CESTAT Sets Aside ₹352 Cr Service Tax Demand as Coal Mining Held ‘Manufacture’ Not Service

EMTA Coal Limited Vs Commissioner of Service Tax (CESTAT Kolkata)

The appeal before the Tribunal concerned a substantial demand of Service Tax amounting to Rs. 352.42 crore (including cess) for the period July 2012 to March 2015, along with interest and penalties. The demand was raised on the allegation that the appellant’s activities relating to coal mining constituted taxable “mining services” under the Finance Act, 1994.

The appellant was engaged in the production of coal from mines allotted to various State and Central power utilities. These utilities, lacking expertise in mining operations, entered into joint venture arrangements with the appellant. Under these arrangements, joint venture companies were formed, which held the mining leases, while the appellant undertook the entire spectrum of mining activities, including planning, drilling, extraction, processing, sizing, and dispatch of coal. The appellant received service charges based on the quantity of coal produced and dispatched.

The joint venture companies, treated as lessees and manufacturers, discharged central excise duty on the coal produced. The appellant initially paid service tax on its activities but later discontinued such payment upon receiving legal advice that the activities amounted to manufacture and were not liable to service tax.

Subsequently, two show cause notices were issued demanding service tax on the ground that the appellant was providing mining services to the joint venture companies. The adjudicating authority confirmed the entire demand along with penalties.

Before the Tribunal, the appellant contended that its activities constituted manufacture of coal, as they involved an integrated process including extraction, sizing, and preparation of coal for sale. It argued that central excise duty had already been discharged on the same activities and that service tax could not be levied simultaneously, as the two levies are mutually exclusive. The appellant also submitted that there was no element of service involved, as the activities were carried out as part of a joint venture arrangement and not as services rendered to another entity.

The Tribunal examined whether the activities undertaken by the appellant amounted to manufacture or to provision of mining services. Relying on prior decisions, including cases where similar activities of coal extraction, sizing, and processing were held to constitute manufacture, the Tribunal observed that such activities are integral to making coal marketable and therefore fall within the definition of manufacture under the Central Excise Act.

It was noted that the coal produced was subject to central excise duty and that such duty had been accepted by the Department. The Tribunal emphasized that under the constitutional scheme of taxation, excise duty and service tax are mutually exclusive levies, and the same activity cannot be subjected to both.

Accordingly, the Tribunal held that the appellant’s activities amounted to manufacture and not to provision of mining services. Consequently, no service tax was payable on such activities.

On the issue of whether the appellant was providing services to joint venture companies, the Tribunal referred to judicial precedents holding that transactions within a joint venture framework do not constitute provision of services for consideration. It observed that the arrangement between the appellant and the joint venture entities was to be viewed holistically and could not be artificially split into service components.

In light of these findings, the Tribunal concluded that the service tax demand was not sustainable. Since the principal demand failed, the associated interest and penalties were also held to be unsustainable.

The appeal was accordingly allowed, and the impugned order confirming the service tax demand was set aside.

FULL TEXT OF THE CESTAT KOLKATA ORDER

The appellant is in appeal against the impugned order wherein the demand of Service Tax totally amounting to Rs.352,42,66,549/- (inclusive of cess) for the period July 2012 to March 2015 [Rs.154,88,28,983/- for the period from July, 2012 to December, 2013 + Rs.197,54,37,566/- for the period January 2014 to March 2015], along with interest and penalties thereon, has been confirmed against them.

2. The appellant has filed a miscellaneous application for amendment of the Appeal in terms of Section 86(6A)(b) of the Finance Act, 1994 read with the CESTAT (Procedure Rules), 1982 pursuant to the leave granted by this Bench.

2.1. We find that initially, two separate appeals had been filed against the impugned order before this Tribunal. Upon hearing the parties in respect of the other appeal, being Diary No. 750052026, on 04.02.2026, this Tribunal granted leave to the appellant-applicant to amend the said appeal and combine the same with the present appeal bearing No. ST/75003/2026. The amendments sought are purely procedural in nature and do not change the nature or scope of the challenge to the impugned order and are necessary for proper adjudication of the matter. Therefore, in the facts and circumstances of the case and in the interests of justice, we allow the amendments proposed to be incorporated in the subject Appeal No. ST/75003/2026. In these terms, the miscellaneous application filed by the appellant-applicant stands allowed.

3. With the consent of both the sides, we have taken up the present appeal for disposal on its merits.

4. The facts of the case are that the appellant had been engaged, inter alia, in the ‘production of coal from the mines of its clients, who are mine owners. Such coal produced had been exclusively supplied to power utilities engaged in the generation of thermal power/electricity. The appellant had been registered in terms of Section 69 under Chapter V of the Act with effect from July 2, 2010 vide Centralize Registration Bearing No. AACCE3506GSD001 for service provided under Asansol-1 Division and Durgapur-IV Division in the State of West Bengal.

