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TMI Blog2024 (3) TMI 1101X X X X Extracts X X X X X X X X Extracts X X X X ..... o service tax under the category of Supply of Tangible Goods Service? - HELD THAT:- The agreement between the appellant and their customer is from the day one i.e. the day when it was entered into, was an agreement to provide these vehicles on rent to the appellant without transferring the effective control and possession of the vehicle to the customers - Hon ble Supreme Court has in case of Adani Gases Ltd. [ 2020 (8) TMI 789 - SUPREME COURT ] held that the supply of the pipelines and the measurement equipment (SKID equipment) by the respondent, was of use to the customers and is taxable under Section 65 (105) (zzzzj) of the Finance Act 1994 - there are no merits in the submissions made by the appellant in this respect and hold that the appellant has in fact provided the service under the taxable category of the Supply of Tangible Goods Services. Whether the demand is barred by limitation? - HELD THAT:- The issue involved is purely of interpretation of the terms of agreement vis a vis the provisions of the Act. On going through the terms of agreement, the appellant were entertaining a bona fide belief that these service would not be classifiable under any of the taxable categories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tailed in Annexure-A and Annexure-B to the show cause notice against M/s Essel Shyam Communications Ltd., C-34, Sector-62, Noida under section 73(1) of Finance Act, 1994. Since party has deposited Rs 25,00,000/- vide Cyber receipt dated 25.03.2010 under Business Support Service therefore I order for appropriation of the same against the said demand. 2. I order to recover the above said demand along with appropriate rate of interest as provided under section 75 of the Finance Act, 1994. 3. I also impose penalty of Rs. 4,18,50,286/- (Rupees Four crores eighteen lacs fifty thousand two hundred and eighty six only) upon M/s Essel Shyam Communications Ltd., C-34, Sector-62, Noida under section 77 78 of Finance Act, 1994. 2.1 The Appellant was registered with the Department under the category of Online Information and Data service, Maintenance or Repair Service, Erection, Commissioning and Installation service, Transport of Goods by Road Service, Telecommunication Service. 2.2 The Appellant is engaged in the business of providing satellite communication services as well as uplinking services under licences/ permissions from Government of India 2.3 Appellant is also providing DSNG Van, An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and (c) Interest should not be charged from them under Section 75 of the said Act at the appropriate rate applicable during the relevant period 2.7 The show cause notice was adjudicated as per the impugned order referred in para 1 above. Aggrieved appellant has filed this appeal. 3.1 We have heard Shri Atul Gupta and Shri Prakhar Shukla, Advoactes for the appellant and Shri Sarweshwar T Khairnar, Authorized Representative for the revenue. 3.2 Arguing for the appellant learned counsels submit that: No Service Tax is payable on uplinking facility under the head Business Support Service and for that matter infrastructural support the activity of uplinking would not fall within the ambit of Business Support Service as provided under Section 65 (104)(c) of the Act in as much as only the services as included in the 'means' clause or in the nature of such activities provided under the 'includes' clause could be termed as being activities in support of business activities and the principle of noscitur a sociis shall come into play and thus the word 'services' which is very wide in its scope would be restricted by the nature of the services enumerated in the 'i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplete care and caution. In case of any problem, the DSNG is not forcibly operated, the DSNG is used as per the direction for the purpose it is meant for the provide the optimum functionality and life from the DSNG Thus, it is submitted that the transaction between the Appellant and the customers would qualify as a transfer of right to use goods with the control and possession over the diesel generator sets passing on to the customers Reliance is placed on the following decisions o Rashtriya Ispat Nigam Limited [(1990) 77 STC 182 (AP)] B.24 thus in cases where the right to use any good is transferred to the customers along with the right of possession and effective control then the same would not be covered within the ambit of taxable service Supply of Tangible Goods Service and hence no Service Tax would be leviable in such cases. No suppression or misrepresentation of facts by the Appellant Merely non-payment of service tax does not amount to suppression of facts with intent to evade tax. appellant has been paying VAT in relation to the renting-out of DSNG Vehicle and as per the law set-out by the Hon'ble Supreme Court, service tax and VAT are mutually exclusive and no servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paying VAT on the possession and control of equipments with the customer and paying service tax when possessive and control of the equipment is with the company. Such service was noticed as covered under the head supply of tangible goods service and the party was alleged to have not paid service tax amounting to Rs. 2,73,33,587/- during the period May, 2008 to March, 2011. The said non-payments of service tax has been proposed recoverable under extended provision to section 73(1) of the Finance Act, 1994 as party did not disclose the fact to the department at their own because the said facts have come to notice only on investigation undertaken by the department. Accordingly. the recovery of payment of service tax has been proposed along with interest and penalty. Party in their defence have submitted that they are only an uplinking agency and not providing any support or assistance to the nature envisaged under Business Support Service. Their activity can not be said as covered under the said service. In this regard they have invited attention to Board Circular issued vide letter F. No 334/4/2006 TRU dated 28.10.2006 and contended that no service tax