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TMI Blog2023 (10) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph 14.2.0, the adjudicating authority has held that the activities undertaken were not stand-alone and therefore, the contract has to be considered as composite one. The Notification No. 17/2005-ST dated 07.06.2005 exempts site formation services (soil stabilisation, land reclamation) provided in the course of construction of road, airports, railways, transport terminals, bridges, tunnels, dams, major and minor ports. After considering the agreement, the original authority in the above extracted order has come to the conclusion that the consideration received for site formation services is exempted under the above Notification and cannot be subject to levy of Service Tax under dredging services. The facts entirely being the same, the demand of Service Tax under the category of dredging services for the amount received by the appellant for soil stabilisation and land reclamation services cannot sustained and requires to be set aside. Whether the service offered by the appellant to Dredging Corporation of India by way of charter-hire of vessel for dredging work of the Sethu Samudram Canal Project? - HELD THAT:- The very same issue was considered by the Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Private Ltd., are engaged in providing Dredging Service. They are registered with the service tax Commissionerate and subsequently obtained centralized registration on 12.02.2009. During the course of audit, it was noted by the Department that appellant had not paid Service Tax on Dredging Services provided to Dredging Corporation of India (DCI) for Sethu Samudram Project and Dhamra Port Company Ltd., and also on certain services imported by them. Show Cause Notices for the different periods were issued to demand Service Tax on amounts received for Soil Stabilisation and Land Reclamation Services as Dredging Services, Charter-hire charges as Dredging Services, Maintenance and Repair Services, Man Power Recruitment and Supply Agency Services and other services. After due process of law, the authorities below confirmed the demand on the above and dropped all other issues. Aggrieved by the confirmation of demand of Service Tax, interest and penalties imposed the appellants are now before the Tribunal. 3.1 The Ld. counsel Shri Raghavan Ramabadran appeared and argued for the appellant. The details of the Show Cause Notice period involved and the issues are furnished below:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible goods service? ii. Whether the services offered to Dhamra Port Company were Dredging Services or otherwise? iii. Whether ISDL were liable to service tax for maintenance, repair services rendered by Foreign Service provider? And iv. Whether service tax was payable on manpower supply services received from M/s. Bellsea? 3.4 The facts of each issue was explained by the Ld. counsel as under:- Services at Dhamra Port: 3.4.1 The present dispute revolves around dredging services rendered to Dhamra Port Company Limited ( Dhamra Port ). The appellant had undertaken the activities of dredging, soil stabilisation, land reclamation under separate agreements, as described herein below: i. Dredging Services: The appellant provides dredging services by removing material including silt, sediments, rocks, sands, debris, etc., form the port / navigational route, so that the vessel can approach and berth at the port. The appellant has remitted applicable service tax on dredging services. This is an undisputed fact as is reflected in paragraph 4 of the Show Cause Notice No. 240/2010 dated 19.04.2010 and paragraph 4 of the Show Cause Notice No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the service became taxable), and thus, no service tax was paid by appellant on the consideration received. Import of Services Maintenance and Repair: 3.4.4 The appellant s dredger-vessel required repair-work to be undertaken. In such situations, the appellant would engage Foreign Service providers to carry out maintenance and repair work on the dredger. The Foreign Service providers had physically taken the dredger(s) to their premises at Durban in South Africa for carrying out the repairs. As the repair work was performed outside India, the appellant did not remit service tax under reverse charge since the activity as per the Taxation of Services (Provided from outside India and received in India) Rules, 2006 (Import Rules), the appellant is not liable to pay tax for the services received/performed outside India. 