TaxTMI 
TaxTMI 
2024 (2) TMI 1616
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....on companies. For the purpose of tax compliance, the appellants have registered themselves with jurisdictional service tax authorities and are holding service tax registration No. AACCG438ONST001. 2.2 The appellants have entered into three contracts viz., No. OG3/ 3610529/2006 and OG3/3610527/2006, both dated 15.05.2006 and OG3/ 3627932/20067 dated 11.01.2007 with M/s Reliance Industries Limited (RIL) for providing the services of offshore support vessels namely Malaviya Twenty nine, Malaviya Eighteen and Malaviya Twelve on charter hire basis for offshore exploration and production activities (E&P), oil field operations. The appellants had received total consideration of Rs. 70,21,71,974/- during the period May 2008 to March 2010, for the aforesaid services. Post introduction of the service tax levy on the Supply of Tangible Goods for Use (STGU) service w.e.f. 16.05.2008, the appellants on the basis of the understanding with their customers, have treated the above services, for which they had entered into contracts prior to the introduction of service tax levy, as not being liable for payment of service tax. Accordingly, the appellants did not pay service tax in respect of the a....
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....e Petronet LNG case (supra), wherein it was acknowledged that in the case of supply of tangible goods service, so long as the supply was prior to 16.05.2008, no levy is attracted, even though the use of the goods may extend to beyond 16.05.2008. In their case, the vessels have been made available for use, undisputedly prior to 16.05.2008 i.e., the date of delivery of vessel is 15.02.2006, 20.02.2006 and 15.02.2007, therefore the decision of the Tribunal in the case of Petronet LNG (supra) squarely applies to their case. 3.3 Learned Advocate also stated that it was specifically held in the Petronet case that charging of consideration on a per-day basis is immaterial and the same is merely a commercial term relating to computation of consideration. Further, he stated that the services were not taxable inasmuch as the said services were received and consumed outside India, i.e., in the Continental Shelf and Exclusive Economic Zone to which the provisions of the Finance Act, 1994 did not apply in terms of Section 64 read with Notification No. 1/2002-ST dated 01.03.2002; Notification No. 21/2009ST dated 07.07.2009 and Notification No. 14/2010-ST dated 27.02.2010. 3.4 In supp....
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.... the services of "Supply of Tangible Goods for Use (STGU)" in the list of taxable services by inserting a new clause (zzzzj), under sub-section (105) of Section 65 ibid. Such taxable service has been defined to mean, the service provided 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 appliances. The extract of such legal text is given below: "Section 65(105) "taxable service" means any service provided 8[or to be provided, -....... (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 appliances;" The said levy of service tax was brought into force w.e.f. 16.05.2008 by notifying such date under Section 90 of the Finance Act, 2008 (18 of 2008) vide Notification No.18/2008-Service Tax dated 10.05.2008. It was also explained by the Ministry of Finance at the time of introduction of such levy in the instructions ....
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....f the Sea (UNCLOS), signed on 10th December 1982, effective as of 16th November 1994, to which India is a signatory, provides the core element of international legislation for maritime industry. The other important international conventions that are required to be complied with by the shipping industry are International Convention for the Prevention of Pollution (MARPOL) covering prevention of pollution of the marine environment by ships/vessels due to either operational or accidental causes; International Convention and Code on Standards of Training, Certification and Watch keeping for Seafarers (STCW), International Management Code for the Safe Operation of Ships and for Pollution prevention (ISM Code). In order to ensure compliance with various legal requirements of international maritime law, the ship/vessel owners first and foremost, generally enter into a contractual relationship with terms agreed between them and with a charterer, by adopting the standard agreements. BIMCO in their efforts to complement the global regulatory regime developed by the International Maritime Organization (IMO) have created standard contracts and clauses that address the commercial and practical ....
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....ew, commercial and technical management, the Ship/Vessel owner have entered into contractual arrangement with a charterer-client. 8.3 In India, while consolidating the laws and generally amending the laws relating to merchant shipping, the Merchant Shipping Act, 1958 had been enacted to foster the development and ensure the efficient maintenance of an Indian mercantile marine in a manner best suited to serve the national interests and for that purpose to establish a National Shipping Board who will provide for the registration, certification, safety, security of Indian ships/vessels and also for the engagement and discharge of seamen, their wages and welfare, working conditions etc. Further, we find that in order to consolidate the laws relating to admiralty jurisdiction, legal proceedings in connection with vessels, their arrest, detention, sale and other matters connected therewith or incidental thereon the Government had brought out the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017. Section 96 of the Merchant Shipping Act, 1958 provide for engagement of seamen only by a ship owner or his agent. The relevant section is extracted below: ....
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....sonably require without any obligations of the Charterers to pay to the owners or the Master, Officers of the crew of the Vessel any excess or overtime payments. The Charterers shall furnish the Master with all instructions and sailing directions and the Master and Engineer will keep full and correct logs accessible to the Charterers or their agents..... 7. Owners (a) The Owners shall provide and pay for all provisions, wages and all other expenses of the Master, Officers and crew: all maintenance and repair of the Vessel's hull, machinery and equipment as specified in ANNEX "A", also except as otherwise provided in this Charter Party, for all insurance on the Vessel all duties and charges directly related to the Vessel's flag and/or registration, come all deck, cabin and engine room stores, cordage required for ordinary ship's purposes mooring alongside in harbour,... 10. Hire and Payments (a) Hire:The Charterers shall pay Hire for the Vessel at the rate stated in box 19 per day or pro rata for part thereof from the time that the Vessel is delivered to the Charterers until the expiration or earlier termination of this Charter Party.... ....
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....ctive control of the vessels was with the charterer to operate and to undertake the activities that they are purported to do with the vessels, the transaction between the appellants and the charterer cannot fall within the ambit of STGU for levy of service tax. 8.6 In view of the above discussions, we are of the considered view, that both on the facts of the case and on the interpretation of legal provisions of the Finance Act, 1994, the demand of service tax on charter hiring during the disputed period goes beyond the mandate of Section 67, which is a charging section for levy of service tax. 8.7 The department had also failed to prove the claim made by the appellants that in terms of Section 64 of the Finance Act, 1994 read with the aforesaid notifications, service tax was applicable only in the territory of India. In the present case, the services were consumed in the offshore locations in the Continental Shelf and Exclusive Zone and hence, to that extent the levy of service tax is unsustainable since the service were consumed outside India. In this context, the appellants have placed reliance on the decision of the Hon'ble Bombay High Court in the case of Greatship ....
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...., the imposition of penalties is invalid. 43. In view of the conclusions above, the appeal is allowed, the impugned Order-in-Original Nos. 62-64/GB/2012, dated 2-6-2012 passed by the Commissioner of Service Tax, New Delhi is quashed. The amounts remitted by the appellant towards service tax and interest, under protest, shall be refunded forthwith..." We also find that in the Civil Appeal No. 5076/2015 filed by the department, the Hon'ble Supreme Court had vide judgement delivered on 11.05.2010, the interim stay granted earlier by it was vacated and ordered the appellant-Commissioner of Service Tax, New Delhi to make the refund to the party along with interest, as the appeal is yet to be finally disposed of. 10. We also find that the disputed issue of time charter of vessels in the context of levy of sales tax and deemed sale has been examined by the Hon'ble Supreme Court in the case of Great Eastern Shipping Company Limited (supra), wherein it was held that there is complete transfer of right to use the vessel by the Charterer in view of the Article 366(29A)(d) of the Constitution. Relevant paragraphs of the said judgement is extracted and given below: "37. ....