is payable on the uplinking act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness Support Service. In the instant case party is providing uplinking services to various TV channels/ broadcasters through teleport (uplinking hub) situated at Noida which is an essential service for them to broadcast their programmes. Therefore I am of the view that party is providing support services to the TV channels/ broadcasters and is therefore covered under the category of business support service. It is true that uplinking is not mentioned in the inclusion clause of the definition of business support service but it must be read with its detailed description which provides for an example list of services that would be covered under business support service. The act provides for a definition of Business Support Services, within which it includes the term infrastructural support services . Infrastructure Support Services follows as exemplification through further explained are For the purposes of this clause, the expression infrastructural support services includes providing office along with office utilities, lounge, reception, with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security. The above explanation, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Finance Act, 1994. Supply of tangible goods service:- As per the definition of taxable service 'Supply of Tangible Goods' under Section 65 (105) (zzzzj) of the Act, means any service provided or to be provided to any person by any other person in relation to supply of tangible goods including machinery equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment or appliances . As per the above definition the transfer of right to use any goods without giving transferee the legal right of possession or effective control is levied to service tax. The contention of ESCL that the possession and effective control of the equipments supplied by them is with the customers and therefore they are not charging service tax cannot be accepted as the copy of DSNG Vehicle Rental Agreement dated 30.03.06, alongwith addendum to the said agreement dated 15/07/2008, between M/s. Essel Shyam Communication Ltd. and M/s Media Content Communication Services (India) Pvt. Ltd., submitted by the party vide letter dated 19.04.2011 clearly states at the para 4.1 of the said agreement as Save as otherwise provided in this agreement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as Annexure-B for Supply of Tangible Goods Services is recoverable from them. Further ESCL is a registered service tax assessee and well aware of the service tax laws but they have neither obtained registration for the business support service and supply of tangible goods service provided by them nor they discharged the service tax liability on the said services and have also not filed the periodical returns for the same They never intimated the said facts to the departments at their own in any other manner with the sole intention of evading payment of service tax. The said facts were noticed by the department only on the basis of an investigation conducted by the department therefore I find that extended proviso to section 73 of the Finance Act, 1994 has rightly been invoked for the recovery of non-paid service tax by the party for the period mentioned above. I also find that party has violated the following sections and rules of the service tax. (i) Rule 4 of the Service Tax Rules, 1994 read with Section 69 of the Finance Act 1994 by not obtaining the registration for aforementioned service namely Business Support Service' and Supply of tangible goods Service' and rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / telecasters have outsourced the activity of up-linking their programme contents to the appellant, by use of teleport available with them. Definitely the services provided by the appellant will fall under the category of infrastructure support service . 4.5 As per section 65 (104) (c), Business Support Services has been defined by using the phrases means and includes . It is settled principle in law that the term means used in the definition clause signifies the definition to be exhaustive and the phrase includes widens the scope by specifying those activities which otherwise would not be covered by the first part of definition, using the phrase means . Interpreting the definition of Inputs as per Rule 57A of erstwhile Central Excise Rules, 1944, a larger bench of tribunal has in the case of Union Carbide [1996 (86) E.L.T. 613 (Tribunal)] 4. Resolution of the controversy in these appeals depends on the correct understanding of provisions of Rule 57A relating to Modvat Credit Scheme. The scheme enables manufacturers of specified final products to avail credit of specified duty paid on specified goods (referred to as inputs ) used in or in relation to the manufacture of the said fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to items which would otherwise have come within the inclusive definition of inputs. (Emphasis supplied) and The subject of the legislature appears to me to be to exclude from the genus of inputs, the species mentioned in the excluded categories because otherwise a manufacturer would be entitled to claim Modvat in respect of such inputs repeatedly as these would not be inputs which would be consumed in the process of manufacture. This is clear from a scrutiny of the excluded items. The Court further held that these inputs do not fall within dictionary meaning of machine, machinery, instrument or appliance and are chemicals used for the machinery. The Court held - It does not matter that the items are used in the machinery or for the purpose of the machinery. To repeat, the only relevant question is, are they used in or in relation to the manufacture of ingots. (Emphasis supplied) It was further held that the Tribunal was in error in seeking limit the meaning of the word inputs to those items which go into the steel ingot completely overlooking the phrase in relation to . This decision was followed by a larger Bench of the Tribunal in Collector of Central Excise v. A.B. Tools Ltd. