TaxTMI 
TaxTMI 
2025 (11) TMI 857
X X X X Extracts X X X X
X X X X Extracts X X X X
.... April 2005 to March 2012 ("relevant period") For Period April 2005 to February 2010 For Period April 2010 to March 2011 For Period April 2011 to March 2012 Show Cause Notices F. No. DGCEI/MZU/I&IS'C/30/56/09/ 6225/1575 dated 19.10.2010 and Corrigendum issued vide F. No. DGCEI/MZU/I&IS'C/30/56/09/975 dated 11.2.2011 ("SCN-1") [page 1229-1295 of Volume-III to appeal paper book] No. D-III/ST/R-II/Western Geco/SCN/43/11/6172 dated 24.10.2011 ("SCN2") [page 1309-1374 of Volume-III to appeal paper book] No. D-III/ST/R-II/Western Geco/SCN/43/11/594 dated 16.1.2013 ("SCN-3") [page 1375-1378 of Volume-III to appeal paper book] Demand of Service Tax in dispute Rs. 343,75,25,308 under proviso to Section 73 (1) of the Finance Act, 1994 ("Act") Rs. 34,56,500 under proviso to Section 73 (1) of the Act 2,05,36,970 under Section 73 (1A) of the Act Total = Rs. 346,15,17,778 Demand of Interest & Penalty in dispute • Interest under Section 75 of the Act (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a and it was processed in the project office of Western Geco in Mumbai. Invoices for the services were issued to ONGC and RIL by the Western Geco, Gurugram which also paid service tax on 4% of the total lease amount being the cost of data processing. No service tax was paid on the remaining 96% of the basic cost which is the issue in dispute in these appeals. 4. Show cause notices were issued which culminated in the impugned order confirming the demands with interest and imposing penalties. Submissions of the appellant 5. Shri V. Lakshmikumaran assisted by Shri Kunal Aggarwal and Ms. Shagun Arora, learned counsels for the appellant made the following submissions: (i) The appellant provided service of survey using Q-Marine technology in the high seas beyond the 12 nautical miles from the Indian land mass. Chapter V of the Finance Act, 1994 [6Finance Act] extends to the whole of India but not beyond and the sea which they had scanned was beyond 12 nautical miles and hence was outside India and therefore, no service tax was payable. Reliance is placed on the following decisions: a) Ajay Mishra versus Commissioner of Service Tax, Delhi III-2023 (386) ELT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pany incorporated overseas to the clients ONGC and RIL located in India, as per Section 66A of the Finance Act, service tax could only have been demanded from the service recipients. (x) The officers of Director General of GST Intelligence [DGGI] were appointed as Central Excise officers by Notification No. 7/2004-CE (NT) dated 11.3.2004 and empowered to exercise powers in the whole of India. Since the data acquisition was the activity undertaken beyond India, DGGI officers had no jurisdiction at all to issue the Show Cause Notices. (xi) The appellant had paid service tax on the data acquisition service also from 27.2.2010 and therefore, the demands for the period April 2010 to March 2011 (SCN-2) and April 2011 to March 2012 (SCN-3) are not sustainable. (xii) Extended period of limitation was not invokable in the absence of any act of malafide on the part of the appellant. Demand of Rs. 290,98,26,242/- for the period April 2005 to March 2009 is barred by limitation. (xiii) If the case is decided against the appellant on merits, cum-tax benefit should be extended because the appellant had not collected service tax from RIL and ONGC. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....if the data acquisition is considered as a service, it was completed only when the tapes containing the data were given to ONGC/RIL which happened in Mumbai. viii) The impugned order may be upheld and all appeals may be dismissed. Findings 7. To decide this appeal, we must examine the principles of construction of taxing statutes, interpret relevant provisions of Finance Act and Rules accordingly and apply them to the facts of this case. 8. Tax is a compulsory exaction of money by the Government and the taxpayer gets nothing in return. Fee, even if imposed by a statute, has a broad correlation with a service rendered but tax has no such relationship with any service. 9. "No taxation without representation" was one of the most important slogans of the American independence movement with the people refusing to pay taxes except what their own elected representatives mandated. Likewise, in France Article 14 of the Declaration of Rights of Man, 1789 passed by the National Assembly of France, August 26, 1789, states "All the citizens have a right to decide, either personally or by their representatives, as to the necessity of the public contribution; to grant this fr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion requires not just the charge but even the procedures to recover taxes should be as per the law. 13. The components of levy of any tax are (a) the taxable event which makes the tax payable; (b) the person or goods on which the tax or duty is levied;(c) the person liable to pay the tax; (d) the rate at which such tax is imposed; and (e) the measure or value on which the tax is to be computed. These constitute the charge of the tax. In Govind Saran Ganga Saran versus CST - (1985) 155 ITR 144 (SC), the Supreme Court held as follows: "6. The components which enter into the concept of a tax are well-known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness ill the legislative scheme defi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sponsible for the taxable event has to pay the tax (seller in case of sales tax, buyer in case of purchase tax, etc.) but sometimes for administrative convenience, to reduce cost of collection or to improve collection of the tax, the law itself makes someone else responsible to pay it in full or in part (tax deductor in case of income tax, etc.). If the law requires tax to be paid by a person, only that person will be responsible to pay the tax and it cannot be demanded from anyone else. Computation of the tax 19. Computation of tax is based on the rate of tax and the measure of tax (value, quantity, capacity, etc.) on which it must be calculated. If there is a mechanism for computation of tax in the law but there is no clear charge of tax on that event, no tax can be charged at all. For example, before 2012, providing a 'taxable service' attracted levy of service tax under Chapter V of Finance Act. 