Members of marine logistics association not liable for service tax under Section 65(105)(zzzy) for offshore vessel operations

SC held that members of the respondent Association were not liable to pay service tax for marine logistic services rendered by Offshore Support Vessels to a public sector undertaking during 1.6.2007-15.5.2008 under Section 65(105)(zzzy) of the Finance Act, 1994. The Court found that the contractual activities described in the schedule were not even remotely covered by the said taxable entry. It affirmed the relevant HC judgment on the facts but expressly left the larger question of law open. The Department was permitted to seek documents from the Association or the undertaking to verify if any other taxable services were provided.

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Issues:
Interpretation of Section 65(105)(zzzy) of the Finance Act, 1994 in relation to services provided by the Members of the respondent Association.

Analysis:
The appeal was filed against the judgment of the Bombay High Court, which set aside and quashed the notices issued by the appellant to the Members of the respondent Association. The High Court held that the services provided by the Members of the respondent Association did not fall under Section 65(105)(zzzy) of the Finance Act, 1994. The appellant argued that even though an amendment was made to include such services under Section 65(105)(zzzzj) w.e.f. 16.5.2008, the period in question was from 1.6.2007 to 15.5.2008. The appellant contended that the Members of the respondent Association were still liable to pay service tax under Section 65(105)(zzzy) for services related to mining of mineral, oil, or gas. However, the respondents argued that the nature of work carried out by the Members did not relate to mining activities and pointed out the specific tasks outlined in the contract with ONGC, which did not align with mining operations.

The Supreme Court analyzed the nature of work specified in the contract between the Members of the respondent Association and ONGC. The Court found that the services provided, as detailed in the contract, did not strictly fall under the category of services related to mining of mineral, oil, or gas as per Section 65(105)(zzzy). The Court agreed with the High Court's decision that the work outlined in the contract was not connected to mining activities. Therefore, the Supreme Court affirmed the High Court's order based on the specific facts and nature of work involved. The Court left the question of law open for further consideration in an appropriate case.

The Supreme Court directed the appellant to verify whether the Members of the respondent Association were engaged in any additional duties beyond those mentioned in the contract with ONGC to determine their liability for service tax. The appeal was disposed of in accordance with the observations and directions provided by the Court.

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