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same language is used in exclusion [clause] (i) of the explanation to the Rule. The words goods ..... used by him (dealer) in the manufacture or processing of goods occurring in Section 8(3)(b) of the Central Sales Tax Act and Rule 13 of the Rules have been held by the Supreme Court to take in not only the process of production of goods but also all processes which are directly related to the actual production. The Court held that there was no warrant for limiting the meaning of the expression in the manufacture of goods ( J.K.Cotton Spinning and Weaving Mills Co. Ltd. v. S.T.O. AIR 1965 S.C. 1310 ). The words in relation to occurring in Section 4(1) of the Swadeshi Cotton Mills Company Ltd. (Acquisition and Transfer of Undertakings) Act, 1956 have been held by the Supreme Court to be very broad expressions and to be of comprehensiveness which might have both a direct significance as well as an indirect significance depending on the context. These words have been held to be equivalent to or synonymous with concerning with and pertaining to [ Doypack Systems (Pvt.) Ltd. v. Union of India - 1988 (36) E.L.T. 201]. The goods to be regarded as Raw materials need not necessarily and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be an act of Judicial indiscipline and impropriety not to follow the only decision of a High Court on this aspect as suggested by the Western Regional Bench in the order of reference reported in 1993 (68) E.L.T. 452 . The contention of the assessee is supported by the decision of a larger Bench of the Tribunal in Joy Foam Pvt. Ltd. v. C.C.E., Madras - 1996 (63) ECR 630 (Tribunal), SRB holding that grease proof paper used in machine for manufacture of foam products is an eligible input under Rule 57A of the Rules. 23. The exemption notification which came up for consideration at the hands of the Supreme Court in Rohit Pulp and Paper Mills Ltd. v. Collector of Central Excise - 1990 (47) E.L.T. 491 excluded five kinds of paper from the benefit of the exemption. It was found that four out of the five varieties of paper belong to the category of Industrial paper. In the context, the Court held that the noscitur a sociis principle was applicable. The principle is that when two or more words which are susceptible of analogous meaning are coupled together they are understood to be used in their cognate sense. They take, as it were, their colour from each other, that is, the more ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been stated by us above, means and includes is a legislative device by which the includes part brings by way of extension various persons, categories, or things which would not otherwise have been included in the means part. If this is so, obviously both parts cannot be read conjunctively. What is in the includes part is relatable only to the subject that is to be defined and takes within its sweep persons, objects, or things which are not included in the first part. We have already pointed out that the reason for including holding and subsidiary companies in the includes part is so that the authorities may look behind the corporate veil. To say that the holding and subsidiary companies must in addition have a mutual interest in the business of each other is wholly incorrect. Further, the word and which joins the two parts of the definition is not rendered meaningless. It is necessary because it precedes the word includes and brings in to the definition clause persons, objects, or things that would not otherwise be included within the means part. 4.6 In the case of Heinz India Ltd. [2023 (385) ELT 162 (SC)], Hon ble Supreme Court observed as follows: 47. .. Besides, includes has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The court's function is not to give a strained and unnatural meaning to the provision. The intention of the legislature, manifested in plain words, must be accepted. In the decision of A.V. Fernandez v. State of Kerala 1957 (1) SCR 837 , the Constitution Bench stated the principle of strict interpretation in construing a taxing statute, in the following manner: [..] In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law. If the revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case of not covered within the four corners of the provisions of the taxing statue, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter.[..] 49. In the present case, the clear legislative intent, of inserting a carefully worded entry, which was a hybrid one, i.e. describing an article that contained medicinal ingredients, as well as those used for cosmetics, and yet placing such a creature ( neither beast nor fowl so to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dary packing would also constitute a wrapper or a container in which the excisable goods are wrapped or contained. [..] 4.7 Thus in view of the decisions as above we have to interpret the scope of definition of Business Support Services , which has been defined as service provided by one person to another in relation to Business or Commerce. Undisputedly the clients of the appellant are engaged in business of telecasting/ broadcasting the programmes produced by them. For telecasting/ broadcasting they have entered in to contractual agreement with the appellant for providing the facility of up-linking their programmes. The appellants provide the said services by use of teleport available with them. Undisputedly appellant provides the support service for the Business of their clients against the agreed charges for usage. The relevant excerpts from the up-linking Service Agreement, entered between the appellant with its clients are reproduced below: Uplinking Service Agreement This agreement ( Agreement ) is made at New Delhi on this 21st day of June 2007. Between Essel Shyam Communication Limited, a company incorporated under the Companies Act, 1956 and having its registered office a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (s), which have been specifically approved/ permitted by the Ministry of Information Broadcasting. c) ESCL will demonstrate to the Customer, that its uplink system has been approved to transmit on the INSAT 4A satellite. d) In the event of failure of satellite, if ISRO provides with another capacity on different satellite, ESCL shall provide to the Customer, uplink of signal to that satellite. e) In