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2015 (8) TMI 594 - CESTAT MUMBAI

2015 (8) TMI 594 - CESTAT MUMBAI - 2016 (41) S.T.R. 203 (Tri. - Mumbai) - Demand of service tax - Mining and minerals services - Imposition of interest and penalty - Held that:- hiring of rigs to ONGC by making payment to foreign entities is liable to be tax from 16.5.2008

From the records we find that the appellant has discharged entire service tax liability which was charged by them to ONGC. When the appellant has already paid the amount collected by them from ONGC to the Government .....

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eal No. ST/407/2010-Mum - Final Order No. A/1928/2015-WZB/STB - Dated:- 15-5-2015 - M V Ravindran, Member (J) And P S Pruthi, Member (Technical),JJ. For the Appellant : Shri S S Gupta, CA For the Respondent : Shri Devendra Nagvenkar, Addl. Commissioner (AR) ORDER This appeal is directed against Order-in-Original No. 08/STC-I/BR/10-11 dt. 20.05.2010. 2. The relevant facts that arise for consideration are appellant are registered under the category of Mining of Mineral Oil or Gas service on which .....

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such conclusion, a show cause notice dt. 23.9.2008 was issued for demanding service tax liability for the payment made by the appellant during period July 2007 to September 2007 to the foreign parties. The appellant contested the show cause notice on merits inter alia contesting the duty liability as also the imposition of penalty on the ground that they are not service providers. The adjudicating authority after following the principles of natural justice held against the appellant and passed .....

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d, on service tax amount confirmed in (5.1) above, under Section 75 of the Act. 5.3. I hereby impose the penalty on the Noticees under Section 76 of the Act, which shall be ₹ 200/- (Rs. Two hundred only) for every day during which such failure continues or at the rate of two percent (2%), of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax. The penalty shall, however, not exceed .....

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h the show cause notice and Order-in-Original. He would submit that the classification of the services as made by the adjudicating authority is under the supply of tangible goods for use . It is his submission that the said services were tangible only from 16.5.2008 and they have discharged the service tax from that date. It is his submission that the service tax liability under the reverse charge mechanism is also applicable to the provisions of the service tax liability on the supply of tangib .....

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nt of the service tax liability as the service provided by the appellants were to ONGC and ONGC has paid the tax to him; it is the submission that the dispute today before the Tribunal is regarding the payment of interest on the said amount of tax as also penalties imposed. It is his submission that service tax liability itself does not arise, which is enough to set aside the interest and the penalties imposed. It is his submission that appellants had discharged entire amount of the service tax .....

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collected the amount of service tax from the ONGC and did not deposit with the Government which is evident from the fact that they have not paid ₹ 4.92.lakhs approximately. He would submit that the collection of service tax from ONGC under the category of mining and minerals service itself is enough for the Revenue to demand interest and penalty, as there is no dispute as to service tax liability on the appellants under the provisions of Section 66A of the Finance Act, 1994. He would subm .....

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ength by both sides and perused the records. 5. The undisputed facts are that the appellants have paid an amount to foreign parties for hiring the drilling rigs and enlisted the same to ONGC by way of charter hire. Revenue authorities are of the view that the amounts paid by the appellant to such foreign parties is taxable under the provisions of Section 66A of the Finance Act, 1994 under the category of mining and minerals services. 6. At the outset, we will record that the issue on merits as t .....

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as well as in the international waters) with their various vessels that include offshore drilling rigs, offshore support, vessels, harbour tugs and construction barges. The vessels provided by the members of the 1st petitioner carry out various jobs, inter alia, as enumerated hereunder : (a) The Offshore Support Vessels carry out various types of jobs like, anchor handling, towing of vessel, supply to rig or platform, diving support, fire fighting and safety support in designated and non-design .....

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05) of Section 65 of the Finance Act, 1994 to be effective from 16-5-08 to tax service in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliance. The 2nd respondent by Circular bearing No. M.F. (DR) Letter D.O.F. No. 334/1/2008 TRU dated 28-2-08 clarified the scope of this entry as covering inter alia, the supply of vessels without giving legal right of p .....

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session and effective control, not being treated as sale of goods, is treated as service . After considering the detailed submissions made by both sides; Hon ble High Court has held that the service tax liability under the category of supply of tangible goods would be effective from 16.5.2008 and prior to that the same was not taxable. The ratio is in para No. 34, 37, 38 & 48 which with respect we reproduce: 34. We are concerned here with the scope of entry (zzzy) inserted into Section 65(10 .....

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rvices rendered by them are covered by this new entry but their contention is that those services i.e. Marine Logistic Services are not covered by entry (zzzy). 37. Entry (zzzzj) is entirely a new entry. Whereas entry (zzzy) covers services provided to any person in relation to mining of mineral, oil or gas, services covered by entry (zzzzj) can be identified by the presence of two characteristics namely (a) supply of tangible goods including machinery, equipment and appliances for use, (b) ther .....

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ing big vessels in and out of the harbour and for husbanding main fleet. They give vessels on time charter basis to oil and gas producers to carry out offshore exploration and production activities. The right of possession in and effective control of such machinery, equipment and appliances is not parted with. Therefore, those activities clearly fall in entry (zzzzj) and the services rendered by the members of the 1st petitioner have been specifically brought to the levy of Service Tax only upon .....

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of entry (zzzzj), the services rendered by the members of the 1st petitioner were not taxable. Creation of new entry is not by way of amending the earlier entry. It is not a carve out of the earlier entry. Therefore, the services rendered by the members of the 1st petitioner cannot be brought to tax under that entry. 48. Applying the above conclusions to the instant case, we hold that the services rendered by the members of the 1st petitioner are either pre-mining or post-mining activities. They .....

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zzy) was introduced to comprehensively bring under the service tax net activities having a direct nexxis to mining activities. Entry (zzzzj) is not a carve out of entry (zzzy). Both entries are independent. Entry (zzzzj) was not inserted into the Finance Act by amending entry (zzzy). It is not possible to invent a remote connection of the services rendered by the members of the 1st petitioner to mining activities and hold that they fall in entry (zzzy). Entry (zzzzj) is not a specie of what is c .....

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