taxabilityofservices of exploration report based on survey and detailed expression of mineral deposit for which grant from government is received.

PJ/CASE LAW/2014-15/2504

Case:-M/S Mineral Exploration Corporation Ltd Vs Commissioner Of Central Excise, Nagpur

Citation:-2015-TIOL-54-CESTAT-MUM

Brief facts:-the appellants are in appeal against the impugned order-in-original in which demand of service tax has been confirmed of rs.4,36,88,734/- along with appropriate interest and penalties under sections 76, 77 and 78 of the finance act, 1994. The facts are that the appellant is public sector undertaking (psu) unit owned 100% by the government of india. They undertake two kinds of activities. First, they provide exploration report based on survey and detailed expression of mineral deposit for which they get grant in aid from the govt. Of india. This is called preliminary exploration. The second activity is exploration work in respect of which they provide detailed survey and exploration reports on contractual basis to various clients. On the second activity, service tax is paid by them.

Appellant’s contention:-the contention of the appellant is that they carry out work in the national interest to know the location of mineral deposit so as to bridge the gap between the initial discovery and the detailed exploration of mineral deposits. On the basis of their work, they prepared detailed reports which are retained by them. The expenses involved in this activity are reimbursed by the govt. Of india in the form of grant-in-aid,which is reflected in their annual reports as well as outcome budget of the ministry of mines. They showed the annual reports for the financial years ending on 31 st march of every year. The annual report, at schedule (l) under the head ‘income from work; reflects the income on the activities under various subheads such as drilling, mines, geology etc.

Respondant’s contention:-the contention of the learned counsel is that no service has been rendered by the appellant to the government because they are merely undertaking work on basis of 100% reimbursement of expenses involved in the work. He also stated that the department has wrongly classified the activity under the scientific or technical consultancy services, whereas their activity is more akin to the service in relation to survey and exploration of minerals falling under section 65(105), which came into force on 10.9.2004. According to him, the demand relating to the period prior to 10.9.2004 is clearly time barred. He also states that initially, on the asking of the department, they had paid service tax upto 31.3.2002. However, later on the advice of their ministry i.e. ministry of mines, they discontinued the payment of service tax as activity undertaken by them is not a service under the service tax law.

Reasoning of judgment:-coming to the issues whether any service has been provided by the appellant for consideration, we are convinced by the argument of the learned counsel that when the activity is undertaken by them on the basis of 100% grant received from the government and the grant is totally expended on the expenses involved under various activities as reflected in the balance sheet, it cannot be said that any service has been provided. For any service, there has to be a service provider, a service receiver and consideration. In the present case, the records show that no consideration has been paid by the government to the appellant for undertaking the work of survey and exploration of mineral and preparation of the detailed reports thereof. What has been received from the government is only the reimbursement of the actual expenses involved. Board's circular (supra) also clarifies that if scientific or technical consultancy service is provided to the government department for which consultation fees are received, then service tax would be applicable. In the present case it has not been shown by the revenue that any consultation fee has been received by the appellant. It is also not a matter of dispute that the reports prepared by the appellant on the basis of grant-in-aid received are kept with them. As and when the situation or opportunities arise, these reports may be sold to clients or customers on payment of charges and service tax is paid on such charges. Clearly there cannot be duplication of service tax payment. If the revenue's contention is accepted that the service tax should be paid by the appellant for preparation of consultancy report and again when the reports are sold to parties for consideration. Therefore, we hold that there has been no service provided by the appellant to the ministry of mines. Having decided the matter on merits, there is no requirement of taking up the issue of cum-duty payment and time limitation and penalties. Accordingly, the adjudication orders are set aside and the appeals are allowed with consequential relief, if any.

Decision:-the appeal is allowed.

Comment:-the crux of the case is that when services of exploration report is provided which is based on survey and detailed expression of mineral deposit for which grant in aid is received from the govt. Of India, it is only the reimbursement of the actual expenses involved and therefore should not be chargeable to tax.

Submitted by:-Somya jain

Comments

PJ/CASE LAW/2014-15/2504

Post a Comment

Query