5.1 The Ld. counsel submitted that the Tribunal in the appellants own case had occasion to consider all these three issues as reported in [2018 (6) TMI 933] and adverted to the same. 5.2 In regard to the demand of Service Tax as dredging services at Dhamra Port, for soil stabilisation and reclamation services, the Ld. counsel explained that appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces. The relevant paragraph reads as under:- 4.1 We propose to address the matter issues wise: (i) Services provided to Dredging Corporation of India (DCI): The adjudicating authority has concluded mainly on the ground that the dredging vessel supplied by the appellants is required to be delivered with full complement of officers and crew who operate, control and supervise the dredging work. We are not able to appreciate such an interpretation. Even a plain reading of the agreement between the appellant and Dredging Corporation of India will indicate that it is Charter Hire Agreement . The said Charter Hire Agreement lays down charter hire per week of operation, period of hire (4 months), place, date and time of delivery as also place, date and time of re-delivery. We also find that although the vessel is hired along with a complement of officers and crew, the decision where to do the dredging work, the hours of operation etc. are totally those of the Dredging Corporation of India and appellants have no role or say in that whatsoever. The positioning of one Appeal Nos.ST/502504/2010 representative of the appellant on board the vessel may well be for co- ordination p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides that in cases where services are provided from outside India and such services are received in India then the recipient of services would be liable to pay service tax provided the respective conditions are fulfilled. 5.8.3 Rule 3 of the Import Rules categorise taxable services in the following three categories: location of immoveable property. situs of services/location where the services are provided; location of service provider 5.8.4 Rule 3(ii) of the Import Rules positions Section 65(105)(zzg) for management maintenances and repairs services' under the second category i.e. they will be deemed as having been rendered in India if the situs of performance of services is in India. In other words, the Import Rules provide that such services would be taxable in the hands of the recipient of services located in India, provided that such services are partly or fully performed in India. The services having been provided outside India, the demand is prayed to be set aside. 5.9 The fourth issue is with regard to the Manpower Recruitment and Supply Agency (MRSA) Services. This issue was also considered by the Tribunal for the earlier period (appeal). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand of Service Tax under MRSA, the Ld. counsel put forward detailed arguments. It is submitted that the appellant was under bona fide belief that there was no MRSA in the arrangement entered between foreign entities for providing employees. In the appellant s own case, the Tribunal had decided the issue in their favour. Being an interpretational issue, the penalties may be set aside. It is pleaded that the benefit of waiver of penalty under Section 80 may extended as the appellant has put forward reasonable cause for non-payment of tax. The Ld. counsel prayed that the appeals may be allowed. 6.1 The Ld. Authorised Representative Smt. Anandalakshmi Ganeshram appeared and argued for the Department. The main crux of argument was in respect of the demand of Service Tax under MRSA. It is submitted by the Ld. AR that the appellant s contention that manpower supplied by the non-resident service providers were absorbed as their own employees and only the payment to the employees was routed through the overseas service providers (M/s. N.V. Baggerwerken Decloedt and M/s. Bellsca Investments Ltd., Cyprus (Bellsee)) and that no service was involved as per the secondment agreement dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian employees is permitted and monitored by the Reserve Bank of India as per regulations stipulated. Whereas, it is observed that the appellant requested Bellsea to depute personnel to them and accordingly the charges for the service were paid to them. Further, it is also an admitted fact that Bellsea paid the remuneration to such personnel as per the terms and conditions of the agreement. It is also categorically mentioned in the agreement that any extension of deputation of such personnel can take place only upon terms and conditions mutually agreed upon by the appellant with Bellsea and not the employees. 6.4 It is very much apparent that the appellant has directly appointed these persons working in Bellsea as their employees, it can be reasonably understood that such persons have resigned their jobs with Bellsea and joined the appellant company in their individual capacity. It is substantiated with documentary evidence with regard to deputation of personnel to the appellant and extension of deputation to responsibility for payment of salaries is remains within the control of Bellsea itself. The above facts establish that the personnel deputed to the appellant continued to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board authorities, as they are interconnected with dredging services, the appellant has to discharge Service Tax under the category of dredging services. This view does not find favour with us. On the very same set of facts, the Tribunal had remanded the matter for the earlier period to examine the agreements. In such denovo adjudication, the original authority vide Order-in-Original No. 15/2020 dated 31.10.2020 has dropped the demand. Further in the appellant s own case for the different period on the very same agreements, the original authority vide Order-in-Original No. 14 15/2013 dated 28.02.2013 dropped the demands. In such order, the original authority has dropped the demand in respect of all the above three issues and has upheld the demand of Service Tax on manpower supply services only. The discussion by the adjudicating authority for setting aside the demand of Service Tax in regard to soil stabilisation and land reclamation activities is as under:- 7. Dredging service 7.2 This taxable service covers dredging which is generally undertaken for removal of material such as silt, sediments, rocks etc. of rivers, ports, harbour, backwater or estuary for providing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice tax demanded in the show cause notice in respect of these activities is liable to be dropped. 