TaxTMI 
TaxTMI 
2009 (3) TMI 29
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....licies relating to Revenue. Respondent 2 is an apex body functioning under the control of respondent 1 that regulates all policy decisions relating to Central Excise, Customs and Service Tax matters. One of the functions of the 2^nd respondent is to issue clarifications under Section 378 of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. Respondent 3 is the Commissioner of Service Tax and Respondent 4 is the Additional Commissioner (Technical) Service Tax, Mumbai. The 5^th respondent is M/s. Oil & Natural Gas Co. Ltd. ("ONGC" for short). It is an instrumentality of State and has entered into various contracts with the members of the 1^st petitioner. 3. Before we go to the facts of the case and the challenge raised in this petition, it is necessary to see the legal provisions and various circulars which have relevance to the present case. 4. In 1994 Chapter V of the Finance Act, 1994 was enacted in order to tax services rendered by service providers in India. Each year more and more services have been made taxable. 5. Section 65 (105) defines taxable service to mean any service provided or to be provided as enumerated in the subclauses therein. S....
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....on of coal/mineral from pit head to a specified location within mine/factory or for transportation outside the mine. These activities are post-mining activities and are chargeable to service tax under the relevant taxable services i.e. "Cargo Handling service" and "Goods Transport by Road". However, in case such transportation is undertaken by mechanical systems, such as conveyor belt system, ropeway system, merry-go-round systems etc. and the same is chargeable under cargo handling service, even if the loading, unloading and similar activities are done using mechanical systems." 10. Entry (zzzzj) was inserted into Section 65(105) of the Finance Act, 1994 by the Finance Act 2008 with effect from 16/5/08. The said entry reads as under: "Section (65(105)(zzzzj) To any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliance". 11. It is now necessary to state the petitioners' case. Members of the 1^st petitioner provide services to major exploration and production operators (in India as well as in the i....
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....r hire of vessels. The 5^th respondent indicated its decision not to reimburse Service Tax unless it is found leviable by a higher legal forum. Similar letters were sent by the 5^th respondent to other members of the 1^st petitioner. 15. The 1^st petitioner received a clarification letter from the 3^rd respondent on 17/12/07 wherein it was mentioned that the Marine Logistic Services rendered by the members of the 1^st petitioner are in relation to "Mining of Mineral Oil or Gas Service as defined under subclause (zzzy) of Section 65(105) of the Finance Act, 1994." A further letter dated 19/2/08 was addressed to the 1^st petitioner by the 4^th respondent as a reply to its representation dated 28/11/07 reiterating the view of the 3^rd respondent that Marine Logistic Service is liable to Service Tax. Members of the 1^st petitioner were advised that they should obtain registration with Service Tax authorities and pay Service Tax. It was further stated in the letter that the 2^nd respondent had directed that action may be taken in accordance with law. It is not necessary to refer to various letters sent by the 5^th respondent to the 1^st petitioner, to SCI and to other members because....
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....h effect from 16/5/08. The petitioners amended the instant petition inserting the necessary averments in relation to new entry (zzzzj). The controversy in the present petition is only for the period from 1/6/07 to 15/5/08. 20. We have heard learned counsel for the parties. We have also perused the written submissions submitted by them. 21. Mr. Nankani, learned counsel for the petitioners submitted that the members of the 1^st petitioner are engaged in operation of offshore vessels. Chartering of vessel is not an activity relating to mining. He submitted that entry (zzzy) covers only premining activities. He took us to the circular dated 28/2/07 and circular dated 12/11/07 in support of this submission. Relying on the judgment of the Supreme Court in Navin Chemicals Mfg. & Trading Co. Ltd. v. Collector of Customs, (1993) 4 SCC 320 and the judgment of this court in C.K.P. Mandal v. Commissioner of Central Excise, Mumbai, 2006(4) STR 183 (Bom.). Mr. Nankani submitted that the phrase "in relation to" means that the activity must have a direct relation to the subject matter of the taxing entry. He submitted that the activities of the members of the petitioner are premining in natu....
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....even if Section 65A were to be applied, the services provided by the members of the 1^st petitioner are specifically covered by the taxing entry for supply of tangible goods, and applying the principles set out in Section 65A (2) (a) also, the services are rightly covered under entry 65(105)(zzzzj). 27. Lastly Mr. Nankani submitted that the service provider who pays the Service Tax is entitled to recover the same from the service consumer, Service Tax being an indirect tax. In this case even contractually the 5^th respondent is liable to reimburse the tax to the members of the 1^st petitioner under the respective contracts entered into by such members with the 5^th respondent. Mr. Nankani submitted that in the event of this court coming to the conclusion that Service Tax is payable on Marine Logistic Services this court may direct the 5^th respondent to pay Service Tax to the members of the 1^st petitioner on the Marine Logistic Services rendered by them to the 5^th respondent. 28. Mr. Sankhlecha, learned counsel for the 5^th respondent adopted all arguments of Mr. Nankani except his arguments in relation to alternative prayer (b). He added that India having adopted selective....
