TaxTMI 
TaxTMI 
2016 (2) TMI 220
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....t, 1994 read with Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 [hereinafter referred as Rules 2006] and Rule 2(1(d)(iv) of the Service Tax Rules, 1994, for the services received from the service provider who have provided services from outside India, the service receiver in India shall pay service tax on such services as if the recipient had himself provided the service in India. Therefore Revenue is of the view that RIL as a service receiver has to discharge service tax liability. RIL was not paying service tax on the belief that the imported services are used outside the territorial waters of India viz., beyond 12 nautical miles (NM) to which provisions of the Finance Act, 1994 are not extended. Revenue viewed that provisions of Chapter V of the Finance Act, 1994 are extended to installations, structures and vessels in the continental shelf of India (CS) and the exclusive economic zone of India(EEZ) vide Notification No. 1/2002-Service Tax dated 01-03-2002, as amended by Notification No. 21/2009-Service Tax dated 07-07-2009, and hence service tax is payable. 2. During investigations by DRI, RIL informed the activities undertaken by them ....
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....s based on the geological chance factor envisaged and the economics. * Peer review and validation of the ranked prospects by internationally reputed geoscientists. The end result of this stage is a prospect which is handed over to the exploration team. Stage 3.2 Exploration Drilling of recommended prospect & Notify the discovery to Govt. of India, if any, hydrocarbon is encountered during drilling Stage 3.3. Appraisal * Submission of appraisal plan to ascertain the potential commercial interest of the discovery for development * Carry out Appraisal activities which include, inter-alia, acquisition, processing and interpretation of additional 2 D, 3 D surveys in focused areas, drilling of wells (s), carry out other geological and geophysical studies, etc. Stage 3.4 : Development * Submit a development plan for the development & exploitation of the hydrocarbons from the demarcated development area * Drill and complete additional development wells * Establish the production facilities like pipeline, platform, manifolds, umbilicals, etc. (sub-surface, sub-sea and on land) to facilitate....
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....Only after completion of the entire formation is the extraction activity of the oil & gas carried out, which may require trouble free and unhindered maintenance of the operation of the "formation" So, the services received during the entire activity, have been consumed/utilized or provided to structures or installations or vessels, and are liable to service tax. Regarding the information given along with ST-3 returns, it is stated in the SCN that in .In the fixed establishment of the recipient, RIL have given the names of the Blocks where the services have been received by them and in the Place of performance, they have shown the remarks as On block or Abroad or India but consumed at locations to which provision of Finance Act, 1994 are not extended ... It is further stated in the SCN that .. Moreover, RIL claim of their fixed establishment at blocks allotted to them is contrary to their own claim that there is no structure or installation in the CS and EEZ of India. The SCN goes on to state .. As clarified by CBEC vide circular dated 27-07-2005, a fixed establishment should have both the technical and human resources necessary for providing or receiving services permanently prese....
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....s Service Zzh 3(iii) 54,154,248 5,577,888 Grand Total 7,357,159,765 757,787,456 The adjudicating authority set aside the demand of Rs. 75,43,93,392/- but confirmed the service tax amount of Rs. 33,94,064/- already paid by the respondent towards "Management maintenance or repair service". The proceedings initiated under Show cause notices V.ADJ(SCN)15-32/LTU-M/2011-12 dated 8.03.2012 ; V.ADJ(SCN) 15A-11/LTU-M/2011-12 dated 08-06-2012 & F.No. LTU/MUM/GLT-3A/RIL/SCN-DGCEI-Ahmd/05/2011-12 dated 27.05.2013 were also dropped. 7. The Ld Advocate Shri V K Jain appearing on behalf of RIL made the following submissions. 7.1. RIL, either individually or along with other members of the consortium such as Niko Resources, Hardy Exploration and Production Inc., etc. were granted 33 blocks, each of which has a specified area earmarked and is a separate independent business establishment in respect of which a separate production sharing contract is entered into with the Government of India whereby the consortium members for each block have to select an operator, who enters into contracts with various third parties/vendors f....
