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TMI Blog2025 (2) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... ng contract of appellant herein with owner of a vessel under on flag of Liberia. The appellant as well as the oil companies are located in the territory of India with consequential location of the 'provider of service', which, in this case, is the appellant would render the tax liability to arise within the taxable territory of India; this aspect was never in dispute. However, 'address commission' is amount contractually withheld by the appellant and, while that may arithmetically be the difference between that received as 'charter charges' and paid as 'charter charges', is also the amount payable by the 'vessel owner' to the appellant as 'commission' for recourse to those vessels. It would, therefore, amount to consideration paid by the overseas entity to the appellant and either recompense for provision of service which was not considered by the adjudicating authority or unaccounted payment. In the haste to fall back on Place of Provision of Service Rules, 2012 for fastening liability, this aspect appear to have been overlooked. Conclusion - In view of the inadequacy in the impugned order and such inadequacy precluding us from determining the tax liability to be legal and prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contended to commission received by the appellant herein for acting as an agent on behalf of oil companies in engaging vessels on charter and taxable in terms of section 65(105)(zzb) of Finance Act, 1994 upto June 2012 and as 'taxable service' under section 66B of Finance Act, 1994. 3. We cannot but notice the impugned order does refer to reliance upon the meaning of certain expressions accorded by Merriam Webster dictionary and Investopedia in the show cause notice to propose the impugned recovery, viz., 'freight' and 'address commission' respectively. It would appear to us that proposals in the show cause notice should necessarily be founded on the letter of law and, while an adjudicating authority may fall back upon outside reference such as publication and other sources in response to contentions of the notice, for interpretation, show cause notice should restrict itself to the provisions of law. Moreover, reliance on an external source which is not recognized in the statutes amounts to filling gaps in law that show cause notice issued under section 73 of Finance Act, 1994 should not. Notwithstanding this peculiarity, we proceed to decide the appeal on the common ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n' in 'books of accounts' had no bearing on determination of taxability for which reliance was placed on the decision of the Hon'ble Supreme Court in Delhi Stock Exchange Association Ltd v. Commissioner of Income Tax, Delhi [(1961) 41 ITR 495 (SC)] and in Assam Small Scale Industries Development Corporation Ltd and others v. JD Pharmaceuticals and another [2005 (8) SCALE 298]. Reliance was also placed on the decision in National Building Corporation Ltd v. Commissioner of Central Excise & Service Tax, Patna [2011 (23) STR 593], in order [final order no. 77387 of 2023 dated 19th October 2023], in Apeejay Shipping Limited v. Commissioner of Service Tax, Kolkata disposing off appeal [service tax appeal no. 88 of 2012] against order [order-in-original no. 43/COMMR/ST/KOL/201-12 dated 28th November 2011] of Commissioner of Service Tax, Kolkata, in order [final order no. 50814-50818 of 2023 dated 3rd July 2023], in Commissioner of Service Tax v. Sidh Designers Pvt Ltd and others, disposing off appeal [service tax appeal no. 52112 of 2014 & others] against order [order-in-original no. 190/GB/2013 dated 05th December 2013] of Commissioner of Service Tax, New Delhi. Reliance was also pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other. The retained amount has been sought to be taxed by the fitment of carriage of cargo belonging to oil companies by vessel belonging to others as acting on behalf of oil companies, from contract, and causing receipt of service from vessel owners to oil companies. From a perusal of the impugned order, it would appear that the adjudicating authority has examined the contract, at least of a particular customer with the appellant herein and corresponding contract of appellant herein with owner of a vessel under on flag of Liberia. That the link between the two intended in the former to ensure that technical specification were not amenable to dilution was not tested for subordination of the latter and nor was the commercial terms of the latter examined for conformity with former deprives the finding that: '4.5.2 The above conditions indicate that as and when M/s SCI are unable to provide their owned vessels to the charterers, M/s SCI can in-charter vessels against payment of freight, dead freight and demurrage etc for the in- chartered vessels on back-to-back basis, as per charter party terms finalized by SCI. xxxx 6.1 I find that the amount recovered in the guise of "addre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which, in this case, is the appellant would render the tax liability to arise within the taxable territory of India; this aspect was never in dispute. However, 'address commission' is amount contractually withheld by the appellant and, while that may arithmetically be the difference between that received as 'charter charges' and paid as 'charter charges', is also the amount payable by the 'vessel owner' to the appellant as 'commission' for recourse to those vessels. It would, therefore, amount to consideration paid by the overseas entity to the appellant and either recompense for provision of service which was not considered by the adjudicating authority or unaccounted payment. In the haste to fall back on Place of Provision of Service Rules, 2012 for fastening liability, this aspect appear to have been overlooked. As set out in section 66C of Finance Act, 1994 and with the change of taxability from service as described to activity within the taxable territory a design for identification of activities as occurring within the taxable territory was required. Place of Provision of Service Rules, 2012 is accordingly nothing but machinery for determination of taxable entry and, necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... description is warranted, the span of activity is to be inferred from, 'consideration' paid for it. Thus, in normal circumstances, receipt of 'consideration' suffices for saddling the 'provider', subject to exclusions and exemptions afforded by section 66D and section 93, with levy of tax as 'service' rendered in 'taxable territory' under the authority of section 66B of Finance Act, 1994 much like it was in the classificatory regime. The 'out of normal' is the contriving, in specific circumstances, of 'taxable territory', under authority of section 66C of Finance Act, 1994 by recourse to Place of Provision of Service Rules, 2012 which is designed to locate the delivery of service within the 'taxable territory', by reference to provider, in rule 9, or recipient, in rule 8 and, in other rules, to triggering circumstances, for invoking section 66B of Finance Act, 1994. Superficial equivalence with commodity exports, by identification of recipient as claimed by appellant-assessee, does not, owing to statutory obliteration of recipient in determining the rendering of 'service', suffice for exacting privileges without conforming to rule 6A of Service Tax Rules, 1994. 21. Therefore, un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'provider' - one of the two essential determinants of 'service' - the 'consideration' received, as it must for coverage under Finance Act, 1994, by the 'intermediary' is lesser than, or subordinate to, the consideration that corresponds to performance of the 'main service' on own account. Here, irrespective of the delivery of the 'main service' in the 'taxable territory' or otherwise, the 'consideration' received by the 'provider' in India is deemed to have been for service rendered in India. From this would emerge a pattern in which 'services' coalesce within a 'main service' detracting from independent existence of each of them except for the description corresponding to 'consideration' of the coalesced 'main service' rendered on own account which is characterized by the recipient of service acknowledging only one provider for contractual consideration but yet carrying on business with other entities with whom the recipient of consideration has entered into separate contracts. This is the only chain of service providers that offers latitude for several entities to participate in transactions of 'service' that is 'main service; the alternative model, and more commonplace, is the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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