2024 (4) TMI 431 - AT - Service Tax

Point of taxation - Continuous supply - Principles of natural justice - cryptic and non-speaking order - Mining of Mineral, Oil or Gas service - Business Support service (by foreign entity) - Supply of Tangible Goods service - Works Contract service - Security/Detective Agency service - Manpower Recruitment and Supply Agency service - Reverse Charge Mechanism - HELD THAT - Admittedly appellant have not reached the stipulated event where it can raise invoice pursuant to supply of crude oil/gas to ONGC, during both the periods under dispute. It is found that the value of taxable turnover determined by the Commissioner in the impugned order is hit by proviso to Rule 3 of Point of Taxation Rules, as admittedly, the stipulated event for completion of service i.e., supply of crude oil/gas by the appellant to ONGC was not achieved. It is further found that admittedly appellant have neither received any consideration nor was entitled to receive any consideration during the period under dispute in absence of achieving the stipulated milestone. It is also held that the determination of taxable turnover under the provisions of section 67 read with the Service Tax (Determination of Value) Rules is erroneous and against the provisions, particularly, proviso to rule 3 of Point of Taxation Rules. Further, addition of notional value towards profit @ 10% is also bad and against the provisions of law - the impugned orders, being in the nature of best judgment assessment are bad under the admitted facts that the appellants have maintained proper records of the transactions and were registered with the department and have regularly filed the returns - the impugned orders are cryptic and nonspeaking. Extended period of limitation - HELD THAT - The extended period of limitation is not available to Revenue, in absence of conditions stipulated/precedent for invocation. The impugned order set aside - appeal allowed.

Summary

Issues Involved:

1. Determination of Taxable Turnover
2. Point of Taxation for Continuous Supply of Service
3. Applicability of Service Tax (Determination of Value) Rules
4. Invocation of Extended Period of Limitation

Summary:

1. Determination of Taxable Turnover:
The appellant, M/s B.G. Shirke Construction Technology Pvt Ltd, engaged in a service contract with ONGC for the development of the Manepalli Field, argued that the taxable turnover determined by the Commissioner was erroneous. The Commissioner calculated the service tax liability based on the expenditure incurred plus a notional profit of 10%, which the appellant contended was against the provisions of the service tax law.

2. Point of Taxation for Continuous Supply of Service:
The appellant argued that the services provided were in the nature of continuous supply of service, and the point of taxation had not been triggered as the milestone for production and supply of oil/gas to ONGC had not been reached. The contract stipulated that payment would only be made upon the successful delivery of oil/gas, and no such delivery occurred during the disputed period. The Tribunal agreed, stating that the point of taxation rules, particularly Rule 2 and Rule 3, were misconceived by the Commissioner.

3. Applicability of Service Tax (Determination of Value) Rules:
The Tribunal found that the determination of taxable turnover under section 67(1)(iii) read with Rule 3(b) of the Service Tax (Determination of Value) Rules was incorrect. The appellant had neither issued invoices nor received any consideration from ONGC during the disputed period, and thus, the taxable turnover could not be determined based on the cost incurred plus notional profit.

4. Invocation of Extended Period of Limitation:
The Tribunal held that the extended period of limitation was not applicable as the appellant maintained proper records, was registered with the department, and regularly filed returns. The demand raised by the Commissioner was based on a best judgment assessment, which was found to be cryptic and non-speaking.

Conclusion:
The Tribunal allowed the appeals, set aside the impugned orders, and held that the appellant was not liable to pay service tax for the disputed period. The appellant was entitled to consequential benefits in accordance with the law.