AI Drafter 
TaxTMI 
TaxTMI 
2023 (10) TMI 318
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....ng Services provided to Dredging Corporation of India (DCI) for Sethu Samudram Project and Dhamra Port Company Ltd., and also on certain services imported by them. Show Cause Notices for the different periods were issued to demand Service Tax on amounts received for Soil Stabilisation and Land Reclamation Services as Dredging Services, Charter-hire charges as Dredging Services, Maintenance and Repair Services, Man Power Recruitment and Supply Agency Services and other services. After due process of law, the authorities below confirmed the demand on the above and dropped all other issues. Aggrieved by the confirmation of demand of Service Tax, interest and penalties imposed the appellants are now before the Tribunal. 3.1 The Ld. counsel Shri Raghavan Ramabadran appeared and argued for the appellant. The details of the Show Cause Notice period involved and the issues are furnished below:- Appeal No. O-in-O Period Nature of services for which demand confirmed/dropped 1.ST/40452/2013 40&41/2012 dt. 30.11.2012 01.01.2009 to 31.03.2009 a) Soil stabilisation and land reclamation services alleged to be dredging services provided to D....
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....ken the activities of dredging, soil stabilisation, land reclamation under separate agreements, as described herein below: i. Dredging Services: * The appellant provides dredging services by removing material including silt, sediments, rocks, sands, debris, etc., form the port / navigational route, so that the vessel can approach and berth at the port. * The appellant has remitted applicable service tax on dredging services. This is an undisputed fact as is reflected in paragraph 4 of the Show Cause Notice No. 240/2010 dated 19.04.2010 and paragraph 4 of the Show Cause Notice No. 608/2010 dated 11.10.2010. ii. Land Reclamation: * The land reclamation process involved reclamation of land from the sea. The appellant was required to undertake activities such as construction of containment of dikes, extraction of filling material from the respective locations, filling up of the proposed reclamation site with the fill material as specified by the customer for finally reclaiming the land. * The appellant did not remit service tax on the land reclamation activities since the activity is classifiable as 'site formation services' under S....
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.... not remit service tax under reverse charge since the activity as per the Taxation of Services (Provided from outside India and received in India) Rules, 2006 (Import Rules), the appellant is not liable to pay tax for the services received/performed outside India. 5.1 The Ld. counsel submitted that the Tribunal in the appellants own case had occasion to consider all these three issues as reported in [2018 (6) TMI 933] and adverted to the same. 5.2 In regard to the demand of Service Tax as dredging services at Dhamra Port, for soil stabilisation and reclamation services, the Ld. counsel explained that appellant had entered into three separate contracts for dredging, soil stabilisation and land reclamation. The appellant had discharged the service tax for dredging services provided by them. They are not liable to pay service tax for amounts received for land reclamation and soil stabilisation for the reason that these services in the nature of site formation services are exempted from payment of service tax when provided at port as per Notification No. 17/2005-ST. 5.3 In the earlier appeal, the Tribunal had remanded this issue to the adjudicating authority to verify whether ....
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....that it is "Charter Hire Agreement". The said Charter Hire Agreement lays down charter hire per week of operation, period of hire (4 months), place, date and time of delivery as also place, date and time of re-delivery. We also find that although the vessel is hired along with a complement of officers and crew, the decision where to do the dredging work, the hours of operation etc. are totally those of the Dredging Corporation of India and appellants have no role or say in that whatsoever. The positioning of one Appeal Nos.ST/502504/2010 representative of the appellant on board the vessel may well be for co- ordination purpose, but it is nobody's case that the said representative calls the shots in respect of dredging operations. From the sample of the invoice produced by the Ld. Advocate (page 351 of compilation), it is in fact seen that the billing has been done based on operational hours at 100% and at 85% and even at 0%. The DCI has also been billed towards wear and tear of the dredging equipment at Rs. 3.60 per cubic metre. If the services provided by the appellant indeed was only "dredging service", the appellant would not have been able to bill DCI for such wear and tear cha....
