2013 (2) TMI 559 - Commissioner - Service Tax

Activity of supply of floating rigs - whether the activity of supply of floating rigs by M/s. Aban Offshore Ltd. is covered under the category Supply of tangible goods service as contended by the appellant or under the category Mining service Held that - Mine has been very widely defined to include infrastructure created for mining of minerals, oil or gas. Thus, the meaning of mining has to be restricted to process of extracting metallic or non-metallic mineral deposits. In short, the word mining must be understood as the process of taking minerals, gas or oil from underneath the surface of the earth. Pocess of actual extraction of mineral, oil or gas from beneath the earth is taxable under this category. In the instant case the floating rigs supplied by M/s. Aban is used by the appellant for purifying the extracted oil which is an activity subsequent to the extraction of oil. As the activity to be taxed under Mining Service is restricted to actual extraction of oil, the process carried out by the appellant after extraction of oil by using the floating rigs supplied by M/s. Aban is definitely not covered under this category. Hence the activity of supply of floating rigs to the appellant by M/s. Aban is not covered under Mining Service . The taxability of supply of tangible goods services would get attracted when a supply of tangible goods including machinery, equipment and appliances is made for the use of service recipient. The taxable service covers where tangible goods are supplied without transferring possession and effective control thereof though the goods are made available to the service recipient for use. In the instant case, M/s. Aban had supplied floating rigs to the appellant for post extraction activity without transferring possession and effective control. As per Section 65A of the Finance Act, if a service is classifiable under two or more sub-clauses of clause (105) of Section 65, Classification shall be effected to the sub-clause which provides the most specific description to sub-clauses providing a more general description. Activity of supply of floating rigs by M/s. Aban Offshore Ltd. to the appellant is more specifically covered under the category Supply of tangible goods service Therefore supply of floating rigs covered under Supply of tangible goods service, appellant has erroneously paid the service tax for the disputed period and the appellant is right in claiming the refund. Further judgement in the case of Indian National Shipowners Association v. Union of India 2009 (3) TMI 29 BOMBAY HIGH COURT which was later affirmed by the Hon ble Supreme Court 2010 (12) TMI 12 - SUPREME COURT OF INDIA is relevant to this case where it was held that a service not covered by any entry prior to insertion of entry is not liable to Service tax till entry was introduced covering them Service tax on supply of rig is taxable only w.e.f. 16-5-2008 under the category Supply of tangible goods service and that they had been erroneously charged by M/s. Aban Offshore Ltd. under Mining Service and the same was paid by them erroneously for the period 1-6-2007 to 15-5-2008 under the said category; and hence they are eligible for the refund Refund claim is not hit by limitation inasmuch as the time prescribed under Section 11B is applicable only to those tax which is collected as permitted by the statute and in the instant case the tax was collected without authority of law and hence time limit is not applicable Appellant is eligible for the refund claimed by them Appeal allowed, refund claim sanctioned In favour of assessee.

Issues Involved:
1. Classification of the service provided by M/s. Aban Offshore Ltd.
2. Eligibility for refund claim.
3. Applicability of unjust enrichment.
4. Time-bar on the refund claim.

Detailed Analysis:

1. Classification of the Service Provided by M/s. Aban Offshore Ltd.:

The primary issue was whether the service of supplying floating rigs by M/s. Aban Offshore Ltd. to the appellant should be classified under "Mining Service" or "Supply of tangible goods" service. The appellant argued that the service should be classified under "Supply of tangible goods" service, which became taxable from 16-5-2008, rather than "Mining Service," under which they were erroneously charged from 1-6-2007 to 15-5-2008.

The judgment referred to the Finance Act definitions:
- "Mining Service" involves services in relation to the extraction of minerals, oil, or gas.
- "Supply of tangible goods" involves providing tangible goods for use without transferring the right of possession and effective control.

The court concluded that the activity of supplying floating rigs for purifying extracted oil is a post-extraction activity and does not fall under "Mining Service." Instead, it is more specifically covered under "Supply of tangible goods" service.

2. Eligibility for Refund Claim:

The appellant sought a refund of the service tax paid under "Mining Service" for the period from 1-6-2007 to 15-5-2008, arguing that the tax was erroneously paid. The court agreed with the appellant, citing the Bombay High Court judgment in the Indian National Shipowners' Association case, which was affirmed by the Supreme Court. This judgment clarified that services related to supply of tangible goods were not taxable under "Mining Service" before the introduction of the specific entry for "Supply of tangible goods" service on 16-5-2008.

3. Applicability of Unjust Enrichment:

The lower authority had rejected the refund claim partly on the grounds of unjust enrichment, stating that the appellant had not provided sufficient documentary evidence to prove that the tax burden was not passed on to any other person. However, the appellant argued that the concept of unjust enrichment did not apply because the price of crude oil is determined by market forces and not by the cost of production, which includes the service tax.

The court accepted the appellant's argument, supported by a certificate from M/s. CPCL confirming that no service tax was invoiced or paid by CPCL on the sale of crude oil. Thus, the court concluded that unjust enrichment was not applicable in this case.

4. Time-bar on the Refund Claim:

The lower authority had also rejected part of the refund claim on the grounds that it was time-barred under Section 11B of the Central Excise Act. The appellant contended that the time limit under Section 11B did not apply because the tax was collected without authority of law.

The court supported this argument, citing various judicial pronouncements that held the time limit under Section 11B is not applicable when the tax was collected without authority of law. Thus, the court concluded that the appellant was eligible for the refund claim.

Conclusion:

The court held that the service of supplying floating rigs by M/s. Aban Offshore Ltd. to the appellant was correctly classifiable under "Supply of tangible goods" service, taxable from 16-5-2008. The appellant was entitled to a refund of the service tax paid under "Mining Service" for the period from 1-6-2007 to 15-5-2008. The court also ruled that unjust enrichment did not apply and that the refund claim was not time-barred. Consequently, the impugned order was set aside, and the lower adjudicating authority was directed to sanction the refund as per law. The appeal was allowed.

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