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....ere there were no installations, structures and vessels. 7.5. With effect from 1.7.2012 India has been defined in Section 65(B)(xxvii) of the Finance Act to mean "India" means - (a) the territory of the Union as referred to in clauses (2) and (3) of article 1 of the Constitution; (b) its territorial waters, continental shelf, exclusive economic zone or any other maritime zone as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976); (c) the seabed and the subsoil underlying the territorial waters; (d) the air space above its territory and territorial waters; and (e) the installations, structures and vessels located in the continental shelf of India and the exclusive economic zone of India, for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof; Legislature has treated the CS and EEZ of India as distinct from the installations, structures and vessels in the CS and EEZ of India for the purpose of prospecting or extraction or production of mineral oil and natural gas and supply thereof. Undisput....
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....al conclusion, then, instead of the respondent being the operator, if M/s Hardy Exploration and Production, or Niko Resources, which are companies operating outside India, were to be operators then going by the arguments advanced by the Ld. AR Commissioner, the two being overseas entities, the services in question would have been consumed outside India and would not have attracted liability to service tax. What is to be seen is whether the business for which the services are consumed is carried on in India or otherwise. 7.8. In the appeal filed by Revenue the ground of liability to tax under the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 has not been urged. Moreover if the provisions of the Act itself did not apply, the levy could not be extended by interpreting the Rules in a manner which will be inconsistent with the Act. It is settled law that the jurisdiction of an Act cannot be enlarged by the Rules. In the case in hand, since services have not been consumed in India but have been consumed on the blocks/sea bed in the offshore location in the CS & EEZ, where there was no installation, structure or vessel, of India, the levy to servi....
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....ations or structures has been borrowed from the Notification issued under the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, it would have the same meaning in the other Notifications issued under the same Act amending the earlier Notification. The installations, structures etc., referred to in the Notification 1/2002-ST dated 1.3.2002, being permanent in nature, and having fixed co-ordinates, the expression vessel referred to therein would also cover a vessel which is permanently stationed like a FPSO/platform having fixed co-ordinates and not a vessel traversing across the CS and EEZ while rendering the services. 7.11. The review ground that soon after the construction activity starts, a structure comes into existence is also beyond the scope of the allegations leveled in the notice. The admitted position in the notice is that there were no installations or structures. Shri Raghavan in his statement specifically stated that only after a well which is drilled is covered with casing, the gap is cemented, manifolds and umbilicals are attached to the sub-surface and sub-seas surface level that a structure comes into existence. ....
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.... "A contract for the carriage of goods in a ship is called in law a contract of affreightment. In practice these contracts are usually written and most frequently are expressed in one or other of two types of document called respectively a charterparty and a bill of lading." In para 402 we read that a contract by charterparty is a contract by which an entire ship or some principal part of her is let to a merchant, called `the charterer, for the conveyance of goods on a determined voyage to one or more places, or until the expiration of a specified period. In the first case it is called a voyage charterparty, and in the second a time charterparty. Such a contract may operate as a demise of the ship herself, to which the services of the master and the crew may or may not be added, or it may confer on the charterer nothing more than the right to have his goods conveyed by a particular ship, and, as subsidiary to it, to have the use of the ship and the services of the master and crew. 43. Thus for the purposes of ascertaining the responsibility of a charterer in respect of the cargo shipped and landed, it would be necessary to know not only the stipulations betw....
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....ds on the stipulations of the charterparty. The principal test is whether the master is the employee of the owner or of the charterer. In other words where the master becomes the employee of the charterer or continues to be the owners employee. Where the charterparty is by way of demise, the charterer may employ the ship in carrying either;his own goods or those of others. Where the charterparty does not operate as a demise, the charterers right vis-a-vis the owner depends upon the terms of the contract. The contract of carriage is personal to the charterer, and he cannot call upon the shipowner to undertake liabilities to third persons or transfer to third persons his own liabilities to the shipowner unless the contract so provides. A charterparty has to be construed so as to give effect, as far as possible, to the intention of the parties as expressed in the written contract. The stipulations of charterparty may be incorporated in a bill of lading so that they are thereby binding on the parties. It is an accepted principle that when stipulations of the charterparty are expressly incorporated, they become terms of the contract contained in the bill of lading, and they can be e....
