No Service Tax Leviable under Obligations and responsibilities discharged by co- venturer in Joint Venture : CESTAT [Read Order]

The Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that no service tax is leviable under the obligations and responsibilities discharged by the co-venturer in a joint venture. 

BG Exploration & Production India Lt, the appellant assessee registered with the Service Tax Registration for providing taxable services under the category of ‘management consultancy services, consultancy engineer services, cargo handling services, mining services, business support services, supply of tangible goods services and telecom services’ covered under the taxable services defined under section 65 (105) of the Finance Act, 1994. 

The assessee appealed against the order passed by the Commissioner for the demand of service tax which was short paid along with a proposal for recovery of interest and imposition of penalty. 

Rohan Shah, Mihir Deshmukh, C. Sabri Rajan and Mohammad Anajwalla, the counsels for the assessee contended that the assessee along with Oil and Natural Gas Corporation (ONGC) and Reliance Industries Ltd (RIL )had entered into a Joint Operating Agreement (JOA). 

Also stated that the true nature of the transactions under the said Production Sharing Contract was that of a “Joint Venture” between the Government of India, the assessee, RIL and ONGC and that it involves no rendition of service. 

Further submitted that the levy of service tax on the sole basis of balance sheet/ income tax returns, etc. was unsustainable in law and the department had demanded service tax on such expenses which are related to ‘mining services’ even for the period prior by classifying them as ‘management and business consultancy services’, which was illegal, wholly without jurisdiction and directly contrary to the law. 

S. K. Mathur, the counsel for the revenue contended that in the absence of documentary evidence explaining the reasons for the difference in values in service tax Returns and the Balance Sheet, no evidence was produced to indicate that the services had been rendered outside India, and other evidence, the claim made by the assessee is not supported. 

Also submitted that the order passed by the Commissioner was just, legal, and proper. Hence he requested that the appeal filed by the assessee may be disallowed. 

The Bench observed that as a party to the joint venture, the obligations and responsibilities discharged by co- venturer cannot be brought under service tax levy and there was reasonable cause for the failure to discharge tax liabilities which had been rectified by the assessee duly paying the service tax along with interest thereon. 

The two-member panel comprising S.K Mohanty (Judicial) and M.M S.K Parthiban (Technical) quashed the penalty imposed for the non-payment of service tax by the assessee. 

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