The Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) of Chennai Bench has held that service tax can’t be demanded on repair and maintenance work carried out in non-designated areas.
Aban Infrastructure Pvt. Ltd, the appellant is engaged in Management, Maintenance and Repair services (MMR) and Renting of Immovable Property Services (RIP). During verification of their accounts, it was noticed that the appellant had undertaken repairs/maintenance of rig/drillships. They had received work orders from M/s.Western India Shipyard Ltd., Goa, and M/s.BST Management Services Ltd., Chennai for repairing works on a drill ship named ‘Aban Ice’ belonging to their group concern namely Aban Offshore Ltd.
The appellant failed to discharge service tax on the amounts received for carrying out repair works for the reason that the services have been provided in the non-designated areas and therefore the provisions of Chapter V of the Finance Act, 1994 do not apply. After due process of law, the original authority confirmed the demand along with interest and imposed a penalty.
It was submitted that the services were rendered as per the work orders placed by M/s.BST Management Services Ltd., Chennai and M/s.Western India Shipyard Ltd., Goa. The appellant had carried out these services in a non-designated area.
The provisions of Chapter V of the Finance Act, 1994 were extended only to a designated area in the continental shelf and exclusive economic zone of India vide Notification No.1/2002 dated 01.03.2002, the appellant is not liable to pay the service tax. Further viewed that services were provided by one Indian company to another Indian company and that the consideration has been received in Indian rupees.
In the case of Greatship (India) Ltd. Vs CST Mumbai-I – 2015 (39) STR 754 (Bom.) and in the case of CGG Veritas Services Ltd. Vs CST., Mumbai – it was held that the demand for service tax cannot sustain when services are rendered in a non-designated area before 07.07.2009.
A Coram comprising of Ms Sulekha Beevi C.S, Member (Judicial) and Mr Vasa Seshagiri Rao, Member (Technical) observed that the repair works were performed in the nondesignated area of the continental shelf and exclusive economic zone. The provisions of Chapter V of the Finance Act, 1994 can only apply to the areas to which the Act is specifically extended.
While allowing the appeal, the Tribunal held that when the drill ship is located in an area which is outside the territorial purview of the Finance Act, of 1994, the demand cannot sustain and set aside the same.
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