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....h M/s Oceaneering International AG, the service tax authorities had assessed and appropriated service tax under the head of mining services, when being rendered within 12 nautical miles of the territory of India. It was only in respect of services rendered beyond 12 nautical miles, that tax was being demanded under the head of STGU. There being no installation, structures, vessels in existence in the CS & EEZ where the ROV is operating, no service tax could be demanded since the levy had not been extended to the entire CS and EEZ. The ROVs were always placed on board vessels which kept traversing through the CS and EEZ, and therefore could not be regarded as being located in India since the term vessel in Notification No. 21/2009 referred to a fixed vessel and not a moving vessel ( Tribunals order in RIL v. CST) (supra). 7.17. The fourth contract that has been referred to by Ld AR was with M/s Aker Kvaerner Subsea Ltd. The said contract was for technical direction and onsite supervision during installation & pre commissioning of subsea facilities / equipment. Since the said service was consumed by the Respondents business located in an offshore location i.e. the sea bed beyo....
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....ce tax is made from RIL relating to hiring of rigs for drilling purposes which is the case in Greatship ; major part of demand is on leasing of FPSO which were providing services to structures or platform supply vessels which were providing services to rigs. (ii) Another major element of demand relates to hiring of equipment which was to be placed on rigs or used on the vessels and was thus covered within the scope of Notification No. 21/2009; (iii) A major contract was for hiring of Remote Operated Vehicle Packages(ROV) operated by a crew out of a cabin placed on the rig. They are linked to the rig by either a neutrally buoyant tether or, often, when working in rough conditions or in deeper water, a load-carrying umbilical cable is used along with a tether management system (TMS) and this service is outside the scope of Greatship judgment; (iv) Support vessels ferry goods and personnel from onshore to offshore & vice versa for oil exploration activities at installations, structures and vessels located in the CS and EEZ and thus covered in the scope of Notification 21/2009 and outside the scope of the judgment of Greatship India; (v) Simil....
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....aling with the said issue had specifically used the word consumption with respect to the consumer and had observed that the tax so liable is to be paid by the consumer. The terms "destination" was used with reference to the place where such service was provided. So far as the principle of determination of destination is concerned, it is well established that the same needs to be determined in terms of the laws framed under the provisions of Chapter V of Finance Act, 1994. The same needs to be accordingly determined in terms of Taxation of Services (Provided from outside India and Received in India) Rules, 2006. The specific headings under which each of the services are taxable under the above said Rules and the category have been specified in the SCN and are thus liable for tax as they have been provided in India. (iii) Under the existing laws there are three words which are used in the service tax statute viz., service provided, service received and services performed. The destination of the services can only be determined by (i) location of the service provider (ii) location of the recipient (consumer) of the services and (iii) place whether the service has been perfor....
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....ham it is seen that training programme was conducted at RIL premises at Mumbai. Therefore RIL is liable for payment of service tax on the value of service charges to these trainers under the category of Commercial Training or Coaching which falls under Rule 3 (ii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 (iii) Management Consultant service is covered under Rule 3(iii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. RIL, being a service receiver having fixed establishment in India, is liable to pay service tax. (iv) Manpower Recruitment or Supply Agency Service On examination of contracts entered by RIL with M/s. AGR Peak Consultancy Services Ltd., M/s. Richard Brent Kopulos, M/s. Stephan Lembart, etc. at para 8.9 of the SCN it is seen that this service is covered under Rule 3(iii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. RIL, being a service receiver having fixed establishment in India, is liable to pay service tax. (v) Few other contracts such as those with Enventure Global Technology, Internationa....
