TaxTMI 
TaxTMI 
2023 (4) TMI 921
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....safe and efficient manner; prepare work programs and budgets for the approval of the operating committee, acquire permits, consents, approvals, etc.; require the non-operators to provide monthly advances under cash calls to meet expenses of the joint operations and ensure that the Operator neither gains any profit nor suffers any loss as a result of the joint operations. The Operator is also required to engage or retain such employees, employees of affiliates, contractors, consultants and/or agents as are reasonably required to conduct joint operations. The Operator has to also determine the hours of work and the compensation payable to such employees for conduct of Joint Operations. It is an admitted position, both in the notice as well as in the impugned order that there is an Unincorporated Joint Venture (UJV) between the different PI Holders under the PSC. The dispute involved in the present case is as to whether, the expenditure incurred by the appellant, in respect of its employees and assets which were deployed for undertaking joint operations at the blocks, where it was acting as the Operator, and which was recorded as a cost incurred for undertaking joint operations, could....
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.... same at actuals is allotted amongst the three PI Holders for the KG-DWN-98/3 Block in the ratio of 60:30:10, being the respective interest of the appellant, BP and Niko respectively. This practice is followed by the Appellant for the 6 other blocks, in respect of which separate PSCs have been entered into and in respect of which the Appellant has been appointed as the Operator. 2.3 It was submitted that PSC is a joint venture, where the co-venturers i.e. the Government of India and the other PI Holders have come together for a common cause of exploring and exploiting the natural resources viz: crude and natural gas and earning profits therefrom. Each co-venturer is acting on its own count and in the furtherance of the business of the venture. The cost incurred in respect of employees deputed as also the assets deployed for the conduct of the joint operations is nothing but the appellant's share of capital contribution to the Joint venture and consequently, there was no basis to hold that the appellant was rendering services to the un-incorporated Joint Venture of the PI Holders. Alternatively, it was submitted that the appellant had acted for and on behalf of the PI Holders and h....
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.... period of limitation could not have been invoked. 3. Shri Vinod Kumar Ld. Authorised Representative appearing on behalf of the Respondent has reiterated the findings recorded in the impugned order. In particular, it has been submitted that if the appellant had instead of engaging its own employees for conduct of the joint operations, hired contractors to undertake the said operations, such contractors would have charged service tax. The activity being undertaken by the appellant was similar to the activity being undertaken by the contractor and was accordingly a service rendered to the UJV. 3.1 It was further submitted that the decision in the case of B.G. Exploration (supra) and Production India Ltd., reported in 2021 (49) GSTL 143 (T) could not be relied upon as a binding precedent, as there was no evidence produced to demonstrate that the terms of the Joint Venture with which the Tribunal was concerned with in that case were similar to the terms of the JV executed by the appellant. 3.2 Insofar as the aspect of limitation is concerned, it was submitted that the appellant had suppressed from the department the value of taxable services as also the tax payable thereon and conse....
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.... asset was brought on the table by the Government of India as its share of capital contribution, while the private parties brought in their contribution in the form of technical expertise and capital. The profits from such joint operations were shared between the Government and the private parties as per the formula prescribed and agreed in the Contracts. The common objective of the parties is to explore, develop and produce the maximum amount of mineral resource for commercial sale. 8. We have examined the relevant documents and records and find merit in this submission of the appellant. In our view, the PSC is a classic example of a public private partnership, where each of the co-venturers contributes to the success of the venture in their own way and work towards enhancing the benefits flowing therefrom. Under the PSC, the Government of India brings on the table the block which could potentially hold crude and/or natural gas, while the technical and financial contribution is made by the PI Holders. There is also a management committee which is constituted comprising of members from the Government of India as also the PI Holders which has to interalia approve the annual work pr....
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....s dependent upon there being a distributable surplus after deduction of the costs incurred by the Holders. .......... 26. There is no dispute that the joint venture in the present case has been constituted in terms of the Contract, which is a contractual arrangement between the Government of India, the Appellant, ONGC and RIL. The said joint venture was entered into for maximizing the extraction of crude petroleum/natural gas from the identified blocks and to share the profits from the venture. The management committee comprising of representatives of the Government of India, the Appellant, ONGC and RIL undertook all the strategic, financial and other operative decisions with respect to the venture. Thus, all the pre-requisites of being a joint venture are clearly met. In this backdrop, it is clearly impermissible to hold that the contribution made by a co-venturer (partner) in the course or furtherance of the joint-venture is a service rendered to the joint venture for a consideration. It is not in dispute that in a partnership or a joint venture, whatever a partner does for the furtherance of the business, he does so also for advancing his own interest, as he has a stake in t....
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....est, as he has a stake in the venture. All the resources contributed enter into a common pool required for running the enterprise and that there is no contractor-contractee or principal-agent relationship between the co-venturer and the joint venture. Consequently, there is no basis for the finding that the appellant as a co-venturer was rendering services to the UJV of the PI Holders. 11. We also agree with the observations of the findings of this Tribunal in the other decision of B.G., reported in 2021 (49) GSTL 143 wherein, it has been held that the joint operations undertaken under the PSC does not result in rendition of any service as there is no beneficiary entity outside the PSC to which the joint operation are subordinated. It has been held that the cost incurred towards the employees which has been deployed towards the joint operation is a capital contribution to the venture and not a consideration to the rendition of any service. The relevant observations of this Tribunal are extracted herein below: 11. ................................... In the impugned contract, the several participating interests are, collegially, designated as 'contractor' in the singular and in fu....
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....al and the by-passing of transubstantiation of accumulated capital, in the form of cash and bank balances, into these rights and competencies does not derogate from that. Hence, the activity undertaken by the appellant with its cost equivalence recorded in the books is nothing but capital contribution. The adjudicating authority has erred in concluding that the mechanism of 'cash call' prescribed in the 'joint operations agreement' is consideration for services; it is intended as the vehicle for contribution by the participating interests to the capital requirements of the venture. As such capital contributions are obligated for the establishment and operation of a business venture, it is not 'consideration' for rendering of any taxable service. 12. In view of the above, we are of the considered opinion that there is neither any service rendered by the Appellant nor is there any consideration involved in the appellant's deploying its man power and assets for furtherance of the operation of the joint venture. The ratio laid down in the aforesaid decision of the Tribunal in the case of B.G. Exploration & Production India Ltd., reported in 2021 (49) GSTL 143 is squarely applicable an....