2016 (2) TMI 220 - AT - Service Tax

Place of receipt of services - within in domestic services or outside India - location of fixed establishment. - RIL was not paying service tax on the belief that the imported services are used outside the territorial waters of India viz., beyond 12 nautical miles (NM) to which provisions of the Finance Act, 1994 are not extended. - Application of provisions of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. Held that - Not 21/2009 extends the taxable territory only to constructed installations and structures and not to under-construction installations. Therefore services provided to latter are not taxable. - The structures referred to in Not 21/2009 are complete structures. - Services provided by vessels traversing to and fro from shore to off shore and in the EEZ are not taxable under the provisions of Not 21/2009. - Not 21/2009 extends taxable territory to installations etc in the CS and EEZ in contradistinction to Not 14/2010 which also extends the taxable territory to the whole of the sea-bed and thus the services provided to the sea-bed are not taxable. Service tax is payable on the services namely Commercial Training and Coaching service and Management Consultant Service . Appropriate interest on demand confirmed in respect of these two services is payable. However no penalty is imposable - Decided partly in favor of assessee.

Issues Involved:
1. Taxability of services received by RIL from foreign service providers in the Continental Shelf (CS) and Exclusive Economic Zone (EEZ) of India.
2. Interpretation and applicability of Notification No. 21/2009-ST and Notification No. 14/2010-ST.
3. Classification of services and their taxability under various categories.
4. Jurisdiction and territorial applicability of the Finance Act, 1994.
5. Penalties and interest on service tax liabilities.

Detailed Analysis:

1. Taxability of Services Received by RIL:
The respondent, RIL, engaged in offshore oil and gas exploration, received services from foreign service providers. The Revenue argued that RIL must pay service tax on these services under Section 66A of the Finance Act, 1994, as extended to the CS and EEZ by Notification No. 1/2002-ST, amended by Notification No. 21/2009-ST. RIL contended that services consumed beyond 12 nautical miles (NM) from India's territorial waters were not taxable.

2. Interpretation and Applicability of Notifications:
The key issue was whether Notification No. 21/2009-ST, which extended service tax provisions to installations, structures, and vessels in the CS and EEZ, covered services provided to under-construction installations. The Tribunal held that Notification No. 21/2009-ST did not apply to under-construction installations and structures. It only applied to completed installations and structures. The Tribunal also noted that Notification No. 14/2010-ST, which extended service tax to the whole CS and EEZ, including pre-construction activities, could not be applied retrospectively.

3. Classification of Services and Their Taxability:
The Tribunal examined various contracts and services received by RIL, including Supply of Tangible Goods for Use (STGU), Survey and Exploration of Mineral Services, Erection, Commissioning or Installation Service, Management, Maintenance or Repair Service, Manpower Recruitment or Supply Agency Service, Technical, Inspection and Certification Services, Consulting Engineer Service, Scientific or Technical Consultancy Services, Technical Testing and Analysis Service, Commercial Training and Coaching Service, and Management Consultant Service. The Tribunal concluded that most services related to exploration and pre-construction activities were not taxable as they were provided outside the taxable territory. However, services provided within India's taxable territory, such as Commercial Training and Coaching Service and Management Consultant Service, were taxable.

4. Jurisdiction and Territorial Applicability:
The Tribunal emphasized that service tax is a destination-based consumption tax, applicable only to services provided within the taxable territory of India. Services provided beyond the 12 NM limit or to under-construction installations in the CS and EEZ were not taxable. The Tribunal relied on judicial precedents, including the Supreme Court's judgment in All India Federation of Tax Practitioners vs. UOI and the High Court of Bombay's judgment in Greatship India Ltd vs. CST.

5. Penalties and Interest:
The Tribunal noted that RIL had declared in its ST returns that the services were performed or received at locations not covered by the Finance Act, 1994. Therefore, penalties were not warranted under Section 80, as the issue involved interpretation of law. However, interest was payable on the confirmed demand for taxable services.

Conclusion:
- Notification No. 21/2009-ST applies only to completed installations and structures, not to under-construction installations.
- Services provided beyond the taxable territory (CS and EEZ) or for pre-construction activities are not taxable.
- Commercial Training and Coaching Service and Management Consultant Service provided within India's taxable territory are taxable.
- No penalties are imposed due to the interpretational nature of the issue, but interest is payable on the confirmed demand.

Disposition:
The appeal was disposed of in the above terms, confirming the taxability of certain services and setting aside the demand for others based on territorial jurisdiction and the nature of the services provided.

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