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....ocated at Kakinada, Paradip, Visakhapatnam and Pipavav. The agreements which RIL entered into with service providers from outside India who are not having a fixed establishment in India reveal that contractors (i.e., service providers from outside India) place of business with full style, address and telex / telefax number etc. is shown as in a country other than India and the RIL's (service recipient in India) place of business with full style, address and telex / telefax number etc. is shown as M/s. Reliance Industries Limited, 3rd Floor, Maker Chambers IV, 222, Nariman Point, Mumbai 400 021 or M/s. Reliance Industries Limited, Building No. 8/A, Ground Floor, Reliance Corporate Park, Ghansolin, Thane-Belapur Road, Navi Mumbai 400 701, India. Thus (i) M/s RIL is incorporated in India; (ii) Their fixed establishment is in India and all the correspondence has been made from these addresses; and (iii) An address cannot exist at an undefined place without any fixed building etc. Accordingly, the above referred terms of agreements / contracts satisfy the provisions of sub-sections (1) (a) and 1(b) of the Section 66A of the Finance Act, 1994, thereby rendering such servic....
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....ns-- does not imply that the services in the CS and EEZ received prior to issue of Notification 14/2010 were exempted. The intention of the notification was to limit the applicability of the provisions of Chapter V of the Finance Act only to services provided in relation to prospecting or extraction or production of oil or natural gas. 10. The issue in the present case requires an answer to the following question:- Whether the services received by RIL and listed in the Table in para 6 above are taxable services provided in the taxable territory under the provisions of Notification No. 21/2009 dated 7/7/2009. 10.1. We find that the proceedings center around various notifications declaring certain areas in the Territorial waters, CS and EEZ to which the provisions of Finance Act 1994 are extended. It would be useful to reproduce these notifications: Position between 1/3/2002 to 6/7/2009 Notification No. 1/2002-ST dated 1/3/2002 Service Tax- Extension of provisions of Chapter V of the Finance Act (32 of 1994) to the designated areas in the continental shelf and exclusive economic zone of India In exercise of the powers conferred by clause (a) of ....
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....ersession of the Government of India in the Ministry of Finance (Department of Revenue) notification No. 1/2002-Service Tax, dated the 1st March, 2002, published in the Gazette of India, Extraordinary, vide number G.S.R. 153(E), dated the 1st March, 2002, except as respects things done or omitted to be done before such supersession, the Central Government hereby extends the provisions of Chapter V of the Finance Act, 1994 (32 of 1994), to the areas specified in column (2) of the Table below, in the continental shelf and exclusive economic zone of India for the purposes as mentioned in column (3) of the said Table :- TABLE Sl. No. The areas in the Continental Shelf and the Exclusive Economic Zone of India Purpose (1) (2) (3) 1. Whole of continental shelf and exclusive economic zone of India Any service provided for all activities pertaining to construction of installations, structures and vessels for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof. 2. The installations, structures and vessels within the continental shelf and the exclusive economic zone of India, constructed for the purposes....
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....se the three words i.e. installations, structures and vessels have to be understood in an adjunct manner following the Noscuntur a Socii Rule of Construction. That is, where the associated words are susceptible of an analogous meaning, they are to be read in a cognate sense. It was held by the Tribunal in the case of Reliance Industries vs Commissioner of Central Excise & Service Tax LTU 2014-TIOL-940-CESTAT-MUM, that the word vessel in the phrase installations, structures and vessels must be taken to mean a stationary vessel when read with the words installations and structures. The Tribunal held that the vessels covered therein would be such vessels which are akin to installation and structures and which are to be stationed at a fixed location in the Continental Shelf and Exclusive Economic Zone of India while rendering services. In our opinion such vessels may be of the type such as floating or submersible drilling of production platforms, generally designed for the discovery or the exploitation of offshore deposits of oil and natural gas. The vessels in question are offshore supply vessels which are different from function in a fixed or stationary position". We may see the ....
