TMI Blog2016 (11) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... ri. D. Nagvenkar, ADC (A.R.) for the Respondent Per : Ramesh Nair The fact of the case is that appellant has entered into agreement with M/s. Gujarat Paguthan Energy Corporation Ltd(GPEC). which earlier known as Gujarat Torrent Energy Corporation Ltd to operate and maintenance of their power plant situated at Baruch Gujarat and for such operation and maintenance the appellant received lumpsum amount in consideration from M/s. GPEC. This lumpsum consideration was divided into two parts in ratio 55:45 representing consideration for operation and maintenance respectively. Appellant has been paying service tax on maintenance charges w.e.f. 16-6-2005 under Management Maintenance or Repair Service but did not pay service tax on operation charges. In the adjudication, the Adjudicating authority has confirmed the demand of service tax on the charges for operation of the plant under the head of Management, Maintenance or Repair Service. Being aggrieved by the impugned order, appellant filed this appeal. 2. Shri. Tarun Jain, Ld. Counsel along with Shri. Bhupendra Singh, Ld. Advocate appearing on behalf of the appellant submits that the issue has been considered in various judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customers or vendor, public relation services, management or supervision and includes services as a commission agent, but does not include any information technology service and any activity that amounts to manufacture within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944. As per this definition, any activity involving manufacture of any goods within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944 is not subject to tax under the head Business Auxiliary Service. It is a settled position that electricity is goods manufactured in the sense envisaged in clause (f) of Section 2 of the Central Excise Act, 1944. The Hon ble High Court of Orissa in Orient Paper Industries Ltd. v. Orissa State Electricity Board (supra), had upheld imposition of Central Excise duty on electricity, electricity being manufactured goods as defined in the Central Excise Act 44. Therefore, we find that the argument of the appellants that the services involved are not liable to tax as Business Auxi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot render any advice to improve the functioning of the working system of another organization. They ran the facility and organized the required materials through the owner and services of their own staff. These activities did not constitute services to any other person/organisation. These impugned functions were incidental to their main activity of producing power. The O M contract is a works contract and it is bad in law to vivisect it and tax certain activities covered by the contract. A reading of the whole contract makes it plain that the same was intended to ensure generation and supply of power as per PPA and not for rendering any service to the owner. 32. As we have decided that the appellants did not render any taxable service we do not think it is necessary to examine the question relating to valuation of the impugned services or the question whether the demands were made in time. Accordingly we allow both the appeals. Rolls Royce Industrial Power(I) Ltd 3. We have perused the records and have heard both sides. Learned Counsel representing the appellant took us through the clauses in the agreement to show that the appellants contract was not for render ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd maintenance agreement dated 14-3-95. The appellant had taken over the plant and was operating maintaining it in terms of the agreement. A perusal of the agreement makes it clear that it is a contract between owner and an operator. The terms of the contract vest complete freedom and responsibility on the appellant, without any interference by the owner. The owner s right is restricted to entry and access, to be satisfied that the operation is carried out according to standards. He also receives reports about the relevant aspects of operation, status and output. The payment for operation and maintenance are determined under the various clauses of the contract. In addition to the lump sum payment, it also provides for bonus and penalty. The terms of the contract do not envisage or involve providing any consulting or engineering help to the owner. The operator is fully autonomous and responsible for the performance of operation and maintenance. Whatever engineering issues are involved, it is for the operator to find solutions for, and attend to in the course of operation and maintenance. He is not required to render any advice or to take any orders from the owner. He cannot pass o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso. There is no management consultancy in the facts of the present case and the demand is clearly beyond the scope of the statute. 9. In the result, the impugned order is set aside and the appeal is allowed with consequential relief to the appellant. The above judgment is upheld by the Hon ble Supreme Court. Global S.S. Construction Pvt Ltd 3. On perusal of records, it transpires the issue that falls for consideration is whether the respondent herein has provided the services of maintenance or repair for the period prior to 01.05.2006 and for the subsequent period under Management, Maintenance or Repairs services during the period 2005-06 to 2009-10. 4. The respondent herein had entered into a contract with M/s ONGC for operation of cooling water system, operation of raw water plant at Hazira Plant, operation of MP boilers operation of IG plant compressed Air system. It is the case of Revenue that respondent had provided services under Management, Maintenance or Repairs services, hence the same has to be taxed. 