2019 (3) TMI 41 - AT - Service Tax

Levy of service tax - dredging services provided to various contractors - Held that - The SCN is bereft of the details of the various recipients to whom service was rendered but claimed to be excluded from the tax liability. Undoubtedly, the service rendered to M/s Hindustan Construction Company has, after detailed examination of the facts, been found to be inconsistent with the definition, and the intended object of taxation, of dredging services. Likewise, the service rendered to M/s ABG Shipyard is also not in question. It would, therefore, appear that the breakup of the dues in the present appeal is a discovery attributable to the response to the show cause notice in which the details of contracts entered into appear to have been offered up as justification for non-payment of the taxes. As far as the service rendered to M/s Sri Pathy Assoceates is concerned, the facts are clear enough. The work was undertaken as part of the tsunami emergency funded by Asian Development Bank and executed on work orders issued by Tamil Nadu Maritime Board. The claim of the notice, and the respondent herein, is that the final recipient of the service, Asian Development Bank, is a privileged person excluded from the burden of tax under various international treaties as well as specific legislation of Parliament - We are unable to ascertain whether the exclusion claimed by the respondent during the adjudication proceedings is their entitlement. However, it was the bounden obligation of the adjudicating authority to consider the submission and give a finding thereof. This, he has patently failed to do. The impugned order set aside to the extent that the proceedings were dropped against the respondent in relation to the services rendered to M/s Sri Pathy Associates - matter remanded back to the original authority for fresh decision after hearing submissions made by the respondent - appeal allowed by way of remand.

Summary

Issues:
Proceedings initiated against M/s On & Offshore Hi Tech Engineers Pvt Ltd for providing 'dredging services' taxable under section 65(105) (zzzb) of Finance Act, 1994. Denial of tax liability by the noticee. Dropping of proceedings against M/s Hindustan Construction Company and M/s ABG Shipyard. Dispute regarding tax liability on services rendered to M/s Sri Pathy Assoceates. Lack of representation by the respondent during the appeal proceedings.

Analysis:

1. The proceedings were initiated against M/s On & Offshore Hi Tech Engineers Pvt Ltd for providing 'dredging services' taxable under section 65(105) (zzzb) of Finance Act, 1994. The show cause notice dated 27th March 2012 sought to recover service tax of `68,50,145/- for the period from 1st April 2007 to 30th June 2011. The noticee denied the tax liability on the services rendered. The Commissioner of Customs, Central Excise & Service Tax, Goa dropped the proceedings after examining the work undertaken for M/s Hindustan Construction Company at the Kundankulam Power Project between March 2005 and March 2009. The competent Committee of Chief Commissioners directed the jurisdictional authority to file the present appeal.

2. The Learned Authorised Representative pointed out that the adjudicating authority chose to drop the entire demand despite dealing with only one recipient of the services. The demand against services rendered to M/s Hindustan Construction Company and M/s ABG Shipyard was not in dispute. However, there was a contention regarding the tax liability on services provided to M/s Sri Pathy Assoceates. The absence of representation from the respondent during the appeal proceedings was noted.

3. Despite the absence of representation by the respondent during the appeal proceedings, the Tribunal proceeded to dispose of the appeal. The show cause notice lacked details of the various recipients to whom services were rendered but claimed to be excluded from tax liability. The service to M/s Hindustan Construction Company was found inconsistent with the definition of 'dredging services,' and the service to M/s ABG Shipyard was not in question. The breakup of dues in the appeal seemed to be a response to the show cause notice.

4. The service rendered to M/s Sri Pathy Assoceates was undertaken as part of the 'tsunami emergency' funded by the Asian Development Bank. The claim was made that the final recipient, Asian Development Bank, was excluded from tax liability under international treaties and specific legislation. The Tribunal noted that the adjudicating authority failed to consider this claim during the proceedings.

5. The Tribunal found that the exclusion claimed by the respondent regarding services rendered to M/s Sri Pathy Assoceates was not conclusively determined by the adjudicating authority. Therefore, the impugned order was set aside to the extent that proceedings were dropped against the respondent in relation to these services. The matter was remanded back to the original authority for a fresh decision after hearing submissions from the respondent. The appeal was allowed by way of remand in this regard.