'Taxable service' was defined under various clauses of section 65(105) of that Act and new clauses were added from time to time bringing more services within the net of service tax. From 1.6.2007, a new clause (zzzza) was introduced levying service tax on 'works c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cannot be taxed on any doctrine of "the substance of the matter" as distinguished from its legal signification, for a subject is not liable to tax on the supposed "spirit of the law" or "by inference or by analogy" [G.P. Singh Principles of Statutory Interpretation, 15th Edition pg. 618 citing IRC v Duke of Westminister, (1936) 1, pp 19, 24 (HL)] 24. In short: (a) tax/duty can be levied and collected only if there is a charge; (b) tax/duty can be levied and collected only if there is method for computing it; (c) tax/duty can be levied and collected only from the person who has to pay it; (d) All acts relating to imposition of tax, point at which tax is to be collected, rate of tax and recovery must also be carried out in accordance with law. (e) Tax cannot be levied or collected otherwise. (f) If any tax escapes assessment, it can be recovered only as per the remedy available in law. (g) Interest is payable and penalties are imposable also as per the law and not otherwise. Sections relevant to this appeal and their application to the facts Taxable event in this case 25. The first essential element to l....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of residence, in India, such service shall, for the purposes of this section, be taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly all the provisions of this Chapter shall apply: Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply: Provided further that where the provider of the service has his business establishment both in that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided. (2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate persons for the purposes of this section. Explanation 1.- A person carrying on a business through a branch or agency in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se & Service Tax LTU, Mumbai versus Reliance Industries Limited-2016 (45) STR 341 (Tri-Mumbai) 30. The appellant had paid service tax on 4% of the total value of the contracts received for data analysis done in the Project office of Western Geco in Mumbai which was clearly within India. The dispute is regarding the remaining 96% of the total value of contracts on which the appellant had not paid service tax. Learned counsel for the appellant also contended that no service tax was payable at all since the service was provided by Western Geco BV Islands which was incorporated at a place outside India. 31. In paragraph 30 of the impugned order, the Commissioner rejected the submission of the appellant that it was rendering the services outside the territorial waters of India and held that it did not provide any services to the ONGC(the service recipient) outside Indian territorial waters. He held that the service was provided in India when the processed data tapes and reports were provided to ONGC and only a part of this service, i.e., the data acquisition activity was done outside the territorial waters of India. He further recorded that the title of the data tapes containing t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ivities. In a nutshell, there is a consolidated consideration in the form of basic price, all inclusive, with some adjustments based on contingencies. 35. In particular, the contract specifies the following twelve (12) items as part of the all-inclusive basic price: a) Q vessel with 6000 km x 6 streamer, 100-m separation, 8 sec record length and 4 ms processing. b) Cost of providing boarding and lodging on-board the survey up to three of CORPORTAITONs/Government of India representative c) Payment of Sales Tax, if any, on material bought in India. d) Royalty payment of fees and utilization of patent rights, if any. e) The cost connected with port calls, pilot age and harbour dues, etc. f) The cost connected with reports etc. g) Cost connected with the training of CORPORATIONS's personnel. h) All costs on processing of DGPS Navigation Data. i) All costs for DGPS as primary navigation system. j) All costs related to submission of reports on processing of DGPS position data, preparation of post plot of survey lines. k) All expenses towards cost of collection of Data and other technical....