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....structed for the purposes of prospecting or extraction or production. The key words are constructed for the purpose. These words imply that only vessels specially constructed for this purpose would be covered and not any supply vessels which are merely used to transport men and material from onshore to offshore locations. In view of our discussion above we do not agree with the ground of review. To support such an interpretation as done by Revenue, would be incorrect. 10.3. The next ground of review states that as soon as construction starts, a structure comes into being which becomes an installation. The SCN alleges (para 4.8) that These vessels, the equipments, the drilling pipes and related structures, leading to survey and exploration of oil & gas, putting up of manifolds and umbilical to extract the oil & gas form a structure or installation individually and severally on its own. The various services received for the erection of entire structure are the important part of the exploration activity carried, leading to complete formation, which will lead to extraction of oil.. We are not able to appreciate this view. The Chamber's 21st Century Dictionary defines structure as....
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....the grounds for review, which was argued vehemently by both sides, is the relevance of Not 14/2010 in the present dispute. The Commissioner held in his order that Revenue sought to give retrospective effect to the Notification 14/2010. The Ld. A.R. strongly contested this. He argued that the words Any service provided for all activities pertaining to construction of installations, structures and vessels for the. in notification 14/2010 dated 27.02.2010 are not sought to be applied retrospectively. We find that on 27/2/2010, notification 16/2010 was issued which defined India in the Taxation of Services (Provided from outside India and Received in India) Rules, 2006 as below:- India includes the installations, structures and vessels located in the continental shelf of India and the exclusive economic zone of India, for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof. We may refer to the statutory provisions. An exhaustive definition of India was inserted in Section 65B of the Finance Act 1994 with effect from 1.07.2012 as under: (27) "India" means,-- (a) the territory of the Union as referred to in ....
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....e evidently not borne from a simple reading of the notification, and therefore needs no elucidation from us. The intention to include all activities including those for construction under scope of service tax actually got fructified only in 2012 in the statutory definition of India in Section 65B, which includes well defined territories in (i) clause (b) as Territorial waters, CS and EEZ (which would cover all activities) and (ii) in clause (e) as installations in the CS and EEZ". These two categories of taxable territory are distinct. The statute included the activities pertaining to contruction only from 2012. It is established law that the primacy of the statute cannot be bypassed by reading some intention in a notification. Reliance is placed on the Apex Court decision in the case of Ispat Industries ltd. Vs. Commissioner [2006(202) ELT 561(SC)]. 24. If we read Rule 9(2) of the Rules independently without considering it along with Section 14 of the Act, then of course the submission of the learned counsel for the Revenue could be sustained. However, in our opinion, Rule 9(2) has to be read along with Section 14 and it cannot be read independe....
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....ich is in accordance with the object of Section 14. The object of Section 14 is primary whereas the conditions in Rule 9(2) are the "accessories". The "accessory" must, therefore, serve the "primary". From the above it is clear that the definition of India in notification 21/2009-ST cannot be given a presumed meaning and therefore the services provided for pre-construction and during-construction activities will not fall within the ambit of the notification. What is introduced in the Not 14/2010 and in the Statute in 2012 cannot be given retrospective effect. 11. So far we have given our analysis on the Appeal grounds of Revenue which are based on the Review Order of the Committee of Chief Commissioners. Accordingly we have given our findings on the interpretation of the Notification 21/2009 as to what constitutes taxable territory on the aspect of "vessel", and "under-construction" structures. We note that the aspect of application of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 has been stated at length in the SCN and also discussed by the Ld AR. Therefore we proceed to the larger issue of territorial jurisdiction i.e. fro....
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....e service has been consumed by an innate object such as the seabed. Once it is established that the services have been provided to RIL and they have been received (in contradistinction to the term consumed) in terms of Taxation of Services (provided from outside India and received in India ) Rules 2006, they would be liable to tax under section 66A. 11C. We note that the territorial jurisdiction of service tax law is laid down in Section 64 which states that chapter V of the Finance Act 1994 extends to the whole of India except the State of Jammu and Kashmir. By virtue of notification 21/2009, the provisions of chapter V were extended to the installations, structures and vessels in the CS and EEZ of India. It is in the background of this statutory matrix that we have to address the issue. We refer to some judicial pronouncements on territorial jurisdiction. The Supreme Court in the case of All India Federation of Tax Practitioners vs Union of India 2007 (7) STR 625 (SC) held that "7. In the light of what is stated above, it is clear that Service Tax is a VAT which in turn is a destination based consumption tax in the sense that it is on commercial activities and is not ....
