TaxTMI 
TaxTMI 
2020 (10) TMI 579
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....for service rendered. Thereby, the appellant found themselves saddled, in order-in-original no. 01/STA-I/SN/17-18 dated 29th May 2017 of Commissioner of Service Tax, Audit-I, Mumbai, with demand of Rs. 10,98,62,116 confirmed under section 73 of Finance Act, 1994, along with applicable interest under section 75 of Finance Act, 1994, besides being imposed with penalty of like amount under section 78 of Finance Act, 1994 and further penalty under section 77 of Finance Act, 1994. 2. From the impugned order, it is seen that, in the initial engagement with the assessee, the tax authorities appeared to have got the wrong end of the stick; it is not the intent of any tax legislation that demand can originate in an Explanation and, that too, intended for expanding the scope of existing definition by resorting to legal fiction for overcoming a judicially erected barrier to imposition of a levy. As an adjunct of the principal provision, Explanation is to be read along with it and not as an autonomous provision to be invoked. That overreach at the genesis may well explain the tortuous reiteration of circulars and interpretations that, in the stages preceding the issue of show cause notice, ....
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....takings, M/s BG Exploration and Production India Ltd is engaged in the exploration, development and production of hydrocarbons in the Panna-Mukta and the Mid-South Tapti fields within the framework of 'production sharing contract (PSC)' dated 22nd December 1994 entered into by the Government of India with M/s Oil & Natural Gas Corporation Ltd (ONGC), M/s Reliance Industries Ltd and themselves. Essentially, the monopoly over naturally occurring hydrocarbon resources, retained with the Central Government by constitutional prerogative, was offered to corporate entities - both domestic and foreign - for development and recovery in which the risks transferred to the contractors was compensated by 'cost petroleum' to be shared among the three before the Government of India was entitled to a share of 'profit petroleum' with the three co-venture partners. 6. Vide circular no. 179/5/2014-ST dated 24thSeptember 2014, the Central Board of Excise & Customs clarified that, consequent upon broadening of taxable 'service' in the 'negative list' regime implemented from 1stJuly 2012, transactions between 'joint venture' and constituents of such 'joint venture', akin to the distinguishment of 'un....
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....ndment, through Finance Act, 2006, inserting 'Explanation - For the purposes of this section, taxable service includes any taxable service provided or to be provided by any unincorporated association or body of persons to members thereof, for cash, deferred payment or any other valuable consideration.' in section 65, the fiction of separability was enacted but, notwithstanding which, the activity continued to be held as non-taxable by judicial rulings. The circular that was relied upon in the impugned order maintained the enunciation that mutuality is no bar to taxation of such transactions. 9. That the contents of the said circular of the Central Board of Excise & Customs, directing that 'joint ventures' should also be subject to the very same demutualization as applicable to 'unincorporated associations' or 'bodies of persons', could not go beyond the Explanation did not appear to have weighed with the adjudicating authority. And that it was not within the competence of the adjudicating authority to stretch the clarification beyond the intendment of the Explanation also appears to have been overlooked. As 'unincorporated association' and 'body of persons' is confer....
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....ed 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 the contract provides for distribution of 'profit petroleum' and 'cost petroleum' is a business model for ensconcing within itself the alienation of risk by the Government of India which necessarily mandates a working arrangement for the disaggregation of 'cost petroleum' as compensation for the mutually exclusive risks undertaken by the contractor. The participating interests in the 'joint operations' have not come together of their own accord for the common purpose of bearing the risk but from one stipulation in the contract setting forth the common purpose including the participation in the proceeds of 'profit petroleum' that is extracted. The 'joint operations' doe....
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....deration, and includes a declared service, but shall not include - ..' in section 65B of Finance Act, 1994, to encompass all 'activities' save those exogenic to, and excepted in, it and aligned it with the essence of service by the expression 'for another', replacing 'to any person', to eliminate the recipient as a necessity. In the new scheme of tax, 'consideration', being the obligated recompense to the provider devolving on the person who opted for hiving off the undertaking of an activity, was no longer mere measure of value but translatable as the span of service rendered. Thus, 'service' was the extent of activity entrusted to a provider for such consideration as rendered it economically gainful to be outsourced. We now subject the expenditure booked by the appellant to test of conformity with this definition. 14. In Cricket Club of India Ltd v. Commissioner of Service Tax, Mumbai [2015 (40) STR 973 (Tri-Mumbai), on examination of the several types of payments made to clubs by members, the Tribunal dealt with entrance fees, held to be akin to capital contribution, thus '11....Consideration is, undoubtedly, an essential ingredient of all economic transactions an....