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....t maintenances and repairs services' under the second category i.e. they will be deemed as having been rendered in India if the situs of performance of services is in India. In other words, the Import Rules provide that such services would be taxable in the hands of the recipient of services located in India, provided that such services are partly or fully performed in India. The services having been provided outside India, the demand is prayed to be set aside. 5.9 The fourth issue is with regard to the Manpower Recruitment and Supply Agency (MRSA) Services. This issue was also considered by the Tribunal for the earlier period (appeal). The demand was then set aside. The relevant discussion of the Tribunal reads as under:- "(b) Manpower Supply Services: (i) The dispute relates to salary payments paid to the "expatriate" employees employed under them. According to appellant, the salary payments had been routed through foreign companies who made Appeal Nos.ST/502-504/2010 payment to the said employees on behalf of the appellant in foreign currency and on reimbursement basis without any mark up. (ii) The appellants have contended that with each of the....
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....ayment of tax. The Ld. counsel prayed that the appeals may be allowed. 6.1 The Ld. Authorised Representative Smt. Anandalakshmi Ganeshram appeared and argued for the Department. The main crux of argument was in respect of the demand of Service Tax under MRSA. It is submitted by the Ld. AR that the appellant's contention that manpower supplied by the non-resident service providers were absorbed as their own employees and only the payment to the employees was routed through the overseas service providers (M/s. N.V. Baggerwerken Decloedt and M/s. Bellsca Investments Ltd., Cyprus (Bellsee)) and that no service was involved as per the secondment agreement dated 01.11.2004 cannot be accepted. On a perusal of this agreement it can be seen that the appellant has requested Bellsea to depute the secondees for agreed tenure and the secondees shall resume their services with Bellsea upon completion of the secondment. The salient features of this agreement are as below: Clause B: Bellsea to depute 'Secondees' to the assessee initially for a period of 3 years and renewable further as per agreed terms Clause ID: Bellsea agreed upon the terms and conditions relating to the sec....
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.... only upon terms and conditions mutually agreed upon by the appellant with Bellsea and not the employees. 6.4 It is very much apparent that the appellant has directly appointed these persons working in Bellsea as their employees, it can be reasonably understood that such persons have resigned their jobs with Bellsea and joined the appellant company in their individual capacity. It is substantiated with documentary evidence with regard to deputation of personnel to the appellant and extension of deputation to responsibility for payment of salaries is remains within the control of Bellsea itself. The above facts establish that the personnel deputed to the appellant continued to be employees of Bellsee. Under the facts and circumstance, personnel claimed to be the employees of the appellant are actually employees of the Foreign Service provider and the amount paid by the appellant to them as salary is nothing but a consideration for providing manpower services. 6.5 The argument of the Ld. counsel for the appellant that the amounts are nothing but reimbursements and therefore not subject to levy of Service Tax prior to 2015 was countered by the Ld. AR by stating that the said iss....
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....eements, the original authority vide Order-in-Original No. 14&15/2013 dated 28.02.2013 dropped the demands. In such order, the original authority has dropped the demand in respect of all the above three issues and has upheld the demand of Service Tax on manpower supply services only. The discussion by the adjudicating authority for setting aside the demand of Service Tax in regard to soil stabilisation and land reclamation activities is as under:- "7. Dredging service 7.2 This taxable service covers dredging which is generally undertaken for removal of material such as silt, sediments, rocks etc. of rivers, ports, harbour, backwater or estuary for providing adequate draught for ships and other vessels and to maintain shipping channels. Service tax is leviable only on dredging of river, port, harbour, backwater or estuary and dredging in any other cases does not attract service tax. The definition of dredging is an inclusive definition and the activities specified are only indicative and not exhaustive. As clarified by the Ministry, the dredging service is generally undertaken for removal of material such as silt, sediments, rocks, etc for providing adequa....
