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TMI Blog2020 (9) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 that was alleged to have been wrongly availed as CENVAT credit and of Rs. 18,23,00,608 allegedly due as deemed provider, under section 66A of Finance Act, 1994, on services provided from outside India to the appellant. 2. Both the notices were disposed of by common order-in-original no. 18-19/ST-VII/RS/2015 dated 28th August 2015 of Principal Commissioner of Service Tax, Mumbai-VII which is now impugned for us on several grounds. Revenue is in appeal against the invoking of second proviso to section 78(1) of Finance Act, 1994 for limiting the penalty to fifteen percent without satisfaction that the pre-requisite of deposit of such amount within the period prescribed therein had been complied with. 3. While dropping the demand pertaining to wrongful availment of CENVAT credit of Rs. 2,88,93,108, though not allowed to be debited for adjustment towards their dues, the tax on output service was limited to Rs. 4,05,49,749 by acknowledging chargeability under section 65(105)(zzzza) of Finance Act, 1994 applicable to provider of 'works contract service' with concomitant eligibility for composition scheme. In the disposal of the second notice, the authority, taking note of computationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for taxability in section 65(105)(zzzza) of Finance Act, 1994 could not have been the basis of demand as that had not been proposed in the show cause notice and that the activity did not merit the nomenclature owing to non-leviability of state levy which is of essence in 'works contract' for which the reliance was placed on the decision of the Hon'ble High Court of Gujarat in Larsen & Toubro v. Union of India [2017 (52) STR 457 (Guj)] and of the Hon'ble High Court of Bombay in Commissioner of Sales Tax, Maharashtra v. Pure Helium (India) Ltd [(2012) 49 VST 17]; he opined that, with the decision of the Hon'ble Supreme Court in Commissioner of Central Excise & Customs v. Larsen & Toubro Ltd [2015-TIOL-187-SC-ST], the scope of levy as provider of the taxable service proposed in the show cause notice did not extend to composite contracts. He further contends that the unilateral disallowance of eligibility, under notification no. 12/2003-ST dated 20th June 2003, for exclusion of value of material supplied in the composite contract runs counter to the optional exercise of recourse to Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 and that any tax liability ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany could not seek the shelter of section 66A of Finance Act, 1994; according to him, the adjudicating authority has taken note of the registration under Service Tax Rules, 1994 specifying an address in India as well as paragraph no. 3.4.2 of the contract assigning the obligation of discharge of tax to the appellant company. He also points out that the adjudicating authority has, fairly, dropped a portion of the demand pertaining to output service on the submissions made during the proceedings. Relying upon the decisions of the Hon'ble High Court of Calcutta in Indus Integrated Information Management Ltd v. Principal Commissioner of Service Tax, Kolkata-I [2018 (14) GSTL 24 (Cal)] and of the Hon'ble Supreme Court in JK Steel Ltd v. Union of India [1978 (2) ELT J355 (SC)], Learned Special Counsel disputes the challenge to the adoption of fresh classification, as well as application of composition scheme, made on behalf of the appellants. The operation, in full measure, of the law laid down by the Hon'ble Supreme Court in re Rashtriya Ispat Nigam Ltd, he contends, cannot be wished away by mere denials. 7. On the confirmation of demand in the second notice, Mr Mondal argues that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing provider. Services originating outside the country, with the provider being jurisdictionally non-existent, inherently renders the circle of transaction incomplete. The free ends of the circle are brought together by deeming the activity as taxable and deeming the recipient be the provider. In the domestic context, the contrarian mechanism of the recipient pays was in vogue though by transposing the object of tax.... With this creation of the new breed of taxpayer, the existence, character and status of the provider was rendered irrelevant in the scheme of taxation thus extending the jurisdiction of Finance Act, 1994 to all and any taxable service subject specific general exemption under section 93 of Finance Act, 1994..... 