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....ided and consumed outside the Indian territory; are beyond the province and purview of the provisions of the Act, the consideration received which corresponds and is relatable to services provided outside the Indian territory required to be excised by applying the doctrine of apportionment. On such vivisection, the consideration attributable to the services provided outside the Indian territory must be excluded, as this is not subject to levy and collection of Service Tax, under provisions of the Act. This conclusion is also the logical corollary of the non-derogable premise that Service Tax is not a tax on the pursuit of the profession of providing a taxable service but is a tax on the provision of a taxable service, a destination based consumption tax. (k) The fundamental fallacy in the substantive demise of the adjudicating authority, in our considered view, is applying the provisions of the act (which authorizes the levy and collection of service tax as a destination and consumption based tax and in respect of a service defined and enumerated in the Act to be a taxable service), to a service provided and consumed beyond Indian territory, within which alone the legislat....
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....ervices are discussed by us in following paras as being services that are received in the installations under construction in the CS and EEZ; the question of taxing such services does not arise being outside the scope of the notification which defines only existing installations as falling in the territory of India. The review directions/grounds of appeal further confuse the issue. On the one hand, the services provided to/ by installations structures etc are sought to be taxed. On the other hand, the services enumerated in the table in para 6 pertain to activities in respect of installations which are not installed as yet. For example the supply of FPSO under the STGU service which constitutes the major chunk of the demand, is sought to be taxed for providing service to installations, structures and vessels in the CS and EZ. It is simply beyond our comprehension as to how the supply of FPSO can be considered as a service to the installation (taxable territory) in the CS when the FPSO itself is the so called installation which is to be installed in the CS and EEZ. The learned AR submits that the service is provided to the service recipient, that is RIL, who are in India, and not th....
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....vice tax [2015(39) STR 754(Bom)]. The relevant paras of the judgment are reproduced below: 35. In the present case, we find that the plain reading of the 2009 Notification would give a clear meaning and it cannot be said to be obscure. The words are clear and plain capable of giving only one meaning that the provisions of Chapter V of the Finance Act are extended to the installations, structures and vessels in the Continental Shelf and Exclusive Economic Zone of India. We find that the words used in the said notification are not capable of giving two meanings. As already discussed hereinabove, prior to 2002, the areas in the Continental Shelf and Exclusive Economic Zone of India were not brought under the purview of Service Tax net. Only by the Notification of 2002, the said provisions were made applicable to the areas in the Continental Shelf and Exclusive Economic Zone of India, only insofar as the areas which were covered under the 1986 and 1996 notifications. By amendment to 2002 Notification by the 2009 Notification, the services rendered to installations, structures and vessels were brought in the Service Tax net irrespective of the fact that as to whether the said i....
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....the purpose as mentioned in column 3 of the said Table. 37. It is sought to be contended on behalf of the Revenue that in 2002 Notification, as amended in 2009, this Court should construe that the legislature not only intended to make the provisions applicable to the installations, structures and vessels in the Continental Shelf and Exclusive Economic Zone of India but also by the installations, structures and vessels. We find that if the contention as raised by the Revenue is to be accepted, then between the word "to" and "the installations, structures and vessels in the Continental Shelf and Exclusive Economic Zone of India", the words "and by" will have to be read into. In our considered view, that would amount to supplying casus omissus. 38 to 41. .......................... 42. In view of settled legal position, we find that the 2010 Notification cannot be said to be clarificatory in nature, but it brings about substantive change in law. Whereas the 2002 Notification as amended by 2009 Notification is applicable only to the services rendered to installations, structures and vessels, the 2010 Notification widens the tax scope and amongst various other ....
