ST - Refund - Commissioner(A) has given strange reasons to deny appellant benefit - he is not taking consistent stand in his reasoning - he has not read Apex Court decision - Notification 21/2009 does not have retrospective effect: CESTAT
By TIOL News Service
MUMBAI, NOV 11, 2014: THE appellant, a Company incorporated in France, with representative office in Mumbai entered into two contracts with ONGC for seismic surveys for Oil and Natural Gas in blocks/sites awarded by Government of India in the Eastern and Krishna Godavari basin Areas Offshore India.
The appellants were asked to pay Service Tax of Rs.7.44 crores which they paid under TR-6 Challans marked "Under protest" for the period 1.4.2006 to 18.4.2006.
This amount was claimed as refund but the same was denied by the adjudicating authority.
Before the Commissioner (A), the appellant had taken the following stand - that service tax was not payable because the sites where survey was done were not in the designated areas of the Continental Shelf and Exclusive Economic Zone (EEZ) of India specified in Notification No. 1/2002-ST by virtue of which notification the provisions of Chapter V of Finance Act 1994 were made applicable to such areas. Moreover, it was only in July 2009, vide notification No. 21/2009-ST that the service tax provisions under Chapter V of the Finance Act, 1994 were made applicable to the Continental Shelf and EEZ in which their survey sites are located. It was further submitted that the service tax paid under protest was not passed on to M/s. ONGC Ltd. from whom a certificate dt. 24.9.2007 was produced before the service tax authorities and, therefore, unjust enrichment was not applicable.
The Commissioner (Appeals) had while rejecting the appeal held that by notification No. 21/2009-ST, the words "designated areas in the continental shelf" in notification No. 1/2002-STdt. 1.3.2002 were substituted by the words "installation structures and vessels in the continental shelf of India and the EEZ of India" and this effect of substitution in the earlier notification results in notification No. 21/2009-ST having retrospective effect. Reliance was placed on the decision in Government of India vs. India Tobacco Association - 2005-TIOL-109-SC-CUS in reaching this conclusion. It was also held that since the matter was decided on merits, the issue of unjust enrichment becomes superfluous and redundant. The claim of payment of tax 'Under Protest' was also rejected on the ground that the assessment under Section 70(1) of the FA, 1994 was not challenged.
The appellant is before the CESTAT.
After hearing the submissions made by both sides, the CESTAT inter alia observed thus -
On Merits:
++ It remains beyond doubt that the service tax levy during the period 2006 was operative only in the designated areas i.e. areas designated by notifications issued by Ministry of External Affairs and made applicable for levy of service tax under Service Tax notification No. 1/2002-ST dt. 1.3.2002. The survey sites where the appellants conducted their operations of seismic survey did not fall in the designated areas. It was only in 2009 that notification No. 21/2009-ST extended the service tax levy to the continental shelf and EEZ in which their survey sites did fall.
++ The judgment in Indian Tobacco Association states that in the interpretation of a statute, when a person is held to be eligible to obtain the benefit of exemption notification, the same should be liberally construed. It is clear from the judgement that it would apply to cases where the effect of a beneficial statute is sought to be extended. In the present case we have a reverse position where the effect of the amended notification if read retrospectively will have the effect of punishment. We therefore do not agree with the order of Commissioner (Appeals), who has not read the judgement in its proper perspective.
++ The appellant only have a representative in India for communication purposes. The service was actually provided outside India because it was not performed in the designated areas i.e. in India. Even otherwise, the import of services became leviable to tax only w.e.f. 18th April 2006 and the period of dispute is prior to this date.
++ The Commissioner has given amongst other reasons a strange reason for denying the benefit to the appellants. He states that the appellants did not produce a certificate from the naval authorities to prove their claim that the services were provided outside the territorial waters of India. The Commissioner gives this reasoning after discussing at length that the notification No. 21/2009-ST which extends the levy of service tax to the continental shelf and EEZ has retrospective application, meaning thereby that the Commissioner is convinced that the services were provided outside the territorial waters. The Commissioner is not taking a consistent stand in his reasoning. After all the discussion on this issue the Commissioner suddenly makes a point that certificate was required from naval authorities. The appellant have submitted evidence to show that their sites of survey fall outside the territorial waters with reference to the notification issued by Ministry of External Affairs. It is for the department to prove otherwise which they have not even attempted to do so because they have all along been trying to prove that notification No. 21/2009-ST has retrospective application. In fact, the entire reasoning in the Commissioner's order pertains to the provisions of service in the Continental Shelf and EEZ.
On Unjust Enrichment:
++ The Commissioner has brushed away the appellant's contention that duty was paid under protest. The Commissioner has held that since the assessment had attained finality the same could not be re-opened by way of refund claim. He relied on the decision of Supreme Court in Priya Blue Industries Ltd. - 2004-TIOL-78-SC-CUS. The facts in the present case are at variance. In the present case there was no order of assessment. There is no assessment order against which the appellant could file appeal. The appellants were simply asked to pay during investigations. And they deposited the amount under protest. This 'protest' itself is a challenge to the assessment. Commissioner Central Excise Vs. Noble Grain India Pvt. Ltd. - 2009-TIOL-667-CESTAT-MUM, Manipal Media Network Vs. CCE - 2008-TIOL-2178-CESTAT-BANG relied] They have produced a certificate from ONGC that service tax has not been passed to ONGC & a certificate from the company's statutory auditors that the amount of service tax deposited is shown as receivables in the company's books which facts have not been controverted by the Commissioner.
Holding that there is no reason to deny the refund claim, the order was set aside with consequential relief.
(See 2014-TIOL-2233-CESTAT-MUM)
