Territorial scope of service tax barred demand on drill ship repair work done outside designated offshore areas.

Service tax was held inapplicable to repair and maintenance services performed on a drill ship in a non-designated area of the continental shelf and exclusive economic zone for the relevant period. The applicable notification had extended Chapter V of the Finance Act, 1994 only to designated areas, and the demand itself proceeded on the footing that the work was done outside that notified territorial scope. As the charging provisions had not been validly extended to the place where the services were rendered at that time, the demand could not be sustained and the assessee succeeded on the merits.

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Issues: Whether service tax was payable on repair and maintenance services rendered on a drill ship in the non-designated area of the continental shelf and exclusive economic zone for a period prior to the later extension of the service tax regime.

Analysis: The applicable notification extended the provisions of Chapter V of the Finance Act, 1994 only to designated areas in the continental shelf and exclusive economic zone of India. The record showed that the repair works were carried out in a non-designated area, and the demand itself proceeded on that factual basis. In such circumstances, the service tax provisions did not apply to the activity for the relevant period, and the tax demand could not be sustained. The cited territorial scope of the levy and the timing of the later expansion of coverage supported this conclusion.

Conclusion: The demand for service tax was not sustainable and the assessee succeeded on the merits.

Ratio Decidendi: Service tax cannot be demanded for services rendered outside the territorial area to which the charging provisions had been validly extended for the relevant period.

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