the event the Customer wants to use the services of optical fiber bandwidth provider for recording or live contribution to its transmission, ESCL will provide all support and will cooperate with the service providers engaged by the Customer and will provide rack space, conditioned power etc. In case the Customer engages ESCL to provide these services, the charges of these services shall be mutually agreed upon between the Parties. f) ESCL will also cooperate for the DSNG/ OB feeds, especially where the Customer needs the signal to be downlinked at ESCL facility for recording or live contribution on payment of extra charges as mutually agreed between the parties. g) ESCL shall also record the TV signal uplinked from the teleport anjd keep the same for 90 (ninety) days as per the MIB gui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and regulations imposed by any governmental and regulatory authorities either in India or in the countries where the obligation hereunder will be performed by Customer including those governing the content of programming of any television transmission that is transmitted by Customer. 5.6 In the event that the Customer decides to setup its own Teleport and in case, ESCL sets up the said teleport and playout for the Customer before the expiry of this agreement, then foreclosure charges as detailed out in Clause 11 of this agreement, will not be due and payable by the Customer. 6 Prices: 6.1 6.2 6.3 The prices provided for in this agreement are exclusive of Service tax, value Added Tax, WPC/Spectrum charges or any other present or future taxes/ duties/ levies, which shall, be payable by the Customer, extra at actual. Any impact on prices resulting from the future changes in government policy/ increase in such taxes/ duties/ levies etc. not covered above, affecting this agreement shall be solely borne by the Customer. 6.4 The services shall be chargeable from the date of actual launch of the TV Channel. Further, it is agreed between the parties hereto that the Customer shall be entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, understandings, negotiations, proposals or agreements. Annexure SERVICE CHARGES Charges for Uplinking From ESCL Teleport S.No. No of Channels (whether it being of the Customer or any of its associate group companies) Monthly Uplink Charges (INR/ Month) 1 One Channel 3,50,000 2 Two Channel 6,00,000 3 Three Channel 8,00,000 4 Four Channel 10,00,000 5 Incremental charges for every Additional Channel after Channel 4. 2,50,000 per channel Terms Conditions. 1. . 2. . 3. Any taxes, duties, octroi, levies, VVPC/ Spectrum charges, microwave royalty charges, usage charges, leased line charges etc. or other applicable statutory/ other charges in relation to the uplinking services shall be paid by customer, extra at actual. 4. Uplinking license shall be obtained by the Customer from MIB. 5. The charges quoted are only for use of Uplinking facility. The teleport facility will be the property of ESCL throughout the contract period. 6. . Commercial Terms and Conditions: 1. Price The prices quoted are exclusive of Service tax, WPC/Spectrum charges, leased line or fiber optic charges for backhaul or value Added Tax, which shall be payable by the Customer, extra at actual. Any promulgation of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be used for uplinking TV Channels only and it will not be used for other modes of communication including voice, fax and datea communication unless necessary permission for such value added services have been obtained from the competent authority. 14. Conformity to provisions of intersystem coordination agreement: 14.1 The permission holder shall ensure that the uplinking hub (teleports) operation conform to the provisions of intersystem coordination agreement between INSAT and the satellite being used by the permission holder. 4.8 On the issue of uplinking facilities provided by the Appellant to their clients, Appellant relied upon the decision of the tribunal in case of TV Today Networks Pvt. Ltd. [2019 TIOL 3733 CESTAT Delhi]. We find that the tribunal has held as follows: 10. From a perusal of the above stated statutory definitions it is seen that Business Support Service (BSS) covers in its ambit various activities including infrastructural support services. A perusal of the definition, as extracted above, would show that it does not cover the activities undertaken by the Appellant since it only uplinks and downlinks satellite beams at agreed and desired bandwidth provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e explanation to state that the nature of activities are to be generally considered as infrastructural support service can be ascertained from such inclusive definition. These are mainly administrative and office related support. The type of activities like putting up and managing gas storage facility in industrial unit are not fitting into overall scope of the infrastructural support service as contemplated by the inclusive definition given in the explanation. We note that though the activities of the appellant, can be brought under very generic understanding of infrastructure support, when examined with statutory scope as per explanation indicating nature of services which are to be brought under tax net than it would appear that the present activity will not get covered under the said tax entry. We also take note that in legal interpretation, there are situation where the word includes in certain context be a word of limitation [ South Gujarat Roofing Tiles Manufactures - 1977 (1) SCR 878] . In certain situations the nature of included items would not only partake of the character of the whole, but may be construed as clarificatory of the whole. In the present case even consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SNG Vehicle ) detailed in the Schedule I attached hereto and has requested the Company to give the said Vehicle on rent to be used for Live News/footage collection and point to point transmission, to which the Company has agreed thereto. NOW THEREFORE, IT IS HEREBY AGREED as follows 1. DEFINITIONS In this Agreement, unless the context otherwise requires the following terms shall have the meaning ascribed to them herein below: Bandwidth Agreement means agreement dated . entered into by the parties herein for Ku Band satellite segment. DSNG Vehicle means the Vehicle detailed/described in the Schedule I to this Agreement. Month means an English calendar month; Schedule means a schedule to this Agreement; Services Agreement means agreement dated April 1, 2006 entered into by the Parties herein for services of the equipments in the DSNG Vehicle 2. CUSTOMER CONFIRMATION 2.1 The DSNG Vehicle shall be used strictly for the purpose of Live News / footage collection and point to point transmission only. 2.2 The Customer shall ensure and undertake that the operation-and handling of DSNG is done at all times by its fully trained, qualified and experienced engineers following guidelines / instr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies or their authorized representative as and when required. 