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TMI Blog2020 (10) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... ia to involve corporate participation for efficient harnessing of natural resources as codified in the production sharing contract agreed upon. This, then, would be the primary association as joint venture comprising of four entities, including Government of India, for viability in extraction of natural resource as the common goal. The manner in which the contract provides for distribution of profit petroleum and cost petroleum is a business model for ensconcing within itself the alienation of risk by the Government of India which necessarily mandates a working arrangement for the disaggregation of cost petroleum as compensation for the mutually exclusive risks undertaken by the contractor. The participating interests in the joint operations have not come together of their own accord for the common purpose of bearing the risk but from one stipulation in the contract setting forth the common purpose including the participation in the proceeds of profit petroleum that is extracted. Service is the satisfaction of one s need by another person with the existence of a provider as sine qua non in any service transaction and with accumulated capital affording the luxury of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssues. Appeal allowed - decided in favor of appellant. - ST/87085/2017 - A/85785/2020 - Dated:- 11-6-2020 - MR C J MATHEW, MEMBER (TECHNICAL) AND MR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL) Shri JH Motwani, Shri Kirti Bhoite, Shri Arihant Tater and M/s Divya Jaswant, Advocates for the appellant Shri Bidhan Chandra, Additional Commissioner (AR) for the respondent ORDER At the root of this dispute brought before us by M/s BG Exploration Production India Ltd is the fastening of tax liability by combination of the legal fiction in Finance Act, 1994 for deeming provider and recipient and of the inclusion of a particular business model within the compasses of that very fiction by way of a clarificatory circular of the Central Board of Excise Customs that was deployed by the adjudicating authority to hold that the attribution of certain expenditure of the appellant to one of their business ventures sufficed for it to be consideration for service rendered. Thereby, the appellant found themselves saddled, in order-in-original no. 01/STA-I/SN/17-18 dated 29th May 2017 of Commissioner of Service Tax, Audit-I, Mumbai, with demand of ₹ 10,98,62,116 confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated activities in section 65(105) of Finance Act, 1994 that was in force before 1st July 2012. That Revenue is not in appeal against this self-imposed restriction is tacit acceptance that such activity was not taxable in the earlier regime. If that be so, the ingredients that justify invoking of the extended period, as well as imposition of penalty under section 78 of Finance Act, 1994, may well be absent and, particularly, as the clarification was issued only in September 2014. We, therefore, restrict ourselves to the legality of the levy for the normal period under the revised scheme of tax. 4. We have heard Learned Counsel for the appellant and Learned Authorized Representative at length, but as we are tasked with cutting a straight path through the conceptual commotion in the impugned order, we intend to turn to their submissions for assistance, to the extent of relevance, only after isolating the issue for resolution. 5. Among its several business undertakings, M/s BG Exploration and Production India Ltd is engaged in the exploration, development and production of hydrocarbons in the Panna-Mukta and the Mid-South Tapti fields within the framework of production sharing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration for rendering of taxable service. In view of the complexities involved, it may not be out of place to recall historical aspects relevant for proper appreciation of the contours of a dispute that is before the Tribunal for the very first time. 8. The artificial delineation of unincorporated associations as well as body of persons from the members thereof, by way of Explanation referred to supra, is not novel to the paradigm of negative list regime but is a carryover from the legal fiction incorporated, under the erstwhile tax regime, in Finance Act, 1994 for overcoming the impediment of judicial affirmation of the principle of mutuality, originally enunciated by the Hon ble Supreme Court in Commercial Tax Officer v. Young Men s Indian Association [(1970) 1 SCC 462] for relieving such bodies from the ambit of tax on sale of goods to its own members, to set aside demand of tax on services rendered by club or association to its members. Thereafter, by amendment, through Finance Act, 2006, inserting Explanation For the purposes of this section, taxable service includes any taxable service provided or to be provided by any unincorporated association or bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Hon ble Supreme Court in New Horizons Ltd v. Union of India [1995 SCC (1) 478]. He, therefore, argues that recruitment, training and deployment of manpower for the joint venture is service within the meaning of section 65B (44) of Finance Act, 1994. Adverting to circular no. 148/17/2011-ST dated 13th December 2011 of Central Board of Excise Customs which, relying upon decision of the Hon ble Supreme Court in re New Horizons Ltd, clarified that agreement between two entities for rendering of services to a third party suffices to determine the emergence of a new entity, he urged us to apply it here for the resolution of present dispute. 11. We have no doubt that agreement among entities for rendering of service to another entity is the essence of joint venture ; however, it is doubtful if joint operation agreement , mandated by the terms of the production sharing contract , can be deemed to be one such in the absence of an external beneficiary. In the impugned contract, the several participating interests are, collegially, designated as contractor in the singular and in furtherance of the policy of the Government of India to involve corporate participation for effi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assesses and assessors through unfamiliar territory of intangibles. The addition of services to the enumeration, though slow in the early years, underwent a five-fold increase between 2000-01 and 2006-07 signposting the imminence of transition to negative list regime. The adroit easing of the upgraded scheme into the sphere of tax administration was the outcome of carefully calibrated strategy to reach this goal. In the classificatory regime, adopted in the beginning, the definition of service , as enumerated series, did not reflect its essence, viz., substitution of self-performance with the descriptive limit further encapsulated in provider-recipient equation to which consideration , as measure of its value, was subordinated. 13. Under the negative list regime, in which demarcation between services was superfluous, the obliteration of boundaries permitted the definition of service , as (44) any activity carried out by a person for another for consideration, and includes a declared service, but shall not include - .. in section 65B of Finance Act, 1994, to encompass all activities save those exogenic to, and excepted in, it and aligned it with the essence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. .whatever the partner does for the furtherance of the business of the partnership, he does so only for advancing his own interest as he has a stake in the success of the venture ..All the resources and contribution of a partner enter a common pool of resources required for running the joint enterprise and the such an enterprise is successful the partners become entitled to profits as a reward for the risks taken by them for investing their resources the venture.... found approval of the Hon ble Supreme Court with dismissal of appeal of Revenue. 15. It is incumbent upon participants in collaborative undertaking to contribute capital for attainment of the common purpose. It is the nature of the undertaking, in terms of permanence and of purpose, that determines the mode of contribution. In the impugned production sharing contract , Government of India brings in its rights over the resources, M/s Oil Natural Gas Corporation handles contracts and documentation, M/s Reliance Industries Ltd manages financial and commercial requirements and the appellant vested with responsibility for technical operations. The deployment of personnel is in pursuance of that obligation. No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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