2010 (7) TMI 744 - AT - Service Tax

Stay application - demand of service tax against the appellants but did not impose any penalty by invoking Section 80 of the Finance Act, 1994 - Held that - contract between the appellants and ONGC, appellant is undertaking services and for rendering such services, they are using mobile units workover rigs . The nature of activities, prima facie, support the view of the Commissioner that the same are in the nature of management, maintenance and repairing services. We also, prima facie, agree with the submission of the ld. Jt. CDR that the Tribunal in the earlier order has not upheld the view of the Commissioner s earlier findings that the dispute involving legal interpretation and that the belief of the appellants is bona fide, it is not a case for full waiver of dues as per the impugned order. - Pre-deposit ordered partly.

Summary

Issues:
Interpretation of contract for service tax liability on workover rigs, validity of demand of service tax, applicability of extended period for demand, requirement of deposit for stay of recovery.

Analysis:
The judgment by the Appellate Tribunal CESTAT, KOLKATA involved a dispute regarding the liability of service tax on the activity of "workover of rigs" undertaken by the appellants for ONGC. The Commissioner initially confirmed the demand of service tax without imposing a penalty under Section 80 of the Finance Act, 1994. However, the Tribunal's earlier order dismissed the Revenue's appeal due to a procedural issue but remanded the appellants' appeal for fresh consideration by the adjudicating authority.

Upon remand, the Commissioner reconfirmed the demand of service tax amounting to approximately Rs. 263.36 lakhs. The appellants contended that the activity of providing workover rigs to ONGC was a contract for the supply of tangible goods, not a service falling under "management, maintenance, and repair services." They argued that the earlier finding of a bona fide legal dispute by the Commissioner was not overturned by the Tribunal or the High Court of Guwahati.

On the other hand, the Department argued that the contract involved servicing of wells and activities akin to services for maintaining ONGC's oil well operations. They highlighted evidence indicating that the appellants were engaged in re-conditioning and repairing services for the wells. The Department disputed the appellants' claim of a bona fide belief, emphasizing that the Tribunal's previous order did not support such a view and was based on technical grounds rather than the nature of the dispute.

After considering the submissions and examining the contract between the parties, the Tribunal found prima facie evidence supporting the Commissioner's view that the appellants' activities constituted management, maintenance, and repair services. The Tribunal disagreed with the appellants' interpretation of the contract and agreed with the Department that the dispute did not solely involve legal interpretation but also the nature of services provided. Consequently, the Tribunal held that the demand involving an extended period was valid.

Regarding the stay of recovery, the Tribunal directed the appellants to deposit Rs. 75.00 lakhs within eight weeks and stay recovery of the balance amount pending the appeal's disposal. The decision was based on the lack of demonstrated financial hardship and the need for partial payment to proceed with the appeal process effectively.