TMI Blog2023 (4) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... to be shared between the Government and the PI Holder in accordance with the pre-defined percentage computed with reference to an investment-multiple on the cost incurred for undertaking the joint operation. This Tribunal has in the case of B.G. EXPLORATION PRODUCTION INDIA LTD. VERSUS COMMISSIONER OF CGST CEX., NAVI MUMBAI [ 2021 (10) TMI 306 - CESTAT MUMBAI] has considered a similar arrangement under another PSC between the Government of India and B.G. Exploration and Production India Ltd., ONGC and the appellant and after taking note of the policy underlying the execution of the PSCs as also the terms and conditions of the same, concluded that there was a joint venture between the GOI and the PI Holders. It is also agreed with the observations of the findings of this Tribunal in the other decision of BG EXPLORATION PRODUCTION INDIA LTD VERSUS COMMISSIONER OF SERVICE TAX (AUDIT-I) MUMBAI [ 2020 (10) TMI 579 - CESTAT MUMBAI] wherein, it has been held that the joint operations undertaken under the PSC does not result in rendition of any service as there is no beneficiary entity outside the PSC to which the joint operation are subordinated. It has been held that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or retain such employees, employees of affiliates, contractors, consultants and/or agents as are reasonably required to conduct joint operations. The Operator has to also determine the hours of work and the compensation payable to such employees for conduct of Joint Operations. It is an admitted position, both in the notice as well as in the impugned order that there is an Unincorporated Joint Venture (UJV) between the different PI Holders under the PSC. The dispute involved in the present case is as to whether, the expenditure incurred by the appellant, in respect of its employees and assets which were deployed for undertaking joint operations at the blocks, where it was acting as the Operator, and which was recorded as a cost incurred for undertaking joint operations, could be said to be consideration for rendering taxable services of supplying manpower and as also providing support services during the period April 2014 to June 2017. The department has pursuant to an investigation conducted issued Show Cause Notice dated 30.9.2019, which culminated in the adjudication order dated 29.1.2021 (impugned in the present proceedings), where under the demand of service tax, interest and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat PSC is a joint venture, where the co-venturers i.e. the Government of India and the other PI Holders have come together for a common cause of exploring and exploiting the natural resources viz: crude and natural gas and earning profits therefrom. Each co-venturer is acting on its own count and in the furtherance of the business of the venture. The cost incurred in respect of employees deputed as also the assets deployed for the conduct of the joint operations is nothing but the appellant s share of capital contribution to the Joint venture and consequently, there was no basis to hold that the appellant was rendering services to the un-incorporated Joint Venture of the PI Holders. Alternatively, it was submitted that the appellant had acted for and on behalf of the PI Holders and had entered into the employment contract on behalf of each of them with the employees and the share attributable to each of them was recorded as an expense against each of them. In other words, it was submitted that there was neither any service nor any consideration involved; and accordingly, there would be no liability to service tax. 2.4 The Ld. Counsel also placed reliance on the decisions of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractors would have charged service tax. The activity being undertaken by the appellant was similar to the activity being undertaken by the contractor and was accordingly a service rendered to the UJV. 3.1 It was further submitted that the decision in the case of B.G. Exploration (supra) and Production India Ltd., reported in 2021 (49) GSTL 143 (T) could not be relied upon as a binding precedent, as there was no evidence produced to demonstrate that the terms of the Joint Venture with which the Tribunal was concerned with in that case were similar to the terms of the JV executed by the appellant. 3.2 Insofar as the aspect of limitation is concerned, it was submitted that the appellant had suppressed from the department the value of taxable services as also the tax payable thereon and consequently, the extended period of limitation was invokable. 4. Heard both sides and examined the case records, including the written notes filed during the course of hearing of the appeal. 5. We find that the adjudicating authority has in para 114 of the impugned order has rightly framed three issues which arise for consideration in the present case namely: (a) Whether any service has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties is to explore, develop and produce the maximum amount of mineral resource for commercial sale. 8. We have examined the relevant documents and records and find merit in this submission of the appellant. In our view, the PSC is a classic example of a public private partnership, where each of the co-venturers contributes to the success of the venture in their own way and work towards enhancing the benefits flowing therefrom. Under the PSC, the Government of India brings on the table the block which could potentially hold crude and/or natural gas, while the technical and financial contribution is made by the PI Holders. There is also a management committee which is constituted comprising of members from the Government of India as also the PI Holders which has to interalia approve the annual work programs as also the budgets for undertaking the same. Further, the profits arising from the venture are to be shared between the Government and the PI Holder in accordance with the pre-defined percentage computed with reference to an investment-multiple on the cost incurred for undertaking the joint operation. We note that this Tribunal has in the case of B.G. Exploration and Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extraction of crude petroleum/natural gas from the identified blocks and to share the profits from the venture. The management committee comprising of representatives of the Government of India, the Appellant, ONGC and RIL undertook all the strategic, financial and other operative decisions with respect to the venture. Thus, all the pre-requisites of being a joint venture are clearly met. In this backdrop, it is clearly impermissible to hold that the contribution made by a co-venturer (partner) in the course or furtherance of the joint-venture is a service rendered to the joint venture for a consideration. It is not in dispute that in a partnership or a joint venture, whatever a partner does for the furtherance of the business, he does so also for advancing his own interest, as he has a stake in the venture. All the resources contributed by the partners enter into a common pool required for running of the enterprise. There is no contractor-contractee or principal-agent relationship between the co-venturer and the joint-venture, which is a pre-requisite for a service to be liable to tax under the Finance Act. 9. In our view, the principle laid down in the aforementioned decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. We also agree with the observations of the findings of this Tribunal in the other decision of B.G., reported in 2021 (49) GSTL 143 wherein, it has been held that the joint operations undertaken under the PSC does not result in rendition of any service as there is no beneficiary entity outside the PSC to which the joint operation are subordinated. It has been held that the cost incurred towards the employees which has been deployed towards the joint operation is a capital contribution to the venture and not a consideration to the rendition of any service. The relevant observations of this Tribunal are extracted herein below: 11 . .. In the impugned contract, the several participating interests are, collegially, designated as contractor in the singular and in furtherance of the policy of the Government of India to involve corporate participation for efficient harnessing of natural resources as codified in the production sharing contract agreed upon. This, then, would be the primary association as joint venture comprising of four entities, including Government of India, for viability in extraction of natural resource as the common goal. The manner in which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rations agreement is consideration for services; it is intended as the vehicle for contribution by the participating interests to the capital requirements of the venture. As such capital contributions are obligated for the establishment and operation of a business venture, it is not consideration for rendering of any taxable service. 12. In view of the above, we are of the considered opinion that there is neither any service rendered by the Appellant nor is there any consideration involved in the appellant s deploying its man power and assets for furtherance of the operation of the joint venture. The ratio laid down in the aforesaid decision of the Tribunal in the case of B.G. Exploration Production India Ltd., reported in 2021 (49) GSTL 143 is squarely applicable and the reason assigned by the Respondent to disregard the same i.e., there is nothing to show that the terms of the JV executed by B.G. Exploration Production India Ltd. and those executed by the appellant were the same, appears nothing but a ruse to disregard a binding precedent. In our view, besides the fact that the broad contours of the PSC cannot be any different as the same is entered into, basis a model ..... X X X X Extracts X X X X X X X X Extracts X X X X
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