2014 (11) TMI 464 - AT - Service Tax

Denial of refund claim - Unjust enrichment - payment of service tax is under protest or not - Notification 21/2009-ST - Held that - It remains beyond doubt that the service tax levy during the period 2006 was operative only in the designated areas i.e. areas designated by notifications issued by Ministry of External Affairs and made applicable for levy of service tax under Service Tax notification No. 1/2002-ST dt. 1.3.2002. The survey sites where the appellants conducted their operations of seismic survey did not fall in the designated areas. It was only in 2009 that notification No. 21/2009-ST extended the service tax levy to the continental shelf and EEZ in which their survey sites did fall. In the interpretation of a statute, when a person is held to be eligible to obtain the benefit of exemption notification, the same should be liberally construed. It is clear from the judgement that it would apply to cases where the effect of a beneficial statute is sought to be extended. In the present case we have a reverse position where the effect of the amended notification if read retrospectively will have the effect of punishment. We therefore do not agree with the order of Commissioner (Appeals), who has not read the judgement in its proper perspective. Appellant only have a representative in India for communication purposes. The service was actually provided outside India because it was not performed in the designated areas i.e. in India. Even otherwise, the import of services became leviable to tax only w.e.f. 18th April 2006 and the period of dispute is prior to this date. In the present case there was no order of assessment. There is no assessment order against which the appellant could file appeal. The appellants were simply asked to pay during investigations. And they deposited the amount under protest. This protest itself is a challenge to the assessment. They have produced a certificate from ONGC that service tax has not been passed to ONGC & a certificate from the company s statutory auditors that the amount of service tax deposited is shown as receivables in the company s books which facts have not been controverted by the Commissioner. - Decided in favour of assessee.

Summary

Issues:
Appeal against rejection of refund claim under Section 11B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 for service tax paid under protest for seismic surveys in offshore areas.

Analysis:
1. The appellants, a French company, conducted seismic surveys for ONGC in offshore India. They contended that service tax was not applicable as the survey sites were not in designated areas until 2009. The Commissioner held the substitution in notification No. 21/2009 had retrospective effect, citing the Supreme Court's decision in Government of India Vs. India Tobacco Association. Unjust enrichment and payment under protest were rejected.

2. The appellant's counsel argued that the survey sites were outside designated areas for service tax as per notifications. They emphasized the limited sovereign rights of India in the continental shelf and EEZ. The counsel also clarified that import of services did not apply during the disputed period before 18.4.2006.

3. The AR did not dispute the offshore site locations but relied on the Indian Tobacco Association case, claiming retrospective effect of notification substitution. The Tribunal noted the service tax levy's scope in designated areas under notification No. 1/2002-ST until 2009 when it was extended to the survey sites.

4. The Tribunal analyzed the Indian Tobacco Association case, emphasizing its application to beneficial statutes. It disagreed with the Commissioner's order, stating that applying the amended notification retrospectively would be punitive, contrary to the judgment's intent. The Tribunal also addressed the import of services argument and the Commissioner's inconsistent reasoning on territorial waters.

5. The Commissioner's denial of the refund claim based on finality of assessment was challenged. The Tribunal found no assessment order, indicating the payment under protest challenged the assessment. Citing relevant case laws, the Tribunal supported the appellant's claim, noting the absence of unjust enrichment and the submission of necessary certificates.

6. The impugned order was set aside, granting relief to the appellants. The Tribunal's decision was pronounced on 9.10.2014, overturning the Commissioner's rejection of the refund claim for service tax paid under protest for seismic surveys in offshore areas.