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....cluded our findings on this basis alone because, as rightly pointed by the Ld Counsel, all the grounds of appeal filed by the Revenue have been considered by us in preceding paras and nothing remains to discuss if we go by the grounds. However the Ld AR makes a fervent prayer to look into the individual services sought to be taxed on the basis of contracts, as enumerated in the Table in para 6 above. Considering the case holistically we proceed to discuss these. It is seen that, on the basis of available records, most of the services provided are for the exploration activities, not services to existing installations etc. 12A. We find from the table that the main service considered is Supply of Tangible Goods for Use (STGU) service of which the most important in terms of quantum of duty is the supply of FPSO. The respondent have relied on the principal bench decision in the case Petronet LNG Ltd Vs. Commissioner of service tax [2013 TIOL-1700 CESTAT-Del] to say that in the present case there is transfer of effective control of the FPSO which involves deemed sale and therefore no service is rendered. We may extract the relevant legal provisions as below. Section 65(105....
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....ular F. No. 334/1/2008-TRU dated 29/2/2008, while explaining the introduction of STGU service stated that: 4.4 Supply of tangible goods for use: 4.4.1. Transfer of the right to use any goods is leviable to sales tax/VAT as deemed sale of goods[Article 366(19A)(d) of the Constitution of India]. Transfer of right to use involves transfer of both possession and control of the goods to the use of the goods. 4.4.2 Excavators, wheel loaders, dump trucks, crawler carriers, compaction equipment, cranes etc. offshore construction vessels & barges, geo-technical vessels, tug and barge floatillas, rigs and high value machineries 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. 4.4.3 Proposal is to levy service tax on such services provided in relation to supply of tangible goods, including machinery, equipment and appliances, for use, with no legal right of possession or effective control. Supply of tangible goods for use and leviable to VAT/Sales tax as ....
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....rk and all procurement, design, modifying, refurbishing, repairing and FPSO Commissioning of the FPSO, transporting and mobilizing the FPSO to the Designated Location, mooring the FPSO to the mooring system and hooking it up to the Fluid Transfer Lines and Riser Facilities and performing all tests necessary to accomplish the FPSO Commissioning and achieve the Date of First Production of Oil and demobilizing the FPSO following the termination of the contract). 4. INVOICING AND PAYMENT 4.2 Contractor shall raise separate invoices for the following items: (a) Lease Rental; (b) Insurance premiums in respect of which the Contractor is entitle to be reimbursed by RIL pursuant to Clause 6.1; (c) mobilization fee (d) demobilization fee; and (e) other activities and transactions for which invoices may be raised pursuant to the contract. 5. INSURANCE 6. Contractor shall procure and maintain in full force and effect with respect to and for the duration of the Contract, the insurance policies described below. RIL shall have the right to reasonably disapprove of the insurance companies....
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....d to charter FPSO facility (on bare boat basis) along with STP buoy and mooring which meets the FPSO classification and including all equipment, materials, spare parts and supplies to be supplied on such FPSO to RIL for use in relation to extraction and production of oil and gas at the assigned field. From the above we come to a conclusion that service is not rendered in the supply of FPSO because it is being considered as an asset. But the Ld AR protested that the evidences narrated above were never taken up before the lower authorities and therefore cannot be considered by the Tribunal. Therefore we are not inclined to rest our findings on this basis. However we have already observed in preceding paras that the supply of FPSO for use in the EEZ can hardly be considered as a service to an existing installation because the FPSO itself is an installation. Therefore no service is provided in taxable territory. And tax has already been paid by RIL on services received in the FPSO. 12(A)(i) The demand under STGU service includes various other contracts under which services are provided by various suppliers. These contracts are for vessel for offshore exploration, s....
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....lations etc. The contract itself is not available and therefore a definite conclusion cannot be reached. In any case the SCN itself says that the work was executed from 07.02.2119 to 18.02.2009 and payment received. We find this period is not covered in the SCN. Therefore tax is not payable. The contract with Rutledge R & P Pvt. Ltd. is for equipment rental services required for exploratory/appraiser /developmental wells. It is apparent that this service relates to development of wells and not to existing installations, structures etc. and therefore service is not provided in taxable territory. The contract with Vetco Gray Pvt. Ltd. relates to, interalia, supervision of installation of well heads systems at offshore and includes pre-installation testing. It is evident that the contract refers to a pre-installation activity and is therefore not covered under the scope of notification 21/2009. The contract with Deepwater Pacific (1) Inc states that prior to commencing the operations the contractor shall ensure location co-ordinates with rig positioning services. The contract with Frank International Middle East is for casing and tubing running services, tubulars and X-overs ....
