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TMI Blog2022 (5) TMI 1305X X X X Extracts X X X X X X X X Extracts X X X X ..... ot discharging their service tax liability properly and fully. Accordingly, the Department called for relevant service tax records in July, 2010, in response to which the appellant sent copies of challans in support of service tax having been paid of about Rs. 26.39 crores. Further, the appellant also made available the following documents namely; copy of ST-3 returns for the period 2006-07 to 2010-11, Copy of contracts entered into by them with their clients for rendering service under various heads, Cenvat records, Balance sheets for the period 2006-07 to 2010-11. 4. From the scrutiny of the records and documents it appeared to Revenue that:- (a) The assessee had not discharged their service tax liability falls under Section 66A (RCM) for the period December, 2008 to December, 2010; (b) In the past too, they had been discharging their service tax liability after the due date; (c) The assessee had installed Single Point Mooring (SPM) system for the clients such as M/s Bharat Oman Refineries Ltd. (BORL), HPCL, BPCL, Cairn Energy and Reliance Ports & Terminals Ltd. (RPTL). It appeared that the appellant had classified the services with these parties un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the coast to the tanker by use of the same system. Further, stated that these platforms were permanent in nature and allowed the oil tankers having abnormal big size to berth to quickly load and offload the oil cargo. It was further stated that they were regularly making compliances under service tax, however, during October, 2009 till March, 2010 tax could not be discharged in time due to financial hardship. It was further stated that for this period they have discharged service tax of about Rs. 26.39 crores and have also paid interest for late payment amounting to Rs.4,11,47,367/-. As regards taking of credit for delayed payment of service tax under RCM, it was stated that they have correctly taken credit as they have already paid interest for the delayed payment. Further, they were of the view that credit of input tax is available from the date on which the tax was due for payment under the Act. 6. Sh. Shantanu Choudhary, Sr. General Manager (Taxation) also gave details about international transaction during the relevant period, inter alia stated that for financial year 2007-08 they have awarded sub contract to their associated companies namely M/s Leighton Contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Statement of Sh. Senthil Kumar Karmegam, Operations Director, was recorded on 09.09.2011, wherein he interalia stated that the scope of his duty was that he was responsible for execution of EPCI (Engineering, Procurement, Construction, and Installation) of projects allotted to the company after bidding process; that the assessee was having expertise in the field of oil and gas projects, onshore mining projects, building and infrastructure projects, that out of this four sectors, he was Technical Head of projects under the category Oil and Gas; that broadly these projects involved activities like laying of offshore pipe lines, installing offshore platforms, installation of single Point Mooring System, construction of onshore pipelines, construction of shore based ports and jetties; that these contracts were received for execution under i) EPCI ii) CI (construction and installation) iii) C or I (construction or installation); that SPM was a system used for inward movement/ import or outward movement/ export of oil/ gas/ any fluid cargo; that the SPM system facilitates unloading or loading of the products from a water depth where the large tankers can stay safe; that the SPM sys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that they would install the PLEM either prior to the pipeline laying or they would install the PLEM after the pipeline laying; that the PLEM was installed generally piled depending on the soil condition or it was installed sometime gravity based as well; that the piling or the anchor mooring requirements of the buoy mooring system gets installed (again this work could be performed prior to the pipeline lay or after); that the anchor or the pile is installed and then the chain connected to the anchor or pile is laid upto the centre location and tensioned to the requirement of the engineering tension capacity; that thereafter the buoy is brought to the location and moored with the chains; that thereafter the under buoy hoses and umbilical get installed between the PLEM and the buoy; that thereafter the floating hoses are installed and an integrity check of the system from onshore end of the pipeline right up to the end of the floating hose (including PLEM) is conducted; that thereafter the mooring hawser is installed and the system becomes ready to operate; that PLEM is a structure called 'Pipe Line End Manifold', which is used to connect the end of the pipeline coming from shore an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other items such as under buoy hoses, floating hose and mooring hawser; that in all these projects, the laying of the pipelines was also involved. 