2022 (6) TMI 45 - HC - Service Tax

Classification of services - mining services or not - business of exploration and production of crude oil and natural gas - it is alleged by appellant that after an opportunity of personal hearing was granted to the appellant on 23.08.2017, the first respondent waited for two years and thereafter passed the order dated 29.05.2019 - HELD THAT - In the interregnum period, two circulars came to be issued by the Ministry of Finance, which are very well applicable to the case of the appellant, but they were not even referred to by the first respondent, while passing the order dated 29.05.2019. Therefore, the learned counsel prayed to this court to provide one more opportunity to the appellant to substantiate their case with supportive documentary evidence before the first respondent, instead of filing an appeal to the CESTAT, as directed by the learned Judge. This court finds some bonafide in the contention so raised on the side of the appellant. The learned Judge, in the order impugned herein, categorically stated that before passing of the order-in-original, two circulars were issued by the Ministry of Finance and the same were not considered by the first respondent, however, he directed the appellant to file statutory appeal by raising all these factual aspects before the Appellate Authority, which is also a fact finding authority. Though this court does not find any error in the course adopted by the learned Judge, taking note of the plea raised by the learned counsel for the appellant, it may not be wrong to grant an opportunity to the appellant enabling them to produce the relevant documentary evidence to support their case before the first respondent. The matter is remanded to the first respondent for fresh consideration, after affording an opportunity of personal hearing to the appellant, on sixth day of June, 2022 between 10 a.m. and 5 p.m. - Petition allowed by way of remand.

Summary

Issues:
1. Correctness of the order dated 12.11.2019 passed by the learned Judge in W.P. No. 27161 of 2019.
2. Classification of production of oil service as "Mining Services" under Section 65 (105) (zzzy) of the Finance Act, 1994.
3. Consideration of Circulars dated 12.02.2018 and 05.03.2018 by the first respondent.
4. Appellant's contention on delay in passing the order-in-original.
5. Appellant's plea to produce documentary evidence before the first respondent.

Analysis:

Issue 1: Correctness of the order dated 12.11.2019
The Writ Appeal challenges the correctness of the order dated 12.11.2019 passed by the learned Judge in W.P. No. 27161 of 2019. The appellant sought to quash the order dated 29.05.2019 classifying the production of oil service as "mining service" and demanding education cess, higher secondary education cess, penalty, and interest. The court found merit in the appellant's contention and remanded the matter to the first respondent for fresh consideration.

Issue 2: Classification of production of oil service
The appellant, a public limited company engaged in exploration and production of crude oil and natural gas, faced a show cause notice to classify the production of oil service as "Mining Services" under the Finance Act, 1994. The first respondent classified the service as "mining service" and levied service tax, education cess, and penalty. The appellant contested this classification, citing circulars issued by the Ministry of Finance in their favor.

Issue 3: Consideration of Circulars by the first respondent
The appellant argued that the first respondent failed to consider Circulars dated 12.02.2018 and 05.03.2018, which clarified the levy of service tax in respect of "cost production." The court acknowledged the relevance of these circulars and directed the appellant to produce documentary evidence before the first respondent for fresh consideration.

Issue 4: Appellant's contention on delay in passing the order
The appellant raised concerns about the delay in passing the order-in-original after the personal hearing. They argued that the delay, coupled with the issuance of favorable circulars, impacted the decision. The court found merit in this contention and granted the appellant an opportunity to present supportive documentary evidence before the first respondent.

Issue 5: Plea to produce documentary evidence
The court, while acknowledging the direction to file a statutory appeal, granted the appellant an opportunity to produce relevant documentary evidence before the first respondent for fresh consideration. This decision aimed to ensure a fair assessment of the case based on all available materials.

In conclusion, the High Court of Madras remanded the matter to the first respondent for fresh consideration, allowing the appellant to present documentary evidence in support of their case. The judgment highlighted the importance of considering all relevant factors, including circulars issued by the Ministry of Finance, in making a fair determination.