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....ed service tax under the head of mining services, when being rendered within 12 nautical miles of the territory of India. It is only in respect of services rendered beyond 12 nautical miles, that tax is being demanded under the head of STGU. Revenue cannot take a contrary stand now. For all the above reasons we are of the view that the question of providing service to installations does not arise. We conclude that above services are provided in location outside taxable territory and hence not taxable. 12(A)(ii) Among the large number of contracts concerning various services, Ld AR took pains to take us through some of the major ones above which contribute to almost 90 per cent of the total demand. However in all fairness, the other services on which service tax is demanded also need to be considered. A major service provided relates to Survey and Exploration of Mineral Services under Section 65(105) (zzy) read with Section 65(104A). We were shown the contract with GX Technology EAME Limited for 3D Seismic Data special processing KGD4. The contract provides that input data will be transported to the contractors processing center in London. The Seismic Processing will be ....
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....erformed for exploration or for erecting installations, such services are not in the scope of Not 21/2009 as they are performed outside taxable territory. 12(B)(ii) Tax has been demanded on Technical, Inspection and Certification Services under Section 65(105) (zzi) read with Section 65(108) provided by three companies of which one company is Aker Kvaerner Subsea Ltd. Under this contract, we find the scope of work as follows: (a) Provide installation guidelines; review and approve installation procedures of any installation contractor appointed by Company; (b) Carrying out SATs as required herein; (c) Supervision during installation, pre-commissioning and Commissioning goods; (d) Supervision of installation, hook up and testing of Goods which are free issued to agents, contractors and sub-contractors(of any tier) of Company at the direction of Company; (e) Providing post-commissioning operational assistance through to the completion date of the Contract (f) Training of Companys personnel in operations and maintenance. (g) Provision of Rental Tools (h) Three visits by service engineers during the duration ....
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.... safety devices are installed and are working correctly to prevent accidents and equipment failures. During inspection of the rig, the assistance of the crew shall be provided to open and prepare equipment for inspection, run the equipment for testing and to assist with pressure and load testing for various items". Our observations in the case of contract with Aver Kvaerner would apply to these two contracts also. 12(B)(iii) Service tax is demanded under the Consulting engineer service. Show cause notice relies on Board Circular No. F.No. B 43/5/97-TRU dt. 2.7.1997 clarifying that the services of a consultant may include Feasibility study, Pre-design services/project, Basic design engineering, Detailed design engineering, Procurement, Construction supervision & project management, Supervision of commissioning and initial operation, Manpower planning and training, Post-operation and management, Trouble shooting and technical services, including establishing systems and procedures for an existing plant. The SCN states that it appears M/s. Stephan Alam Graham (Copies of pages relating to scope of work not furnished), M/s. ECL Pty. Ltd (copy of agreement not produced), and Prof....
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....g instruction from RIL well site petroleum engineer. Details PVT analysis, if required, will be undertaken in contractor's offsite laboratory located outside India." Core Laboratories International Bv- "Contract for core analysis and formation damage studies. (A) Cores are required for determining reservoir parameters, petrophysical parameters and geological descriptions. The results will help in field development planning, reserve estimation and reservoir simulation. In phase I, Core preparation and fresh state parameter measurements are done. In phase II, conventional core analysis is performed to gather the basic reservoir rock parameters. The tests should start within a week of arrival of core samples in contractors laboratory." Sherry Laboratories- "Contract for toxicity test of drilling mud from various exploration blocks/exploratory wells. Contractor shall perform the testing for assessment of toxicity on drilling mud samples provided by RIL. RIL to deliver mud samples at contractor's address at RIL's cost. Contractor shall perform LC50 test of mud sample and shall submit final test report to RIL's address in India." The above contr....