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....tion received for site formation services is exempted under the above Notification and cannot be subject to levy of Service Tax under dredging services. The facts entirely being the same, we are of the view that the demand of Service Tax under the category of dredging services for the amount received by the appellant for soil stabilisation and land reclamation services cannot sustained and requires to be set aside which we hereby do. 9.1 The second issue is whether the service offered by the appellant to Dredging Corporation of India by way of charter-hire of vessel for dredging work of the Sethu Samudram Canal Project. The demand of Service Tax is under Dredging services. In paragraph 13.1.1, the facts have been discussed by the adjudicating authority as under:- "13.1.1 A perusal of the Agreement dated 10.01.2008 between ISDL (Owner) and DCI (Charterer) at plain sight appears to be an agreement for charter-hire of vessel for dredging work of the Sethu Samudram Canal Project. However, on detailed scrutiny of the same, it is observed that not only has the vessel been leased out but also, the manpower. DCI have deputed only 3 persons for the said project. Hence, the conte....
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.... 010 has referred a particular invoice and confirmed the demand on them; b. They have received repair and maintenance services from the various foreign service providers for the vessel located outside India. c. They have received services for vessels located at Colombo Shipyard & at Singapore. They have submitted documents to substantiate that the repair activities were carried out at Colombo, Sri Lanka & Singapore respectively. d. With regard to maintenance and repair services, the decide the applicability of service tax under import of services, the location of service' is to be determined and as all their services were carried out outside India, service tax will not be applicable on the same. Based on the above reply given by the assessee, I have examined the documents submitted by them to confirm their averments on the place of provision of service. I find that for the work carried out at Colombo Dockyard, they have submitted various documents such as work-done certificate/Invoice wherein date-wise details of work done vis-à-vis the charges for the same has been given. In the said Invoice, charges for occupation of dock, wharfage, ....
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....lysed by the Hon'ble Apex Court in the case of Commissioner of Customs, Central Excise and Service Tax, Bangalore vs. M/s. Northern Operating Systems Pvt. Ltd. [2022 (61) GSTL 129 (SC)]. The Ld. counsel for the appellant has submitted that the Hon'ble Apex Court in the said case did not refer to the application of the decision of the Apex Court in the case of Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (10) GSTL 401 (SC)]. Though in para 26, the said decision was brought to notice and referred to by the Hon'ble Apex Court, the Hon'ble Apex Court has only considered taxability under the category of manpower requirement and supply agency services and has not considered the valuation aspect. The discussion in paragraph 34 of the said judgment is as under:- "34. The contemporary global economy has witnessed rapid cross-border arrangements for which dynamic mobile workforces are optimal. To leverage talent within a transnational group, employees are frequently seconded to affiliated or group companies based on business considerations. In a typical secondment arrangement, employees of overseas entities are deputed to the hos....
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.... invoke Section 80 of the Finance Act, 1944 to set aside the penalties. 10. In the result, the impugned order is modified as under:- i. The demand of Service Tax under the category of Dredging services for Dhamra Port on amounts received for soil stabilisation and land reclamation activity is set aside. ii. The demand of Service Tax on the amount received for charter/hire of vessels to DCI is set aside. iii. The demand of Service Tax on the amounts paid for repair and maintenance of the Vessel Orwell is set aside. iv. The demand of Service Tax on Manpower Recruitment and Supply Agency services is upheld along with interest. v. The penalties imposed are entirely set aside. 11. The appeals are partly allowed in above terms. (Order pronounced in open court on 15.09.2023) ============= Document 1 EXPORTER International Seaport Dredging Ltd 5th Floor, Challam Towers, Old No.62, New No.113, Dr.Radhakrishnan Salai. Chennai-600 004. Ph: 044-43129900/02/03/04/05 Fax: 044-43129901 CONSIGNEE Consortium Dredging Intemaional Group-5 Kuszini House 25, Mauriowp mad grey ville Durban, South Africa Tel +2....