2013 (8) TMI 676 - AT - Service Tax

Stay - dredging activity - Site formation service - Import of manpower service - Appellant contended that dredging activity done is not in river, port, harbor, backwater or estuary and, therefore, it was not taxable - activity was done beyond the territorial waters of India and at the relevant time service tax levy was limited to activities done in territorial waters only. Held that - This is a case, where the liability to service tax has to be proved by the Revenue - in clarification including circulars and press notes issued at the time of introducing the entry for levy of tax, Government had made it clear that service tax was payable only on dredging done in any river, port, harbor, backwater or estuary there is a factual dispute on the issue as to whether any part of the canal can be considered as within the territorial waters or not Site formation service department contended that this is case of site formation, for which they were expected to recover necessary soil by dredging - Since the contract showed payment for dredging and land reclamation held that - It is not justifiable to bring them under a different category and demand tax - purpose of the contract is site reclamation and not dredging - the essential character of the contract at this stage is of site formation only - Under the category of Site formation service are specifically mentioned and are also exempted. Maintenance and repair service Held that - In the case of maintenance and repair service factual dispute is raised as to whether repair was done in Singapore or in India - fact cannot be conclusively decided as sufficient evidence was not produced no sufficient material placed before. Import of manpower service department contended that the assessee was making payments to their parent company abroad and not to the employees - it should be treated as a case of supply of manpower from abroad by the parent company Held that - In the matter of supply of manpower by a parent company to a subsidiary company, there are decisions wherein pre-deposit has been waived treating the present appellant on a different footing is not justifiable . Other miscellaneous items, Dhamra Project and Gangavaram Port - the question whether it is a project for supply of goods appears to be a question of facts needs to be examined at the time of final hearing. - it is reasonable to call for re-deposit of Rs.2 crores - stay granted partly.

Summary

Issues:
Service tax liability on various contracts related to dredging, maintenance of dredger, salaries to employees, and other services.

Analysis:
1. Dredging Services Tax Liability:
- The Revenue claimed that the applicant did not pay appropriate service tax on dredging activities under specific contracts. The disputed services included dredging under Sethusamudram project, activities at Dhamra Port, maintenance of dredger, and other related services.
- The applicant argued that the dredging activity was not taxable as it was done beyond India's territorial waters and did not fall under the taxable definition provided by the CBEC circular.
- The Tribunal noted that the liability to service tax must be proven by the Revenue. It highlighted the requirement for dredging to be done in specific locations to attract service tax, and any pre-deposit order would disturb the balance of convenience against the applicant.

2. Dhamra Port Contract Classification:
- The dispute arose regarding the classification of the activities at Dhamra Port as dredging or site formation. The Revenue contended that the contract indicated payments for dredging and reclamation, making it liable for service tax.
- The Tribunal observed that the contract's essential character appeared to be site formation rather than dredging, falling under exempted site formation services. It deemed unjustifiable to classify the activities differently and demand tax.

3. Maintenance and Repair Services Taxability:
- The issue of taxability of maintenance and repair services was raised, with a factual dispute regarding whether the repair was conducted in India or Singapore.
- The Tribunal noted the lack of conclusive evidence during the hearing to determine the repair location definitively.

4. Manpower Supply Services Tax Dispute:
- The dispute over tax liability on salaries paid to employees of the parent company working with the appellant on deputation was raised. The Revenue sought to classify it as import of Man-power Supply Service.
- The Tribunal referenced previous decisions where pre-deposit had been waived in similar cases, indicating that treating the appellant differently was not justifiable.

5. Miscellaneous Tax Demands on Other Services:
- Various other demands for tax on different services were contested, including supply of equipment for projects like Dhamra and Gangavaram Ports.
- The Tribunal highlighted that the determination of whether these projects constituted supply of goods required further examination during the final hearing.

In conclusion, the Tribunal ordered a re-deposit of Rs.2 crores by the appellant within six weeks, in addition to the amount already paid, with the balance dues waived and recovery stayed during the appeal's pendency. The judgment addressed the specific issues raised by the Revenue regarding service tax liability on dredging contracts, maintenance services, manpower supply, and other related activities, providing detailed analysis and considerations for each dispute.