9. The intent was to close the loophole that enabled escapement from tax that otherwise fastens on a transaction between two entities intra-jurisdiction. It is also an acknowledged rule of interpretation that surplusage cannot be presumed in a statute. The existence of reference to section 93 of Finance Act, 1994 and the rules supra cannot be presumed to be in error or an unintended intrusion. From a harmonious construction of the parent provision and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance embodied in the contract, with Mr Mondal, referring to the decision in re Rashtriya Ispat Nigam Ltd, positing that the appellant company cannot be allowed to alienate itself from contractual commitment. On the other hand, Mr Sridharan refers to that very clause for the proposition that the obligation is limited to tax levies as on the date of offer of price bid. We are afraid that too much emphasis, and not particularly contextual, has been brought to bear on a clause which is commonplace in such contracts. The intent is to ring fence the contractee from susceptibility to non-performance from cost overrun arising from statutory levies that is presumed to have been subsumed in the price bid with claim for reimbursement of tax arising only upon subsequent revision, or imposition, of levy. As a creation of the statute, it can hardly be expected of us to hold that a contractual obligation prevails over statutory provisions. Nor is it within the privilege of Revenue in these proceedings to insist upon enforcement of contractual obligation between two commercial entities. Hence, we are not confronted by any obstacles to consideration of the appeal on merit. 12. That the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escapement from levy of Central Sales Tax, on the admitted lack of jurisdiction of the State of Maharashtra, on supplies effected to the offshore platforms of Oil and Natural Gas Commission (as it then was) in Bombay High (as it then was) and, with the inter-state movement, thereby, inchoate, the provisions of the said law was held to be inapplicable. Undoubtedly, the present dispute pertains to levy but, nonetheless, of tax imposed under powers conferred upon the Union, in which the tax jurisdiction over the offshore installations in Mumbai High is not excluded as it may be for the government of a state. Furthermore, 'works contract' transactions were accorded constitutional sanctification as deemed 'sale of goods' for ensuring that jurisdiction to tax sale of goods, vested in the constituent states, was not compromised. The foray of the Central Government in such transactions, although constitutionally restricted to the service component, occurred decades later and, restricted, as the competence was, to the service component which was amenable to definition validated only with reference to that over which the federating states were invested with constitutional competence, the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allenging the proposed liability with factual rebuttal of the several elements of the demand. To that extent, there can be no controversy that the notice was not lacking in means to confront the demand. Some of the discrepancies pointed out by appellant company were deliberated upon in the impugned order. It is contended on behalf of the appellant company that the substantial portion of the demand, relating to charter of a vessel, is not leviable as the vessel was not operational for the entire period in India. Undisputedly, as pointed out by Mr Mondal, evidence of such is not available; nevertheless, it would appear that the contention arising from the delivery, and the handing over, having occurred outside the country was not considered before crystalizing the demand. Furthermore, it is claimed that two other taxable activities would, in terms of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, not be leviable to tax as these were performance-based and to be taxed accordingly. These appear to be pleadings made for the first time ever. Naturally, these need to be attended to before the appellate jurisdiction can decide on the correctness, or ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 78 of Finance Act, 1994. We, therefore, set aside the penalties imposed on the appellant company. Appeal of Revenue against the restricted penalty is, thus, infructuous and is dismissed. 19. The claim of the appellant to lower tax liability on output service, owing to eligibility for abating of material cost from the taxable value of services, must be responded to. Likewise, the appellant must be given an opportunity to validate claim for availment of CENVAT credit of Rs. 2,88,93,108. The claim of the appellant company to exclude the value of 'supply of tangible goods service', 'survey and exploration of mineral, oil and gas service' and 'technical inspection and certification service', for the reasons specified in the appeal, needs to be scrutinized. Remand is warranted for the purpose. 20. With the finding that service provided under contract to M/s Oil and Natural Gas Corporation Ltd is liable to tax from M/s Sarku Engineering Services as also on the services procured from outside India to the extent permissible, and in accordance with Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 we direct that the matter revert to the original ..... X X X X Extracts X X X X X X X X Extracts X X X X
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