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax. Person responsible to pay tax in this case 40. The next issue to be considered after the charge of service tax is who was responsible to pay service tax in these contracts. As per section 68, the person providing the taxable service has to pay the service tax. Section 68 as applicable during the relevant period reads as follows: SECTION 68. Payment of service tax. (1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed. (2) Notwithstanding anything contained in sub-section (1), in respect of any taxable services notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66 and all the provisions of this Chapter shall apply to such person as if he is the personliable for paying the service tax in relation to such service. 41. In this case, it is undisputed that the service recipients (ONGC and RIL) were located in India and that service was provided. The question to be decided is who had to pay the serv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing is brought on record or to our attention by either party that any contracts were entered into by the Gurugram or Mumbai project offices of Western Geco. However, the data analysis part of the work was done in the Mumbai project office of WesternGeco as a part of the work to be done by Western Geco, BV Islands. There was no lis between the ONGC and Western Geco Mumbai. No consideration was payable or paid by ONGC to Western Geco Mumbai. 45. Invoices under the contracts were raised by Western Geco Gurugram for the work done by Western Geco BV Islands. These invoices were in US$ as per the contracts and the payments were made in US$ by ONGC to the aforesaid bank account of Western Geco BV Islands in New York. 46. The irresistible conclusion is that data analysis by Western Geco Mumbai and the raising of invoices by Western Geco Gurugram were acts done on behalf of Western Geco BV Islands and were not based on some other contracts. There was no lis between ONGC and Western Geco Mumbai or Western Geco Gurugram. No contracts were entered into by ONGC with them and no payments were made to them. 47. The project offices of Western Geco in Mumbai and Gurugram and its headquarte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arges and according to the Revenue, it must be charged on 100% of the value. 53. A perusal of the contract shows that it was a single contract for a basic price which included 12 activities. There were no separate contracts for data acquisition and data processing. The mere fact that a share of the total consideration was attributed to the activity of data processing does not make it a separate contract or contract for a separate service. 54. It is not uncommon to indicate values for some parts/costs of any contract as a part of the total consideration. A composite contract for construction of a building or structure, for instance, may have a Bill of Quantities (BOQ) indicating the materials to be used and their estimated prices. It does not mean that there is a separate sales contract for the goods indicated in the BOQ. A lawyer providing legal services may bill his client for his services as well as for clerkage or for services of his juniors who assisted him in preparing the case. Such billing does not imply that the client has either an explicit or implicit contract with the clerks or the juniors of the advocate for their work. The essence of the contract is that of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....), (h), (i), (j), (l), [* * *], (n), (o), [* * *], (w), (x), (y), (z), (zb), (zc), (zi), (zj), (zn), (zo), (zq), (zr), (zt), (zu), (zv),(zw), (zza), (zzc), (zzd), (zzf), (zzg), (zzh), (zzi), (zzl), (zzm), (zzn), (zzo), (zzp), (zzs), (zzt), (zzv), (zzw), (zzx), (zzy), (zzzd), (zzze), (zzzf), (zzzp), (zzzzg), (zzzzh), (zzzzi), (zzzzk) and (zzzzl) of clause (105) of section 65 of the Act, be provision of such services as are performed outside India: Provided that where such taxable service is partly performed outside India, it shall be treated as performed Outside India 58. Conversely, Rule 3 of the Taxation of services (Provided from outside India and received in India) Rules, 2006 laid down that imported services partly rendered in India should be treated as having been rendered in India. This Rule reads as follows: Rule 3 - Taxable services provided from outside India and received in India Subject to section 66A of the Act, the taxable services provided from outside India and received in India shall, in relation to taxable services : (i) specified in sub-clauses (d), (m),] (p), (q), (v), (zzq), (zzza), (zzzb), (zzzc),(zzzh), (zzzr), (zzzy),(zzzz),(zzzz....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y, India for providing service. e) As per Section 68 of the Finance Act, Western Geco BV Islands which had entered into the contracts and its project offices Western Geco Gurugram which obtained a centralised service tax registration and paid service tax on 4% of the value and Western Geco Mumbai which carried out the data analysis should be treated as separate persons. ONGC and RIL had no contracts with Western Geco Gurugram or Western Geco Mumbai nor have any amounts been paid by ONGC or RIL to them. All contracts were with Western Geco BV Islands to whom the consideration was paid in US dollars. f) Undisputedly, the service was covered by the definition of taxable service under section 65(105) (zzv) of the Finance Act, 1994.The contract was for a single service for a basic price which service included 12 different activities including data analysis. Data analysis was not a separate service even though the cost of data analysis was indicated in the contract as 4% of the basic price. g) Part of the service was rendered outside the taxable territory of India beyond 12 nautical miles from Indian land mass and part of it was rendered in India in Mumbai....