11. It appeared to Revenue that the assessee - M/s Leighton Welspun Contractors Pvt. Limited is part of Leighton Group of Companies based in Australia. Further they are leading contractors in oil and gas, infrastructure development and commercial and industrial buildings. They also engaged in construction /installation services. They are registered with the Service Tax since 10.05.2005 under various service categories. They were receiving various services from companies based outside India and thus liable to pay service tax under RCM. It appeared that they have not discharged service tax liability under RCM properly. Further, they have made delay deposit of service tax payable under RCM during the period 2008-09 to 2010-11. Further, during the course of investigation, they have deposited interest amounting to Rs.5,25,15,616/-. 12. One of the major activities of the assessee is construction and installation of SPM system. They have discharged service tax liability with respect to all the parties in respect of SP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongly claimed the exemption and liable to pay service tax with respect to work done of SPM system for RPTL, under the category of ECIS. It further appeared to Revenue that with respect to services received through sub-contract for the project of RPTL, they are liable to tax under RCM. 17. The appellant-assessee had contended that the services received from service providers/ companies based outside India for carrying out the RPTL contract were exempted under Notification No. 25/2007-ST, wherein the said notification provides exemption for 'Commercial or Industrial Construction Service' referred to in clause (zzq) of clause (10) of Section 65 of the Finance Act and the services provided in relation to execution of works contract, Section 65(105) (zzzza), in relation to construction of 'port' or 'other port', from the whole of the service tax leviable thereon. 18. However, it appeared to Revenue that the exemption is available under Section 66 (levy of service tax) but not under Section 66A (were tax levied under RCM). It further appeared to Revenue that the taxable services (provided from outside India and received in India) Rules, 2006 also do not provide for any kind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posal to appropriate Rs. 5,21,929/-, already deposited against interest, for tax payable on free supplies from Cairn Energy. 20. The appellant -assessee contested the show cause notice inter alia by urging as follows:- i. The services rendered by them to RPTL with respect to construction and installation of SPM system will fall under 'Works Contract Service'. Admittedly in the said service the appellant have also supplied materials and thus being a composite contract for supply of material and labour/ service, will be classifiable under the head Works Contract Service as clarified by Hon'ble Supreme Court in the case of L&T Limited, admittedly the activities involved in this contract specify engineering, scheduling, procurement, construction, pipe coating, pipe induction bends, testing and pre-commissioning of the crude and product SPM and subsea pipelines systems, etc. Further, the said contract also implies that the appellant-assessee shall furnish all Work barges, dredgers, tugs, transport barges, boats for personnel movement, jack up rig, drilling and grouting equipment, survey vessels, plant, labour, materials, tools, supplies, equipment, transportation, supervi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sub-sea hoses connect between buoy and the sub-sea pipeline. iii. Thus, the scope of work with respect to SPM system for RPTL was not simply assembling and erecting the items supplied by RPTL like anchor chain and piles, underbuoy and floating hose, mooring hoses. Rather the work included building a base, positioning of SPM system and commissioning of the system, building a base, whatever is meant by that, is a significant component activity of constructing the SPM system itself. Thus, the whole thing of SPM system emerges when all the activities are completed and all components are integrated into a system. At no point of time, SPM existed as equipment ready for installation. SPM is a structure brought into existence inside the sea, so that the pipeline coming from the jetty or the port can be conveniently connected to a liquid cargo. Further, the loading and unloading operation done at the SPM are not different from what takes place at the jetty/ port. It was further urged that the SPM is a civil structure and not a mechanical structure or equipment. Further, the SPM system functions as transport terminal for liquid cargo. iv. It is further urged that the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alia held as follows:- i. The activity of construction and installation of SPM system for RPTL was held to be classifiable under CICS and the benefit of Notification No. 16/2005-ST was extended and accordingly the proposed demand for Rs. 69,44,13,439/- was dropped. ii. The activities/ services carried by sub-contractor located outside India 'Van Oord Offshore BV' is held entitled to exemption under Notification No. 17/2005-ST and accordingly the proposed demand of Rs. 9,74,92,700/- was dropped. Similarly, the demand for services provided by M/s Indomarine Pte. Ltd., M/s Antarah Koh Pvt. Ltd., and M/s Leighton Contractors (Singapore) Pte. Ltd., was also extended benefit of Notification No. 16 or 17/2005-ST and accordingly the proposed demands of Rs. 1,39,69,724/-, Rs. 1,14,29,956/- and