2007 (8) TMI 81 - HC - Service Tax

Appeal by Department Whether COD clearance is not required where a foreign company is represented by PSU as an agent Held that revenue contention was correct and allowed. COD clearance is required only where there exists a dispute between Ministry and Ministry of GOI, Ministry and PSU

Issues Involved:
1. Whether COD clearance is necessary for an appeal filed by a non-government entity.
2. Whether the assessee represented by a government entity requires COD clearance.
3. Whether COD clearance is necessary when the agent representing the foreign collaborator is a government entity.

Issue-wise Detailed Analysis:

1. Whether COD clearance is necessary for an appeal filed by a non-government entity:

The primary issue revolves around whether the Income Tax Tribunal was correct in holding that Committee on Disputes (COD) clearance is necessary for entertaining an appeal filed by Combustion Engineering Inc. (USA), which is not a government department. The Tribunal dismissed the appeal filed by the Revenue on the grounds that COD approval had not been obtained. However, the Revenue contended that COD approval is essential only for disputes between government entities and not for cases involving non-resident assessees represented by a government undertaking. The Tribunal's decision to dismiss the appeal without considering the merits was challenged, arguing that the COD certificate is not essential in this context.

2. Whether the assessee represented by a government entity requires COD clearance:

The Tribunal held that since the assessee, Combustion Engineering Inc. (USA), was represented by Bharat Heavy Electricals Limited (BHEL), a public sector undertaking, COD clearance was necessary. The Revenue argued that BHEL is merely a representative assessee and not the principal party in the dispute. The Tribunal's reliance on the requirement of COD clearance for the representative assessee was questioned, emphasizing that the actual assessee is a non-resident foreign company, and thus, COD clearance should not be mandated.

3. Whether COD clearance is necessary when the agent representing the foreign collaborator is a government entity:

The Tribunal's decision was based on the premise that since BHEL, a government entity, represented the foreign collaborator, COD clearance was required. The Revenue countered this by stating that the dispute pertains to the assessment of Combustion Engineering Inc. (USA) and not BHEL. The Tribunal's interpretation of the Supreme Court's direction in the Oil and Natural Gas Commission (ONGC) case was deemed a misconception, as the requirement for COD clearance applies to disputes involving government entities and public sector undertakings, not to cases where a non-resident assessee is represented by a government entity.

Judgment Summary:

The High Court concluded that the Tribunal erred in dismissing the appeal on the grounds of lacking COD approval. The court clarified that COD clearance is necessary only for disputes between government entities and public sector undertakings, as per the Supreme Court's direction in the ONGC case. Since Combustion Engineering Inc. (USA) is a non-resident foreign company and not a public sector undertaking, the requirement for COD clearance does not apply. The Tribunal's decision to dismiss the appeal without considering the merits was based on a misconception of the Supreme Court's directive.

The High Court allowed the Revenue's appeal, setting aside the Tribunal's order, and directed the Tribunal to restore the appeal on file and dispose of it on merits. This judgment underscores that the requirement for COD clearance is specific to disputes involving government entities and public sector undertakings and does not extend to cases where a non-resident assessee is represented by a government entity.

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