TMI Blog2009 (3) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... sociation which is registered as a nonprofit making company under Section 25 of the Companies Act, 1956. Members of the 1 st petitioner are owners of Indian Flag Vessels. The Shipping Corporation of India (SCI) is one of its members. The 2 nd petitioner is also a member of the 1 st petitioner. He is a shareholder of a Member Company of the 1 st petitioner. 2. The 1 st respondent is the nodal Ministry in-charge of all matters and policies relating to Revenue. Respondent 2 is an apex body functioning under the control of respondent 1 that regulates all policy decisions relating to Central Excise, Customs and Service Tax matters. One of the functions of the 2 nd respondent is to issue clarifications under Section 378 of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. Respondent 3 is the Commissioner of Service Tax and Respondent 4 is the Additional Commissioner (Technical) Service Tax, Mumbai. The 5 th respondent is M/s. Oil Natural Gas Co. Ltd. ( ONGC for short). It is an instrumentality of State and has entered into various contracts with the members of the 1 st petitioner. 3. Before we go to the facts of the case and the challenge ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omprehensively covered under this proposed service. With this, services provided in relation to both exploration and exploitation of mineral, oil or gas will be comprehensively brought under the service tax net. 9. By a further Circular bearing No. 232/2/2006-CX dated 12/11/07 it was further clarified that post mining activities like transportation were not covered by the said Entry. Paragraph 5 thereof reads as under: 5. Handling and transportation of coal/mineral from pit head to a specified location within mine/factory or for transportation outside the mine. These activities are post-mining activities and are chargeable to service tax under the relevant taxable services i.e. Cargo Handling service and Goods Transport by Road . However, in case such transportation is undertaken by mechanical systems, such as conveyor belt system, ropeway system, merry-go-round systems etc. and the same is chargeable under cargo handling service, even if the loading, unloading and similar activities are done using mechanical systems. 10. Entry (zzzzj) was inserted into Section 65(105) of the Finance Act, 1994 by the Finance Act 2008 with effect from 16/5/08. The said entry re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the Marine Logistic Services rendered by Offshore Support Vessels under entry (zzzy) i.e. treating them as services in relation to mining or mineral' oil or gas . vide its letter dated 17/8/07. Correspondence ensued between SCI and the 5 th respondent. Letters of the 5 th respondent indicate its stand. According to the 5 th respondent Marine Logistic Support has no direct nexus with the mining operations and hence Service Tax should not be deposited in reference to charter hire of vessels. The 5 th respondent indicated its decision not to reimburse Service Tax unless it is found leviable by a higher legal forum. Similar letters were sent by the 5 th respondent to other members of the 1 st petitioner. 15. The 1 st petitioner received a clarification letter from the 3 rd respondent on 17/12/07 wherein it was mentioned that the Marine Logistic Services rendered by the members of the 1 st petitioner are in relation to Mining of Mineral Oil or Gas Service as defined under subclause (zzzy) of Section 65(105) of the Finance Act, 1994. A further letter dated 19/2/08 was addressed to the 1 st petitioner by the 4 th respondent as a reply to its representation dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, wheel loaders, dump trucks, crawler carriers, compaction equipment, cranes etc.,offshore construction vessels and barge flotillas, rigs high value machineries are supplied for use, with no legal right of possession and effective control. Transaction of allowing another person to use the goods, without giving legal right of possession and effective control, not being treated as sale of goods, is treated as service . 19. The members of the 1 st petitioner are paying Service Tax under Entry 65(105)(zzzzj) with effect from 16/5/08. The petitioners amended the instant petition inserting the necessary averments in relation to new entry (zzzzj). The controversy in the present petition is only for the period from 1/6/07 to 15/5/08. 20. We have heard learned counsel for the parties. We have also perused the written submissions submitted by them. 21. Mr. Nankani, learned counsel for the petitioners submitted that the members of the 1 st petitioner are engaged in operation of offshore vessels. Chartering of vessel is not an activity relating to mining. He submitted that entry (zzzy) covers only premining activities. He took us to the circular dated 28/2/07 and circular d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri), Gujarat Chemical Port Terminal Co. Ltd ., 2008 (9) STR 386 (Tri) and Diebold Systems (P) Ltd . 2008- 9b STR 546 (Tri). 25. Mr. Nankani submitted that Section 65-A is called in to determine classification of services only where there are two or more entries which may equally appear to cover an activity, one of which is the genus and the other is a specie. Inasmuch as entry (zzzzj) is not a specie of what is covered by entry (zzzy), the invocation of Section 65-A to decide the classification is unsustainable. 26. Mr. Nankani submitted that in any event, even if Section 65A were to be applied, the services provided by the members of the 1 st petitioner are specifically covered by the taxing entry for supply of tangible goods, and applying the principles set out in Section 65A (2) (a) also, the services are rightly covered under entry 65(105)(zzzzj). 27. Lastly Mr. Nankani submitted that the service provider who pays the Service Tax is entitled to recover the same from the service consumer, Service Tax being an indirect tax. In this case even contractually the 5 th respondent is liable to reimburse the tax to the members of the 1 st petitioner under the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntext in which they are used. He also relied on the Supreme Court judgment in Navin Chemical's case (supra) in this connection. 31. Learned counsel submitted that the introduction of entry (zzzzj) with effect from 16/5/08 emphasises that no tax was payable on Marine Logistic Services prior to 16/5/08 because the new entry was not by way of amending the earlier entry. 