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....ed should be done by the adjudicating authorities. He submitted that the 5^th respondent has undertaken and is obliged to reimburse the petitioners in respect of services being rendered by the members of the 1^st petitioner which are taxable and not any figure demanded by respondents 1 to 4 which the members of the 1^st petitioner may agree to pay without considering the nature of service which is subject to tax. 33. Mr. Rao, learned counsel for respondents 1 to 4 took us through the affidavit in reply of Shri Pitambar Bagh Assistant Commissioner (DN 1, Service Tax Commissionerate, Mumbai). It is inter alia stated by Shri Bagh that all services in relation to mining of minerals, oil or gas are covered under mining services. It is further stated in the affidavit that the members of the 1^st petitioner provide machinery equipment, labour and other infrastructure to the 5^th respondent. The said services are, therefore, relating to the mining of minerals, oil or gas and are as such covered by Section 65 (105) (zzzy). Mr. Rao has reiterated these submissions. Mr. Rao added that the petition is premature because the petitioners have approached this court before issuance of show cause....
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.... Entry (zzzzj) is entirely a new entry. Whereas entry (zzzy) covers services provided to any person in relation to mining of mineral, oil or gas, services covered by entry (zzzzj) can be identified by the presence of two characteristics namely (a) supply of tangible goods including machinery, equipment and appliances for use, (b) there is no transfer of right of possession and effective control of such machinery, equipment and appliances. According to the members of the 1^st petitioner, they supply offshore support vessels to carry out jobs like anchor handling, towing of vessels, supply to rig or platform, diving support, fire fighting etc. Their marine construction barges support offshore construction, provide accommodation, crane support and stoppage area on main deck or equipment. Their harbour tugs are deployed for piloting big vessels in and out of the harbour and for husbanding main fleet. They give vessels on time charter basis to oil and gas producers to carry out offshore exploration and production activities. The right of possession and effective control of such machinery, equipment and appliances is not parted with. Therefore, those activities clearly fall in entry (zzz....
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.... person by a goods transport agency in relation to transport of goods by road in a goods carriage". Section 65(105(zzz) refers to service rendered to any person in relation to transport of goods other than water, through pipeline or other conduit. There was no entry covering transport by sea. Legislature could have easily provided for such an entry. Absence of such entry leads us to conclude that the chartering of vessels undertaken by the members of the 1^st petitioner was not covered by any entry prior to insertion of entry (zzzzj). In the light of judgment of the Assam High Court in Magus Corporation's case (supra) it must be held that the said services were not specified under any entry and hence were not liable to service tax till entry (zzzzj) was introduced covering them. 41. This conclusion of ours is supported by the circulars to which, we have made reference hereinabove. We have also quoted the relevant extracts of the said circular. At the cost of repetition, we must state that when entry (zzzy) was inserted into Section 65(105) of the Finance Act, 1994, by Circular No. 334/1/2007.TRU dated 28/2/07 it was clarified that the different entries relating to mining act....
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.... facilities provided to the client in relation to such use" and also "the services rendered as a caterer". This definition specifically included the facilities provided to the client in the ambit of services provided in relation to use of Mandaps. It is evident that it is this definition which persuaded the Supreme Court to hold that wide range of services are included in the definition of taxable services so far as Mandap-keepers are concerned. It is on the basis of this definition that the Supreme Court concluded that taxable service could include the mere providing of premises on a temporary basis for organising any official, social or business function, but would also include other facilities supplied in relation thereto. The observations of the Supreme Court must be understood against this background. 44. A Division Bench of this court to which one of us (Devadhar, J.) was a party in C.K.P. Mandal's case (supra) distinguished the Supreme Court's judgment in Tamil Nadu Kalyan Mandapam's case (supra) and observed that where the Mandap keeper provides services including catering to the hirer of the mandap such services are leviable to tax, but where the Mandap keep....
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....of service tax came within the competence of State Legislature alone. Placing reliance on Article 276(1) it was urged that the words used in Article 276(1) namely, "no law of the State Legislature relating to taxes in respect of professions, callings etc." were words of widest amplitude and, therefore, the word "profession" would cover every aspect connected with it. It was urged that since the expressions "relating to" and "in respect of" are known in law as words of widest amplitude, if the significance of the said expressions is kept in mind, then it becomes clear that the Constitution framers intended the State Legislature alone to be competent to impose taxes on professions, trades calling and employments. While dealing with this submission the Supreme Court drew distinction between a taxing entry and a general entry and held that Entry 60 is a taxing entry and, therefore, tax on professions has to be read as a levy on professions trades etc. It cannot be extended to include services. The Supreme Court laid stress on the schematic interpretation of the three lists in the Seventh Schedule while interpreting the legislative heads under list II. Repelling the contention of the ap....