Rs. 1,44,74,255/- respectively were dropped. iii. In respect of services received from M/s Soil & Rock Engineering (sub-contractor), the activity was ordered to be classified under 'Technical Testing and Analysis Service' and accordingly demand of Rs.25,298/- including cess was confirmed alongwith interest and equal penalty. iv. The proposed demand of Rs. 34,27,85,829 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e construction work, it inter-alia requires Sub sea trenching work and backfill all necessary construction, trenching and backfill activities with burial of crude and product pipelines across the shipping channel, other channels up to the anchor point 'L' and final 1100m approach to SPM locations. The assessee was required to lay pipelines spans by means of cement filled grouting bags. Construction of an RP (D)Ks, SPM 3/4 and 5, manufacture and delivery of induction bend, free span correction through 48 inch and 37 inch pipeline, crossing the existing 24 inch BKPL pipeline. 26. It is evident from clause 2.4.2 of the Contract that all materials and equipments required for construction under the said contract, other than the free issue material, was to be supplied by the assessee in executing the work. 27. The assessee admittedly in its return have classified the service rendered to RPTL under the head 'CICS' and have claimed exemption from payment of service tax for construction of port in terms of Notification No. 16/2005-ST as amended by subsequent Notification No. 25/2007-ST. 28. Notification No. 16/2005-ST provides for exemption of services provided under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquid cargo or for loading of the liquid cargo. But due to development of technology, the ships/ tankers have become very large and due to their large size and weight they need greater draft, which is not available at the ports. Accordingly, with the advancement of the technology the SPM system has been developed so as to enable the large / bulk tankers to moor or anchor in high seas and with the help of SPM system, loading or unloading the cargo which comes to the port through pipelines. Thus, we hold that the SPM system are part of the port or an extension of the port. We further find that as the work with RPTL, which is in dispute, involves supply of material by the assessee as well as labour and expertise, it is a composite contract and classifiable under the head 'Works Contract Service' or at best under 'CICS' prior to 01.06.2007. Accordingly, we hold that the assessee is not liable to pay any service tax prior to 01.06.2007 as clarified by the Hon'ble Supreme Court in the case of CCE vs. L&T Limited (supra). We further hold that the assessee is entitled to exemption as they have provided composite service to RPTL with respect to SPM system, which is a port or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of free supplies made by their customers for provision of services by the appellant? 37. It is urged by the learned Counsel Sh. Prasad Paranjpe, that it was alleged in the show cause notice that the assessee have not paid service tax under Section 66A(RCM) on certain services received by them. Admittedly, the appellant have paid the service tax but there is some delay. Further, the assessee have deposited the service tax alongwith applicable interest. Such interest, which was deposited have been appropriated in the impugned order-in-original. It is further alleged by Revenue that as the appellant have taken credit in the books/ register prior to deposit of such service tax under RCM, thus resulted in excess utilisation of cenvat credit by them. As per Revenue, the appellant -assessee ought to not have availed credit and utilised before its actual payment. Reliance has been placed by the Revenue on Rule 3(4) of the Cenvat Credit Rules. 38. Learned Counsel urges that it is admitted fact in the show cause notice and in the impugned order, that the appellant have deposited the tax (under RCM) alongwith applicable interest for the delay. It is settled position of law that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erials, the project executed by the appellant which admittedly are composite in nature, are classifiable under 'Works Contract Service'. Learned Counsel urges that the issue is no longer res integra and it has been clarified by the Hon'ble Supreme Court in the case of Bhayana Builders -2018-1-GSTL-118 that the free issue or supply of material to the contractor or service provider, are not be clubbed in the gross value for determination of service tax liability. The ruling of Hon'ble Supreme Court is applicable in the facts of the case and thus the demand is fit to be set aside. 41. Learned Special Counsel relies on the impugned order in answer to the contention of the appellant - assessee. 42. Having considered the rival contentions, we find that demand of interest on alleged excess utilisation of cenvat credit amounts to double demand of interest, as the appellant has already deposited interest on the delayed payment of tax at the applicable rate under Section 75 of the Act. Thus, the second demand of interest is in the nature of double jeopardy, which is not tenable. Accordingly, we allow this ground and set aside the demand of both tax and interes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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