2022 (6) TMI 913 - AT - Service Tax

Exigibility to tax of service rendered in the exclusive economy zone (EEZ) of India - Period between July 2009 and February 2010 - HELD THAT - In view of the settled finding of the Hon ble High Court of Bombay in M/S. GREATSHIP (INDIA) LTD. VERSUS COMMISSIONER OF SERVICE TAX, OIL AND NATURAL GAS COMPANY LTD. 2015 (4) TMI 1006 - BOMBAY HIGH COURT in view of non-taxability between July 2009 and February 2010, insofar as the drilling undertaken by the appellants herein for oil exploration in the continental shelf and exclusive zone (EEZ) is concerned, the impugned orders are set aside. Petition allowed.

Summary

Issues involved:
Exigibility to tax of 'service' rendered in the 'exclusive economy zone (EEZ)' of India between July 2009 and February 2010.

Analysis:

1. Issue of Exigibility to Tax:
The appeals revolved around the taxability of 'drilling service' provided by the appellants under section 65(105)(zzzy) of the Finance Act, 1994 within the 'exclusive economic zone (EEZ)' of India. The appellants argued that the Finance Act, 1994 did not apply to their operations in the EEZ. They relied on notifications, particularly notification no. 1/2002-ST dated 1st March 2002, which extended the Act to designated areas in the continental shelf of the EEZ. Subsequent notifications like 21/09-ST dated 7th July 2009 and 14/2010-ST dated 27th February 2010 further expanded the applicability to cover the entire continental shelf and EEZ of India. The appellants contended that taxability post-2010 was not in dispute, as clarified by the High Court in a previous case. The Tribunal analyzed the notifications and legislative intent, emphasizing that the 2010 notification brought substantive changes by widening the tax scope to include services related to mineral oil prospecting, extraction, and production in the EEZ.

2. Interpretation of Notifications:
The Tribunal highlighted the importance of interpreting legislative intent from the wording of notifications. It noted that the 2010 notification superseded previous notifications, saved actions done before the supersession, and extended the Act to specified areas in the EEZ. The Tribunal rejected contentions that the notifications led to obscure or anomalous situations, affirming that the 2010 notification introduced a substantive legal change rather than a mere clarification. It differentiated between services rendered to installations, structures, and vessels, and services consumed by the seabed of the continental shelf, ruling that the latter was not taxable under the 2009 notification.

3. Legal Position and Conclusion:
Referring to a High Court decision on non-taxability between July 2009 and February 2010 for drilling services in the continental shelf and EEZ, the Tribunal set aside the impugned orders. It concluded that the drilling services provided by the appellants during that period were not taxable under the 2009 notification. The demand for tax was deemed unsustainable, and the appeals were allowed. The Tribunal's decision was based on the settled legal position and the specific nature of the services provided by the appellants in the EEZ.

In summary, the Tribunal's judgment clarified the taxability of services rendered in the EEZ between July 2009 and February 2010, emphasizing the legislative intent behind the notifications and the substantive changes introduced by the 2010 notification. The decision provided a detailed analysis of the legal provisions and previous court rulings to determine the tax liability of the appellants for the disputed period.