ATWOOD OCEANICS PACIFIC LTD. Vs. CCE

JUDGEMENT

(1.) THE appellant entered into an offshore drilling rig contract for supply of jack up rig and certain equipments/tools with experienced persons to operate the rig in November 2005. They started receiving the payments for supply of rigs and crew from November 2006. Service tax demand of Rs. 19,86,31,386/ - has been confirmed against the appellants on the ground that the service provided by them is covered under the category of mining services and is liable to service fax with effect from 01.6.07. Penalty under Section 76 & 77 of Finance Act, 1994 have also been imposed and penalty under Section 78 has been waived invoking the provisions of Section 80 of Finance Act, 1994.

(2.) THE learned consultant on behalf of the appellants submitted that somewhere in the second half of the 2008, the appellants came to know that a new service called supply of tangible goods has been introduced and the service provided by them for supply of jack up rig to GSPC would be covered in this category. Accordingly they took registration for providing such service on 02.02.2009 and also paid about Rs. 10 crore after calculating the liability with effect from 16.05.2008 the date on which the new service was made liable to service tax. On 16.02.2009, the appellants had a meeting with the Commissioner of Central Excise, Ahmedabad -III Commissionerate and had a discussion and thereafter a letter was issued to them stating that the service provided by them was covered under the category of mining services and therefore they would be liable to pay service tax with effect from 01.06.2007, the date on which the mining services came to be liable for service tax. To avoid litigation, the appellants paid an amount of Rs. 17.14 crores and intimated the Commissioner that the amount is being paid to avoid litigation reserving their right to contend that the service provided by them is actually supply of tangible goods only. However, a show cause notice was issued proposing to levy service tax on the services provided by them under the category of survey and exploration of mineral, oil or gas services which became liable to service tax with effect from 10.09.2004. The Commissioner in the impugned order however has confirmed the demand treating the service provided as mining services. He also submitted that the full amount of service tax with interest has been paid by them and he submits that the difference between the service tax demanded and the service tax paid by them has arisen because they had not recovered service tax from GSPC at all and therefore they have treated the amount received from GSPC as cum service tax amount and accordingly calculated the service tax payable. The learned consultant submitted that full amount of service tax with interest has been paid and the Commissioner has already extended the benefit of Section 80 of Finance Act, 1994 as regards penalty under Section 78 of Finance Act, 1994 and in view of the fact that even now there is a dispute about correct category of service under which the tax is to be levied, no penalty is imposable on them. It is his submission that extended period also should not have been invoiced in this case on the same grounds. Therefore, he submits that stay against recovery of penalties imposed may be granted and recovery of balance service tax amount and interest thereon during the pendency of appeal may be stayed.

(3.) AFTER considering submissions made by both the sides and also taking note of the fact that there can be two opinions about the category of service under which service provided by them is required to be classified and the appellant is a Government undertaking we consider that the amount already deposited by the appellants is sufficient for the purpose of Provisions of Section 35F made applicable to find service tax matters by Section 84 of Finance Act, 1994 and accordingly waive the requirement of pre -deposit of the balance amount of service tax, interest thereon and penalties imposed on the appellants and also grant stay against recovery of the same during the pendency of appeal.