2.10 The Customer shall ensure that the uplinking in Ku-Band would be utilizing satellite space capacity provided by Department of Space and the SNG / DSNG will not be used for DTH operations, directly or indirectly and there should be no turn around for broadcasting. 2.11 The Customer shall ensure that the SNG / DSNG is not taken inside the premises of Defence Installations, protected and prohibited areas and into areas condoned off from security point of View. 2.12 The Company represents and confirms and the Customer agrees to as follows (a) The DSNG Vehicle is in good order and working condition (b) The Company is not the manufacturer or seller of the DSNG Vehicle and has only given on rent the DSNG Vehicle to the Customer. The Company has deployed in the DSNG vehicle various Electronic and other equipments from OEMs across the globe supported / back up by their respective specifications / warranty terms 3. COMPANY'S CONFIRMATION The company confirms that it has the requisite relevant permissions and authority to enter into this Agreement and there is no violation by Company of any applicable laws of the country 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e permit entry in the premises where the DSNG Vehicle is used, stored or lying. 7. PAYMENT TERMS a. The Customer shall pay without default all charges as stipulated in Schedule II to this Agreement and any other amount becoming due under this Agreement, quarterly in advance 7 days before the commencement of the quarter (herein after referred to as Due Date ). The Advance Deposit of two quarter charges shall be paid. at the time of the signing of the Agreement which shall be adjusted as and when the vans are commissioned and accepted by the Customer. b. The Customer shall pay to the Company the Invoice amount referred In the Invoice, on or before Due Date by cheque or bank draft issued in favour of the Company, payable at New Delhi. c. The Rental Charge is exclusive of Sales/Service Tax, WCT / Rental Tax, Octroi/ Entry Tax, road permit, Freight and any other statutory other taxes or Government levies etc and these taxes shall be charged in addition to the charges, based on actuals i.e. all taxes relating to the services provided under this Agreement in respect of DSNG Vehicle shall be reimbursed by the Customer to the Company d. The Customer undertakes that all charges in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Customer or for a substantial part of its property without its consent or bankruptcy, reorganization or insolvency proceedings shall be Instituted by or against the Customer, voluntary, or otherwise, or e. Does or suffers any act or thing or omits to do or suffer any act or thing whereby or in consequence of which the DSNG Vehicle may be or is likely to be endangered, attached or taken in execution under any legal process or by public authority; or f. Fails to obtain Consents, licenses, approvals. permissions as are necessary and essential for the installation of the DSNG Vehicle as well as for the execution, enforceability and validity of this Agreement 10.2 An event of default shall occur by the Company, if the Company a. License to perform under this Agreement ls revoked or cancelled for any reasons; b. Shall fail to perform its obligation under this Agreement; c. Shall commit an act of bankruptcy or become insolvent or bankrupt or make an assignment for the benefit of creditors, or consent to the appointment of a Trustee or Receiver, or either shall be appointed for the Company or for a substantial part of its property without its consent or bankruptcy, reorganization o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id have been bona fide and satisfactorily estimated to be the proper and reasonable amount that may be suffered by the Company as and by way of liquidated damages. 12.2 On the occurrence of any of the Events of Default pursuant to what is stated herein above In Clause 11.3 and 11.4- 12.2.1 The Company shall be paid on pro rata basis and any advance received by the Company shall be refunded within 7 days from the date of such termination failing which the Company shall be charged 1% interest per month on such amount from the date of payment till realization. 13 DISPUTE RESOLUTION All disputes arising directly under the express terms of this Agreement or grounds for termination thereof shall be resolved as follows: 13.1 The nominated representatives of both parties shall meet to attempt to resolve such disputes. If disputes cannot be resolved by the nominated representatives either party may make a written demand for formal dispute resolution/Arbitration which shall be in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and the Venue of Arbitration shall be New Delhi. The parties shall endeavor that such disputes are settled within a period of two (2) mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part caused by the occurrence of any contingency beyond the control of the Company's suppliers, including but not limited to war (whether an actual declaration thereof is made or not) sabotage, insurrection. rebellion, riot or other act of civil disobedience, act of a public enemy, failure or delay in transportation (due to reasons beyond its control), act or action of any Government or any agency or subdivision thereof, Including any act or action by way of any statute, sale guidelines / regulation, amendments to license granted to the Company, any other act or action whether judicial action, , fire, accident, explosion, epidemic, quarantine restrictions or flood, lightning, earthquake or other Act of God, satellite / Transponder or related machinery failure where the Company has exercised due caution and care in the prevention thereof 18. NOTICES Any notice, invoice or other communication required or permitted under this Agreement shall be given in writing to the other party at that party's address specified hereunder. or as communicated in writing to the other party from time to time. Notices shall be deemed to have been given when personally delivered facsimile and ackn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h or for loss of or damage, destruction, deterioration or diminishing In the value to DSNG Vehicle resulting from the indemnifier's negligence or willful misconduct hereunder, or on account of breach of representations, warranties or the terms herein.. Where personal injury, death or loss of or damage to property is the result of the joint negligence or willful misconduct of Customer and the Company, the indemnifier's duty of indemnification shall be in proportion to its allocable share of joint negligence or willful misconduct. 22.3 The Company hereby agrees to indemnify, defend and hold harmless the Customer from claims, demands and causes of action asserted against the Customer by any person (including without limitation, Company's employees, subcontractors and employees of such subcontractors or any third party) for personal injury or death or for loss of or damage, destruction, deterioration resulting from the Indemnifier's negligence or willful misconduct hereunder. Where personal injury, death or loss of or damage to property is the result of the joint negligence or willful misconduct of Company and the Customer. the Indemnifier's duty of indemnification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pees Thirty Three Lakhs Twenty Nine Thousand Three Hundred and Four Only) for a period of 4 (four) years from the date of commencement of payment of charges. Hence, the total rental charges be and is hereby Increased from Rs. 3,32,93,040/- (Rupees Three' Crores Thirty Two Lakhs Ninety Three Thousand And Forty Only) to Rs. 3,66,22,344/- (Rupees Three Crores Sixty Six Lakhs Twenty Two Thousand Three Hundred and Forty Four Only) w.e.f. 15 th July, 2008. 2. All other terms and conditions of the said Agreement shall remain same, unchanged continue to be in full force and binding on the Parties accordingly. 4.11 Appellant has relied upon the clause 2.2, 7.4 and 7.6 of this agreement to argue that effective control and possession was transferred to the Customer by the Appellant and such transaction can been considered only as a deemed sale only, thus, the same was not susceptible to service tax. However on going through the agreement we do not find any merits in the said submission, for the reasons as stated below: a. The agreement is titled the DSNG vehicle Rental Agreement . b. In the recitation clauses it is clearly stated that customer is desirous of taking these vehicles only on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sive of sales/ service tax, wct/ rental tax, octroi/ entry tax, road permit, freight and other statutory other taxes or government levies etc and these shall be charged in addition charges, based on actual. h. Clause 9 provides that in the case of termination of agreement, Customer shall be liable to pay the appellant the premium/ charges for the comprehensive insurance which is reflected in the service charges paid by the customer to them. Customer has also to ensure that DSNG vehicle is delivered back to the company in good order and condition. 4.12 From the above we are clearly of the view that the agreement between the appellant and their customer is from the day one i.e. the day when it was entered into, was an agreement to provide these vehicles on rent to the appellant without transferring the effective control and possession of the vehicle to the customers. Hon ble Supreme Court has in case of Adani Gases Ltd. [2020 (40) GSTL 145 (SC)] held as follows: 12. The question that arises for our consideration is whether Section 65 (105) (zzzzj) of the Finance Act, 1994 is applicable in the present case, that is, whether the supply of pipes and measurement equipment (SKID equipment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'sale'. Elucidating on the transfer of the right to use any goods , Dr A R Lakshmanan J. in a concurring opinion held: 97. To constitute a transaction for the transfer of the right to use the goods, the transaction must have the following attributes: a. there must be goods available for delivery; b. there must be a consensus ad idem as to the identity of the goods; c. the transferee should have a legal right to use the goods-consequently all legal consequences of such use including any permissions or licenses required therefore should be available to the transferee; d. for the period during which the transferee has such legal right, it has to be the exclusion to the transferor; this is the necessary concomitant of the plain language of the statute viz. a transfer of the right to use and not merely a licence to use the goods; e. having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others. (emphasis supplied) 16. The test laid down in BSNL has been applied by courts to determine whether a transaction involves the transfer of the right to use any goods under Article 366(29-A)(d). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions which resemble a sale in substance as they result in a transfer of the right to use in goods, instead of the transfer of title in goods. The Finance Act, 1994, deriving authority from the residuary Entry 97 of the Union List, enabled the Central Government to levy tax on services. 