5. The findings of the adjudicating authority while dropping the proceeding initiated by show-cause notice are very relevant, which are reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assigned the work relating to Management, Maintenance or Repair. The; running maintenance of mechanical equipments during operation of plant is only an ancillary activity to the main activity of Operation of Plant. As per contractual obligations, the Noticee is neither required nor expected to provide any service to M/s ONGC in respect of Management, Maintenance Or Repair of any other equipment except the equipment which is used for Operation of Plant. The contracts involve some other minor functions/activities as underi) Monitoring of lube oil level in rotary equipment, ii) Running maintenance of mechanical equipments in work areas, iii) Dechoking, depressurizing, air blowing and inertisation of pipelines and tanks as and when required, fixing connection of hoses, cleaning of pipes/drainage under plant premises of the area, attending leakages on flanges including tightening of bolts, plugs etc. iv) Operation of battery limit valves of the work area, dosing of chemicals/special chemicals, preparing documents for Cooling Water Systems in given formats, providing calculation devise to shift operational staff for computation and process control and keeping/disposing of scrap material/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 would not be correct legal. Observation made by the http://www.vatinfoline.com/data/SERVICE TAX/2016/2016-VIL-240... 2 of 3 9/29/2016 12:00 PM Hon'ble High Court Bombay in the case of Indian National Ship Owner Association Vs. Union Of India [2009 (14) STR 289 BOM] that introduction of new entry and inclusion of certain services in that entry, would presuppose that there was no earlier entry covering the said services is squarely applicable in this case. Ratio of other judgments relied upon by the Noticee also are found to be applicable in the instant case. It is seen that as against above reproduced factual finding, the appeal filed by the Revenue is not contradicting the factual matrix. The grounds of appeal is basically persisting on the argument that the action of the respondent is management of immovable property. We find that the finding recorded by the adjudicating authority are correct as nothing is brought to or notice which indicates that the respondent were engaged for and doing Management Maintenance or Repairs services. 6. In view of the foregoing, we hold that the impugned order is correct and legal and does not suffer from any infirmity. The appeal is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orized to do so. In the case in hand, the definition will not apply as the maintenance or repair service are not for management or repair service, but these are consumed by them for smooth functioning of bulk handling plant. 8. As regards the tax liability for the subsequent period from 01-05-2006, we find that the bulk handling plant was handed over by ONGC to respondent for operation and completing the contract to ONGC in rendering such activities, the respondent undertakes the maintenance or repair services which in our view are for self and the services of management maintenance or repair are not attracted as the same is not provided to any client. It is to be further noticed from reading of the scope of work as per agreement, principal job entrusted to respondent is in connection with smooth operation of bulk handling plant for obtaining desired results from the bulk handling plant. The agreement between ONGC and respondent does not indicate that respondent was required to provide any service relating to Management, Maintenance or Repair Services to ONGC, nor does the agreement indicate any separate fees is to be http://www.vatinfoline.com/data/SERVICE TAX/2016/2016-VIL-263... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rator i.e. the appellant s contract with the owner is to operate the power plant for generation of energy and not merely to maintain it. The appellant s contention is that the management or maintenance of the plant was only incidental to the activity of operating the power plant to generate electricity and steam. The Adjudicating Authority, while conceding to the fact that services rendered by the appellants were wrongly classified under Consulting Engineer as they did not provide any such service. But he (Adjudicating Authority) has jumped on to his hurried conclusion that as per their Agreement entered with the owner, they had provided the service of Management Maintenance and Repair Services as defined under Section 65 of the Finance Act, 1994 and that the appellant s claim that their services are not covered under Service tax is not correct and therefore not acceptable. 24. I do not find any merit in the Adjudicating Authority s above contentions. For the sake of illustration, I may observe that if someone hires a driver to drive one s vehicle; the driver s prime duty is to drive the vehicle though its cleaning, maintenance, proper up-keep etc. will be incidental to his pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the department itself as pointed out supra. Hence, refund of service tax is held to be admissible on its merit. 27. So far as the question of unjust enrichment involved in the present refund claim is concerned, I may agree with appellant s contention that in terms of Article 6.3.3 of the O M Agreement. The operator free payable for each operating year was inclusive of the Operator s Income Tax and any and all other taxes as applicable on such free but was exclusive of service tax at the rates as applicable on such fee at the time of invoicing such fee. Such service tax shall be shown and claimed separately by the operator. No doubt, the appellants have admittedly charged the element of service tax separately in their invoices issued to the owner from time to time but this amount has not been charged/ realised from any other person save and except an amount of ₹ 3,36,278.00. This fact has been duly disclosed by the appellants in their refund claim in Form-R submitted to the Assistant Commissioner of Service tax, Division-IV, Mumbai and further admitted in course of personal hearing held on 10.10.2012 before me. Therefore, the refund claim for a total sum of ₹ 24,09 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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