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2016 (8) TMI 852 - AT - Service TaxRefund of service tax paid inadvertently on non-taxable services - Operation and Maintenance Management of Well Stimulation Vessel - period from 16.6.2005 to 31.3.2006 - Classification of service - Ship Management service or Maintenance or Repair services - Whether the composite contract cannot be vivisected for taxing the taxable components repair and maintenance - Valuation - inclusion or reimbursement of expenses - difference of opinion - Majority Decision Held that:- the tax levy is not crystallized by the mere execution of a contract promising to render service on the agreed terms; section 65(105(zzg) makes it necessary that some repair or maintenance must have been undertaken for a consideration for the tax liability to arise. In proceeding to deny the claim of the assessee for refund, the undertaking, if any, of ‘repairs or maintenance’ has not been ascertained by the original authority. The operator of a ship or vessel under an O&M contract is also bound to maintain the vessel in a sea-worthy manner in the course of its operation by husbanding her with due diligence and care; such an obligation may not even require maintenance as contemplated in section 65(64) of Finance Act, 1994. Not to be overlooked also is the performance of service on goods or equipment with ‘goods’ having the specific import supra. It may not be entirely correct in describing a ship or vessel as equipment though equipment may be fitted on board rendering the ascertainment thereof by the original authority to be that much more complex. It is also moot whether a ship or vessel may, with some degree of accuracy, be described as ‘goods.’ Logically, the oceans and the seas are equivalences of land and the inextricability of a vessel or ship from the waters should bring them within the ambit of immoveable. Ships before launch and for breaking up are goods but vessels or ships that are afloat are not goods except for the time that they are the subject of a sale agreement. That ships, vessels and motor vehicles need not exclusively be goods is also apparent in section 2 of Customs Act, 1962; they could also be conveyances. As conveyances, ships/vessels and motor vehicles move easily on water or land but, not being goods that are amenable to severance from land/water, are not distinguishable from immoveable property. Consequently, the legislative intent to tax 'repairs or maintenance' of conveyance under section 65(105)(zzg) of Finance Act, 1994 may not be so apparent. Motor vehicles were specifically excluded from its purview owing to existence of another taxable entry on 1st July 2003. Exclusion may not have been considered to be necessary for ships/vessels because the taxable entry came into effect on a much later date. It is clear that the later entry was not carved out of an existing entry; neither was there any partial recasting of an existing entry to bring any part of any existing entry within the newer entry. The two entries continue to have an independent existence after 1st May 2006. Judicial pronouncements have made clear that the extent of legislative intent to tax in such situations is easily ascertainable. Classification of service in question under ‘Ship Management Service' under Section 65(95a) upheld. The service provided during the disputed period from 16.06.2005 to 31.03.2006, is not taxable, being composite service, and cannot be vivisected, also on the ground that 'Ship Management Service' is not taxable prior to 01.05.2006. Refund allowed with interest - Decided against the revenue.
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