2014 (6) TMI 311 - AT - Service Tax

Demand of service tax - Commercial and Industrial Construction Service - Whether the Onshore Terminal developed by M/s Reliance Industries Ltd at Pedda Gadimoga Village, near Kakinada, Andhra Pradesh could be considered to be as Transport Terminal for the purpose of exclusion from levy of service tax under the category of Commercial and Industrial Construction Service. - Held that - there is no arrival from different destination and dispersal to different destination. Movement of gas is unidirectional and is fixed. Here there is just one item. There is no arrival of freight. Extracted fluid is received. Processed dry gas is sent to distribution pipeline - Recovered MEG is processed and again pumped to sub-sea facility. TEG is used in the OT for processing. We find that the said Article speaks about various transport terminals but does not talk of transport terminal for gases. Thus, in our view, the concept of transport terminal is relevant for transportation by air, sea, road and not for transporting gases through pipelines. In any processing facility, material has to be received and dispatched but that would not make the processing facility as Transport Terminal . In our view, transportation is only incidental to the processing facility. After all the fluid received is for extraction of dry gas and thereafter the dry gas is required to be sold to its customers and therefore there has to be facility to receive and transport the same. Even the owner of the facility calls the facility as Onshore Terminal and does not call it Transport Terminal . This itself indicates that even the owner does not recognize the facility as Transport Terminal . We have no hesitation in holding that the facilities available at the onshore terminal at Gadimoga cannot be termed as Transport Terminal . There is no requirement that the transport terminal should be owned by a public authority alone. However, since we have held that the onshore terminal at Gadimoga cannot be considered as transport terminal, this argument though in favour of the appellant does not help in the present situation. Extended period of limitation - Held that - Proviso to Section 73 has been invoked and penalty also has been imposed under Section 78 of the Finance Act. We find from the impugned order that the appellant was of the view that immediately on receipt of mobilization advance that the service tax is required to be paid and there have been exchange of letters between the appellant and their client about the same. However, later on instead of collecting the service tax from the customers, started requesting a comfort letter from their client which was also not received by them. Under the circumstances, it is a clear cut case where the appellant knew their service tax liability but still chose not to collect and pay, but started asking comfort letter. This is clear cut suppression of facts, contravention of provision of service tax law with willful intention and therefore the extended period is rightly invoked. Penalty under Section 76, Section 77 and Section 78 of the Finance Act, 1944 has also been correctly imposed. Demand alongwith interest and penalty confirmed - Decided against assessee.

Summary

Issues Involved:
1. Whether the "Onshore Terminal" developed by M/s Reliance Industries Ltd can be considered a "Transport Terminal" for exclusion from service tax under "Commercial and Industrial Construction Service."
2. Interpretation and application of Section 65(25b) of the Finance Act.
3. Applicability of extended period and penalties under Section 73, Section 76, Section 77, and Section 78 of the Finance Act.

Issue-wise Detailed Analysis:

1. Definition and Scope of "Transport Terminal":
The core issue is whether the "Onshore Terminal" (OT) at Pedda Gadimoga qualifies as a "Transport Terminal" under the Finance Act for service tax exclusion. Section 65(25b) of the Finance Act defines "Commercial or Industrial Construction Service" but excludes services related to "roads, airports, railways, transport terminals, bridges, tunnels, and dams." The term "Transport Terminal" is not explicitly defined in the Act or Rules, necessitating reliance on commonly understood meanings.

The OT's function includes processing natural gas extracted from wells, removing impurities, and handling various facilities like gas dehydration, power generation, and effluent treatment. The OT also controls and monitors operations in the high seas from a centralized control room.

The appellant argued that the OT should be considered a "Transport Terminal" because it receives gas and distributes it through pipelines, similar to how bus or truck terminals operate. However, the Tribunal found that the OT's primary function is processing, not transportation. The OT's role in controlling and monitoring offshore operations further supports its classification as a processing facility rather than a transport terminal.

2. Interpretation of Commercial and Industrial Construction Service:
The Tribunal emphasized that the term "Transport Terminal" should be understood in the context of facilities like airports, railway stations, and ports, where passengers or freight are assembled and dispersed. The OT does not fit this description as it involves unidirectional movement of gas, processing, and subsequent distribution, rather than assembly and dispersal of freight or passengers.

The Tribunal also noted that the OT includes various facilities and infrastructure necessary for processing gas, such as MEG regeneration and TEG systems, which further distinguishes it from a transport terminal.

3. Applicability of Extended Period and Penalties:
The Tribunal upheld the invocation of the extended period under Section 73 and the imposition of penalties under Sections 76, 77, and 78 of the Finance Act. It was found that the appellant was aware of their service tax liability but chose not to collect and pay the tax, instead requesting a comfort letter from their client. This constituted clear suppression of facts and willful contravention of service tax laws, justifying the extended period and penalties.

Conclusion:
The appeal was dismissed, and the Tribunal concluded that the "Onshore Terminal" at Pedda Gadimoga is not a "Transport Terminal" and thus not eligible for service tax exclusion under "Commercial and Industrial Construction Service." The Tribunal also upheld the extended period and penalties due to the appellant's willful suppression of facts and non-compliance with service tax laws. The cross-objection filed by Revenue was disposed of accordingly.