon ble Supreme Court in Rashtriya Ispat Nigam Ltd v. Dewan Chand Ram Saran [2012 (26) STR 289 SC] has been erroneously pressed into service on behalf of the Government which is not a party to the impugned contract. He relies upon circular no. B1/6/2005-TRU dated 27th July 2005 of the Central Board of Excise Customs, clarifying the expressions business establishment and fixed establishment , and UK VAT Notice 741A (Place of Supply of Services) to buttress his submissions on being a provider of service from outside India. The second contention of Learned Senior Counsel is that the service enumerated for taxability in section 65(105)(zzzza) of Finance Act, 1994 could not have been the basis of demand as that had not been proposed in the show cause notice and that the activity did not merit the nomenclature owing to non-leviability of state levy which is of essence in works contract for which the reliance was placed on the decision of the Hon ble High Court of Gujarat in Larsen Toubro v. Union of India [2017 (52) STR 457 (Guj)] and of the Hon ble High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Petronet LNG Ltd v. Commissioner of Service Tax, New Delhi [2013-TIOL-1700-CESTAT-DEL], that was followed in Reliance Industries Ltd v. Commissioner of Service Tax [2014 (36) STR 820 (Tri-Mumbai)], in support thereof. A further submission of his is that several of these services had been performed entirely outside India and, with particular reference to survey and exploration of mineral, oil and gas service and technical inspection and certification services , covered by rule 3 (ii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. 6. Mr KM Mondal, Learned Special Counsel representing Commissioner of Service Tax, pointed out that the impugned order itself makes it clear that the appellant company could not seek the shelter of section 66A of Finance Act, 1994; according to him, the adjudicating authority has taken note of the registration under Service Tax Rules, 1994 specifying an address in India as well as paragraph no. 3.4.2 of the contract assigning the obligation of discharge of tax to the appellant company. He also points out that the adjudicating authority has, fairly, dropped a portion of the demand pertaining to output serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the recipient, as deemed provider, owing to the actual provider not having a business or fixed establishment in the country. The logic underlying the fastening of tax liability provided from outside India on the recipient in India, governed by section 66A of Finance Act, 1994 read with Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, was deliberated upon by the Tribunal in Coastal Gujarat Power Ltd v. Commissioner of Service Tax, Mumbai-I [2016-TIOL-2925-CESTAT-MUM] to hold that 8.. We see from provision that there are two elements to the fiction with the existence of both as a prerequisite for the provisions of the Chapter to apply. These are the fiction of taxable service and the fiction of recipient being provider. Services originating outside the country, with the provider being jurisdictionally non-existent, inherently renders the circle of transaction incomplete. The free ends of the circle are brought together by deeming the activity as taxable and deeming the recipient be the provider. In the domestic context, the contrarian mechanism of the recipient pays was in vogue though by transposing the object of tax.... With this creati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inserted as proviso in section 66A upon incorporation in Finance Act, 1994. Obviously, it was flawed provenance that inspired the legislated substitution and any clarification in that flawed context cannot escape taint sufficiently to advance the proposition for exclusion claimed on behalf of the appellant company by such reference. In the nature of the contractual undertaking, specific to the present dispute, it is inconceivable that the service could have been rendered without the physical presence, in some form, of the overseas provider in India. Hence, the recourse to section 66A of Finance Act, 1994 is neither an option for the tax authority nor for us to brook as aiding the appellant company. 11. Both sides have referred to the obligation of tax compliance embodied in the contract, with Mr Mondal, referring to the decision in re Rashtriya Ispat Nigam Ltd, positing that the appellant company cannot be allowed to alienate itself from contractual commitment. On the other hand, Mr Sridharan refers to that very clause for the proposition that the obligation is limited to tax levies as on the date of offer of price bid. We are afraid that too much emphasis, and not particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cating authority, it is not open now to claim that the alternative entry had been invoked without their knowledge. On these facts, the decisions cited by Learned Senior Counsel on travelling beyond the show cause notice will not come to their assistance. The taxing of the impugned activity as provision of works contract service does not, therefore, detract from the legality of the demand. 13. Learned Senior Counsel has contended that acknowledgment as works contract service is predicated upon subjecting the material component of the composite contract to levy of tax by the jurisdictional state government for which reliance is placed on the decision of the Hon ble High Court of Bombay in re Pure Helium (India) Ltd. We find that the referred decision disputed the escapement from levy of Central Sales Tax, on the admitted lack of jurisdiction of the State of Maharashtra, on supplies effected to the offshore platforms of Oil and Natural Gas Commission (as it then was) in Bombay High (as it then was) and, with the inter-state movement, thereby, inchoate, the provisions of the said law was held to be inapplicable. Undoubtedly, the present dispute pertains to levy but, nonetheles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is not provider of service from outside India but an assessee within the meaning of Finance Act, 1994, the correctness of taxability, under challenge by the appellant company, must be decided in terms of section 66A of Finance Act, 1994 read with Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. The primary submission of the appellant company is that the services procured from outside the country had not been specified in the notice which, according to Mr Sridharan, is a requirement as decided by the Tribunal in re United Telecom Ltd to counter which Mr Mondal places reliance on the decision in re Indus Integrated Information Management Ltd and in re JK Steel Ltd. We find from the records that the appellant company was not exactly hapless in challenging the proposed liability with factual rebuttal of the several elements of the demand. To that extent, there can be no controversy that the notice was not lacking in means to confront the demand. Some of the discrepancies pointed out by appellant company were deliberated upon in the impugned order. It is contended on behalf of the appellant company that the substantial portion of the demand, relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x and ₹ 11,79,54,465 on account of interest. As deemed provider of service, the appellant company, upon discharge of tax liability on services procured from outside India, is eligible for CENVAT credit. There is, additionally, a further claim of eligibility for availment of ₹ 2,88,93,108 that was denied by the original authority. On this set of facts, it would appear that, in conjunction with amounts appropriated in the impugned order, no tax liability remained unpaid on the date of notice warranting closure of proceedings without issue of notice merely for imposition of penalty even in circumstances of lack of clarity on the extent of the taxability. 18. Hence, in terms of section 73(3) of Finance Act, 1994, with no dues apparently pending, there is no scope for imposition of penalty under section 78 of Finance Act, 1994. We, therefore, set aside the penalties imposed on the appellant company. Appeal of Revenue against the restricted penalty is, thus, infructuous and is dismissed. 19. The claim of the appellant to lower tax liability on output service, owing to eligibility for abating of material cost from the taxable value of services, must be responded to. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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