32. As regards alternative prayer of the petitioners is concerned, Mr. Sankhlecha submitted that in case this court is not inclined to accept the above submissions then the quantification and examination of each activity of service rendered should be done by the adjudicating authorities. He submitted that the 5 th respondent has undertaken and is obliged to reimburse the petitioners in respect of services being rendered by the members of the 1 st petitioner which are taxable and not any figure demanded by respondents 1 to 4 which the members of the 1 st petitioner may agree to pay without considering the nature of service which is subject to tax. 33. Mr. Rao, learned counsel for respondents 1 to 4 took us through the affidavit in reply of Shri Pitambar Bagh Assistant Commissioner (DN 1, Service Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 2(31) of the Income Tax Act, 1961 was relied upon as a Parliamentary exposition of the earlier Act. Relying on Cape Brandy Syndicate v. I.R.C. (1921) 2 KB 403 the Supreme Court concluded that, if there is any ambiguity in the earlier legislation, then the subsequent legislation may fix the proper interpretation which is to be put upon the earlier Act. 36. The same view was reiterated by the Supreme Court in Pappu Sweet's case (supra) and in Gem Granites v. Commissioner of Income-Tax T.N. (2005) 1 SCC 289. Therefore, it is open for us to consider the scope of entry (zzzzj) while interpreting 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) there is no transfer of right of possession and effective control of such machinery, equipment and appliances. According to the members of the 1 st petitioner, they supply offshore support vessels to carry out jobs like ancho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comprehensive approach or selective approach . Under the concept of comprehensive approach , all services are taxable unless any of the services is specifically excluded; whereas under the system of selective approach , only specified services are taxable and it is the system of selective approach , which India has adopted. This distinction needs to be kept in mind, when we proceed further. 40. It is pertinent to note that Section 65(105)(zzn) of the Finance Act, 1994 covered services rendered to any person, by an aircraft operator, in relation to transport of goods by aircraft . Section 65(105)(zzp) covered services rendered to any person by a goods transport agency in relation to transport of goods by road in a goods carriage . Section 65(105(zzz) refers to service rendered to any person in relation to transport of goods other than water, through pipeline or other conduit. There was no entry covering transport by sea. Legislature could have easily provided for such an entry. Absence of such entry leads us to conclude that the chartering of vessels undertaken by the members of the 1 st petitioner was not covered by any entry prior to insertion of entry (zzzzj). In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andap-keepers inter alia that the provisions of Chapter V of the Finance Act 1994 in so far as they relate to Mandap-keepers were illegal and ultravires the Constitution. One of the questions raised before the Supreme Court was whether taxable service could include mere providing of premises on temporary basis for organizing any official, social or business functions, but would also include other facilities supplied in relation thereto. In that context the Supreme Court referred to the definition of Mandap-keeper. The Supreme Court observed that the said definition includes services provided in relation to use of Mandap in any manner and includes the facilities provided to the client in relation to such use and also the services rendered as a caterer . This definition specifically included the facilities provided to the client in the ambit of services provided in relation to use of Mandaps. It is evident that it is this definition which persuaded the Supreme Court to hold that wide range of services are included in the definition of taxable services so far as Mandap-keepers are concerned. It is on the basis of this definition that the Supreme Court concluded that taxable servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw of Legislature of a State relating to taxes for the benefit of the State in respect of professions, trades, callings or employments shall be invalid on the ground that it relates to a tax on income. Entry 92C of List 1 of the Seventh Schedule to the Constitution pertains to Taxes on Services . Entry 60 of List II of the Seventh Schedule to the Constitution pertains to Taxes on profession, trades, callings and employment . It was submitted before the Supreme Court that the State Legislature alone has the legislative competence to levy service tax. It was argued that the word profession in Entry 60 of List II was nothing but service and, therefore, levy of service tax came within the competence of State Legislature alone. Placing reliance on Article 276(1) it was urged that the words used in Article 276(1) namely, no law of the State Legislature relating to taxes in respect of professions, callings etc. were words of widest amplitude and, therefore, the word profession would cover every aspect connected with it. It was urged that since the expressions relating to and in respect of are known in law as words of widest amplitude, if the significance of the said expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent. 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 1 st petitioner to mining activities and hold that they fall in entry (zzzy). Entry (zzzzj) is not a specie of what is covered by entry (zzzy). Nature of the services rendered by the members of the 1 st petitioner, legislative history of the two entries, various circulars to which, we have made reference and the relevant judgments which we have noted hereinabove lead us to hold that the entry contained in Section 65(105)(zzzy) of the Finance Act, 1994 does not apply to services provided by the members of the 1 st petitioner. Needless to say that respondents 1 to 4 and respondent 6 cannot demand service tax from the members of the 1 st petitioner on the services rendered by them to the 5 th respondent. As a consequence of this view of ours proceedings leading to issuance of letters dated 17/12/07, 19/2/08 and 5/3/08 annexed as Exhibits H, N R respectively to the petition stand quashed and set aside. 49. The petition is disposed of in the aforestated terms. - - TaxTMI - TMITax - Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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