'Service tax' was introduced as a response to the advancement of the contemporary world where an indirect tax was necessary to capture consumption of services, which are economically similar to consumption of goods, in as much as they both satisfy human needs. All India Federation of Tax Practitioners v. Union of India, (2007) 7 SCC 527 = 2007-TIOL-149-SC-ST, para 4 This Court, in Association of Leasing and Financial Service Companies v. Union of India, (2011) 2 SCC 352 = 2010-TIOL-87-SC-ST-LB had noted: 38 Today with technological advancement there is a very thin line which divides a sale from service . That, applying the principle of equivalence, there is no difference between production or manufacture of saleable goods and production of marketable/saleable services in the form of an activity undertaken by the service provider for consideration, which correspondingly stands consume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer of possession and control is a question of facts and is to be decided based on the terms of the contract and other material facts. This could be ascertainable from the fact whether or not VAT is payable or paid. (emphasis supplied) 19. The above circular clarified that Section 65 (105) (zzzzj) is applicable only to those transactions where there is a supply of tangible goods for use, without the transfer of possession or effective control to the recipient. This aspect has been interpreted by various courts and tribunals. In the Bombay High Court decision in Indian National Shipowners' Association and Anr. v. Union of India and others ( Shipowners ), (2009) 4 AIR Bom R 775 = 2009-TIOL-150-HC-MUM-ST . the petitioners were engaged in providing services to major exploration and production operators by supplying their various vessels including offshore drilling rigs, offshore support vessels, harbour tugs, and construction barges. The question before the Bombay High Court was whether, prior to the introduction of Section 65 (105) (zzzzj) in 2008, the petitioner could be taxed on its services in relation to mining of mineral, oil, or gas under Section 65 (105) (zzzy). In the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service; (ii) The service is provided by a person to another person; (iii) The service is provided in relation to the supply of tangible goods, including machinery, equipment and appliances; (iv) There is no transfer of the right of possession; (v) Effective control over the goods continues to be with the service provider; and (vi) The goods are supplied for use by the recipient of the service. There is an element of service which is the foundation for the levy of the tax. 21. . 22. The GSA is an agreement between the respondent and its purchaser for regulating the terms on which gas is sold by the respondent. The agreement is of a 'take or pay' genre. The buyer must lift the quantity contracted or pay for it. The agreement provides for the supply of gas at the Delivery Point through gas pipelines constructed from the distribution main to the measurement equipment. Further, both the seller and the buyer have provided warranties for maintaining the 'measurement equipment' in good working condition, in their respective capacities. The measurement equipment, as has been re-iterated by the respondent in the course of their arguments, is installed for the measurement an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstructed and maintained by the seller at the cost of the buyer. The measurement equipment is supplied, installed and maintained by the seller at the cost of the buyer, inspite of ownership of the equipment resting with the respondent as the seller. The measurement equipment is installed and maintained exclusively by the seller. Clause 5.6 indicates that the buyer has no right to adjust, clean, handle, replace, maintain, remove or modify it in any manner. Clause 5.10 guarantees the seller's access to the Measurement Equipment at the buyer's premises at all hours. Ownership, control and possession of the measurement equipment is with the respondent. The measurement equipment comprises not only of electronic meters that are useful for determining the quantity of gas supplied to the purchaser at the Delivery Point, but also of isolation valves, filters and regulators that are crucial for regulating the pressure of gas and ensuring safe operation of the buyer's facilities. In order to maintain the sanctity of the equipment, the agreement casts the exclusive responsibility to install and maintain it on the respondent as the seller. The terms of the GSA would indicate that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit thereof. Use also means usefulness, utility, advantage, productive of benefit. 27. The expression use does not have a fixed meaning. The content of the expression must be based on the context in which the expression is adopted. The use of an article may or may not result in a visible change in its form or substance. Moreover, the nature of use is conditioned by the kind of article which is put to use. Section 65(105) of the Finance Act, 1994 envisages myriad interpretations of the expression use , in a variety of services such as telecommunication, renting of immovable property, and services related to art, entertainment, and marriage. In the case of some articles, use may be signified by a physical operation of the article by the person who uses it. In such a case, actual physical use is what is meant by the supply of the goods for the use of another. In the case of others, the nature of the goods supplied impacts the character of the use to which the goods can be put. As an illustration, Section 65 (105) (zzzze) of the Finance Act, 1994, seeks to tax services related to information technology and interprets the right to use to include the right to reproduce, distribute, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both of which include the 'measurement equipment'. This warranty would not have been provided if the measurement equipment was not of 'use' to the buyer. The equipment is thus a vital ingredient of the agreement towards protecting the mutual rights of the parties and in ensuring the fulfilment of their reciprocal obligations as seller and buyer in regulating the supply of gas. As an incident of regulating supply, it determines the correct quantity of gas that is supplied. The obligation to supply, install and maintain the equipment is cast upon the seller as an incident of control and possession being with the seller. Section 65 (105) (zzzzj) applies precisely in a situation where the use of the goods by a person is not accompanied by control and possession. 