Taxability of service provided relating to vessel under Supply of Tangible Goods service

PJ/Case Laws/2010-11/1075

Case: Union of India v/s Indian National Ship-owners Assn.

Citation: 2011 (21) S.T.R (S.C)

Issue:- Whether the service provided by the Respondent-association relating to providing vessel amounted to providing service of supply of Tangible Goods?

Brief Facts:- Appellant issued notices issued to the members of the Respondent-Association by contending that the entry contained in Section 65(105)(zzzy) of the Finance Act, 1944 covered the services provided by the Members of the Respondent-Association and hence they were liable to pay service tax.

The Division Bench of the High Court setting aside and quashed the notices issued by appellant holding that the entry contained in Section 65(105)(zzzy) of the Finance Act, 1944 does not cover the services provided by the Members of the Respondent-Association.

Hence, appellant is before the Apex Court.

Appellant’s Contentions:- Appellant submitted that such services which are provided by the members of the Respondent-Association have now become subjected to the payment of service tax by virtue of the amendment brought in Section 65(105) by way of amendment in the Finance Act, 1994 by inserting a fresh entry namely Sec 65(105) (zzzzj). It was submitted that the period relevant in the present case is the period from 01.06.2007 to 15.05.2008. It was also contended that although the aforesaid amendment was brought in subsequently but yet by taking recourse to the provisions of Section 65(105), the members of the respondent-Association is still liable to pay such service tax. They have also drawn attention to Entry No. zzzy which provides that any services provided to any person, by any person in relation to mining of mineral, oil or gas would be taxable.

Respondent’s Contentions:- Respondent-association as well as Respondent No. 3 ONGC submitted that the aforesaid interpretation sought to be given by the counsel appearing for the appellant is misplaced for the simple reason that the services rendered by the members of the respondent-association cannot be said to be any services in relation to mining of mineral, oil or gas. They have also drawn attention to the nature and scope of work which was required to be rendered by the Members of the respondent Association and which are specified in Schedule B-II.

Reasoning of Judgment:- The Supreme Court observed that the High Court had held that the nature work to be carried out by the members of the respondent’s No. 1 cannot be said to be a work in relation to mining of mineral, oil or gas.

The Supreme Court considered the relevant provisions and the nature of work that was required to be carried out by the Members of the respondents Association in terms of the contract entered into by them with the ONGC. None of the aforesaid entry in the schedule could be strictly said to be a service rendered in relation to mining of mineral, oil or gas. Therefore, the Supreme Court found justification in the findings arrived at by the High Court to the aforesaid extent. The nature of work which are set out in the Schedule at P200 of the Paper Book cannot be said to be even remotely connected and included within the ambit of the aforesaid expression as found in Section 65(105) Entry no. zzzy and therefore the Supreme Court affirmed the order of the High Court to aforesaid extent by looking into facts in issue only.

It is stated that it shall be open to the appellant to call for documents from the members of the respondents association or from the ONGC in order to ascertain whether any of the Members of the Association is carrying out any other duties and responsibilities other that what is mentioned in the aforesaid Schedule so as to ascertain whether or not they are liable to make payment of service tax.

Decision:- Appeal is disposed of.

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PJ/Case Laws/2010-11/1075

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