8.2 The Notification No. 17/2005-ST dated 07.06.2005 exempts site formation services (soil stabilisation, land reclamation) provided in the course of construction of road, airports, railways, transport terminals, bridges, tunnels, dams, major and minor ports. After considering the agreement, the original authority in the above extracted order has come to the conclusion that the consideration received for site formation services is exempted under the above Notification and cannot be subject to levy of Service Tax under dredging services. The facts entirely being the same, we are of the view that the demand of Service Tax under the category of dredging services for the amount received by the appellant for soil stabilisation and land reclamation services cannot sustained and requires to be set aside which we hereby do. 9.1 The second issue is whether the service offered by the appellant to Dredging Corporation of India by way of charter-hire of vessel for dredging work of the Sethu Samudram Canal Project. The demand of Service Tax is under Dredging services. In paragraph 13.1.1, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of services. That repair and maintenance services are performance based services; as the services have been performed outside India, the provisions regarding import of services cannot be applied to demand Service Tax from the appellant. After perusal of the documents, the original authority analysed this issue in the remand proceedings as under to drop the demand. The relevant paragraphs read as under:- In this regard, the assessee had submitted that:- a. The 010 has referred a particular invoice and confirmed the demand on them; b. They have received repair and maintenance services from the various foreign service providers for the vessel located outside India. c. They have received services for vessels located at Colombo Shipyard at Singapore. They have submitted documents to substantiate that the repair activities were carried out at Colombo, Sri Lanka Singapore respectively. d. With regard to maintenance and repair services, the decide the applicability of service tax under import of services, the location of service' is to be determined and as all their services were carried out outside India, service tax will not be applicable on the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax on reverse charge basis under the category of Manpower Recruitment and Supply Agency (MRSA) services received from Foreign Service providers. In both the Orders-in-Original, the adjudicating authority has confirmed the demand. The issue as to whether secondment agreement entered by the appellant with the foreign companies for deputation of employees would come within the ambit of the definition of Manpower Recruitment And Supply Agency services was analysed by the Hon'ble Apex Court in the case of Commissioner of Customs, Central Excise and Service Tax, Bangalore vs. M/s. Northern Operating Systems Pvt. Ltd. [2022 (61) GSTL 129 (SC)]. The Ld. counsel for the appellant has submitted that the Hon'ble Apex Court in the said case did not refer to the application of the decision of the Apex Court in the case of Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (10) GSTL 401 (SC)]. Though in para 26, the said decision was brought to notice and referred to by the Hon'ble Apex Court, the Hon'ble Apex Court has only considered taxability under the category of manpower requirement and supply agency services and has not considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. counsel has argued to set aside the penalties. We have already held that only the demand under MRSA survives. The said issue was interpretational in nature and has travelled upto to the Hon'ble Apex Court. Further, in the appellant's own case for the previous period, the Tribunal had set aside the demand under this category. We therefore find that the appellant has made out sufficient cause for non-payment of Service Tax and is a fit situation to invoke Section 80 of the Finance Act, 1944 to set aside the penalties. 10. In the result, the impugned order is modified as under:- i. The demand of Service Tax under the category of Dredging services for Dhamra Port on amounts received for soil stabilisation and land reclamation activity is set aside. ii. The demand of Service Tax on the amount received for charter/hire of vessels to DCI is set aside. iii. The demand of Service Tax on the amounts paid for repair and maintenance of the Vessel Orwell is set aside. iv. The demand of Service Tax on Manpower Recruitment and Supply Agency services is upheld along with interest. v. The penalties imposed are entirely set aside. 11. The appeals are part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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