'Use' in the context of SKID equipment postulates the utilization of the equipment for the purpose of fulfilling the purpose of the contract. Section 65 (105) (zzzzj) does not require exclusivity of use. The SKID equipment is an intrinsic element of the service which is provided by the respondent, acting pursuant to the GSA, as a supplier of natural gas to its buyers. 29. While interpreting the term ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is nothing in the agreement to show that appellant could not have entertained such a belief. Also we find that there has been dispute in respect of interpretation of the term infrastructural support facility used in the definition of Business Support Services. There are decisions which have held that the this term was restricted only to infrastructural support facilities, vis a vis the office maintenance facilities which have been out sourced. In view of the above it cannot be said that appellants could not have entertained such a belief. It is settled principle by various decisions that such a case cannot be the case of suppression with the intent to evade payment of service tax. In case of NRC Ltd [2007 (209) ELT 22 (T-Mum)] 3. In view of the fact that the issue involved interpretation of legal proceedings as to whether the appellant could be considered as clearing and forwarding agents, it can be safely concluded that the appellants were under bona fide belief that they are not covered by the definition of said services. It was under that belief that the appellant did not apply for Service Tax Registration and followed the subsequent procedures. The Revenue has not placed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belief is not the blind belief and need to be established before that plea can be taken. In case of Bharat Bijlee Ltd [2014 (314) E.L.T. 74 (Tri. - Mumbai)] = 2014-TIOL-374-CESTAT-MUM tribunal has observed as follows: 5.15 The argument of the bona fide belief raised by the appellant does not seem to be convincing. If the appellant is claiming bona fide belief, it is for them to establish that they were entitled to hold such a belief based on interpretation of law as pronounced by any judicial fora. In the case before us we do not find any reason for entertaining such a belief nor any judicial pronouncement to hold such belief has been cited before us. Bona fide belief is not blind belief. In the case of Andhra Pradesh Electricity Board [1984 (16) E.L.T. 579 (Tri.)], this Tribunal held that bona fide belief does not mean blind belief or a self-opinionated belief. It would imply a belief which has been reached after a sincere attempt to understand the issue and examining it reasonably. Similarly, in the case of Inter Scape [2006 (198) E.L.T. 275 (Tri.)] this Tribunal held that belief can be said to be bona fide only when it is formed after all reasonable consideration are taken into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances made in the setting of the facts of a particular case. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper. Therefore, the argument of the appellant that in view of the bona fide belief, extended time could not have been invoked falls flat. Without any evidence to show how the appellants claim bona fide belief in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purpose of this section, the duty as reduced or increased, as the case may be, shall be taken into account: Provided also that in case where the duty determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalty under the first proviso shall be available, if the amount of duty so increased, the interest payable thereon and twenty-five per cent of the consequential increase of penalty have also been paid within thirty days of the communication of the order by which such increase in the duty takes effect. Explanation .- For the removal of doubts, it is hereby declared that- (1) the provisions of this section shall also apply to cases in which the order determining the duty under sub-section (2) of section 11A relates to notices issued prior to the date on which the Finance Act, 2000 receives the assent of the President; (1) any amount paid to the credit of the Central Government prior to the date of communication of the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the decision in Dharmendra Textile and we see no reason to understand or read that decision in that manner. In Dharmendra Textile the court framed the issues before it, in paragraph 2 of the decision, as follows: 2. A Division Bench of this Court has referred the controversy involved in these appeals to a larger Bench doubting the correctness of the view expressed in Dilip N. Shroff vs. Joint Commissioner of Income Tax, Mumbai Anr. [2007 (8) SCALE 304]. The question which arises for determination in all these appeals is whether Section 11AC of the Central Excise Act, 1944 (in short the Act') inserted by Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as follows: 5. Mr. Chandrashekharan, Additional Solicitor General submitted that in Rules 96ZQ and 96ZO there is no reference to any mens rea as in section 11AC where mens rea is prescribed statutorily. This is clear from the extended period of limitation permissible under Section 11A of the Act. It is in essence submitted that the penalty is for statutory offence. It is pointed out that the proviso to Section 11A deals with the time for initiation of action. Section 11AC is only a mechanism for computation and the quantum of penalty. It is stated that the consequences of fraud etc. relate to the extended period of limitation and the onus is on the revenue to establish that the extended period of limitation is applicable. Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of penalty is fixed. It is pointed out that even if in some statues mens rea is specifically provided for, so is the limit or imposition of penalty, that is the maximum fixed or the quantum has to be between two limits fixed. In the cases at hand, there is no variable and, therefore, no discretion. It is pointed out that prior to insertion of Section 11AC, Rule 173Q wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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