5. The Ministry of Coal and Mines, Government of India, in exercise of the powers conferred under the Coal Mines (Nationalisation) Amendment Act, 1993, allotted coal mines/coal blocks to various State-owned and Central Government-owned power utilities for production of coal to meet their captive requirements for generation of electricity. The power utilities, namely, The West Bengal Power Development Corporation Limited, The Durgapur Projects Limited, Punjab State Electricity Board, Karnataka Power Corporation Limited, Damodar Valley Corporation and others, however, lacked the requisite expertise to undertake coal mining operations. Through competitive bidding/tender, the appellant had been chosen as the strategic partner for production of coal.

6. The appellant had executed various Joint Venture Agreements with respective State power utilities, namely Punjab State Electricity Board (hereinafter referred to as “PSEB”), Karnataka Power Corporation Limited, Damodar Valley Corporation, and West Bengal State Electricity Board, along with West Bengal Power Development Corporation Limited and Durgapur Projects Limited. On account of legal necessity and/or commercial arrangements pursuant to agreements on captive coal mining through joint venture entities, the aforesaid power utilities and the appellant formed joint venture companies under the name and style of Bengal EMTA Coal Mines Limited, Panem Coal Mines Limited, Karnataka EMTA Mines Limited etc. All mining leases in respect of allotted coal blocks were executed by the respective State Governments in favour of the said joint venture companies which became the lessees. The responsibility for production and dispatch of coal, though, had been offloaded in favour of the instant appellant which became responsible for the entire range of activities in connection with preparation of plans for mining, drilling, mining in open cast or underground or both, raising of coal, sizing, dispatching coal, exploration and other activities. The respective joint venture companies entered into ‘coal production agreements’ with the appellant for production, further processing of coal and for effecting delivery thereof to the power utilities. The appellant was entitled to service charges on the basis of quantity of coal produced and dispatched and the respective joint venture companies discharged central excise duty liability on the self-same activities of production, processing and dispatch of coal. The said joint venture companies also entered into ‘coal purchase agreements’ with the respective power utilities in respect of sale of coal produced by the appellant on their behalf. No part of the process of production or any incidental/ancillary process connected therewith was ever carried out by any joint venture company. No service tax or excise duty had been charged or collected by the appellant and there is no dispute as to the said position.

7. Under misconception of facts and/or law the appellant had started paying service tax on the activity of production of coal aforesaid, which service tax had been paid from the appellant’s own pocket and had not been collected from the respective joint venture companies. A certain amount of confusion may have resulted from the fact that the appellant had originally been a partnership firm operating since 1987 and which subsequently sought service tax registration with effect from August 3, 2007 for provision of mining services in the States of West Bengal and Jharkhand. On the self-same activities of production and clearance of coal, which did not involve any element of rendering service, the concerned joint venture companies had discharged substantial excise duty as follows as per Central Excise Tariff Notification No. 1/2011-CE dated March 1, 2011, as amended: –

PERIOD	BENGAL EMTA COAL MINES LTD	PANEM COAL MINES LTD	DVC EMTA COAL MINES LTD	KARNATAKA EMTA COAL MINES LTD
2012-2013	4,41,84,306	6,18,03,205	2,13,40,091	3,14,80,250
2013-2014	3,89,44,471	6,26,05,017	1,98,94,163	4,51,97,179
2014-2015	9,52,87,993	3,65,53,635	1,02,36,369	3,94,58,946
	17,84,16,770	16,09,61,857	5,14,70,523	11,61,36,384
Grand Total				50,69,85,634/-

8. In view of Sections 3 and 2(d) of the Central Excise Act, 1944 read together with Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985, ‘coal’ had been an excisable commodity, on production of which central excise duty liability had been rightly discharged. On receiving legal advice that no Service Tax was leviable in respect of the manufacture of coal and allied activities with effect from July, 2012, the appellant discontinued paying Service Tax with effect from July, 2012. However, it continued payment of Service Tax on crushing charges, transport, subsidiary, processing charges, supervision charges and delivery charges until March, 2013. However, with effect from April, 2013 the appellant paid Service Tax only on delivery charges for delivery of coal to the door step of power utilities under mistake of law or due to lack of clarity.

8.1. Vide its letter dated June 5, 2013 addressed to the Central Board of Excise and Customs, New Delhi, followed by further reminders, the appellant sought clarification as regards taxability or otherwise on its activities of production and dispatch of coal under Chapter V of the Finance Act and/or Central Excise Act, 1944. However, no contemporaneous reply was received in this behalf, though the jurisdictional Service Tax Division had queried with the appellant as to why there had been drastic fall in payment of service tax on and from July, 2012. The appellant duly responded to the said query and exchanges correspondences from time to time.

8.2. On January 20, 2014 the appellant applied before the Chief Commissioner of Central Excise and Service Tax, Kolkata for refund of Service Tax paid under mistake of law for the period from June, 2007 to June, 2012 under the category of ‘mining of mineral etc. services’ on the activities of production of coal. Thereafter, a show cause notice was issued for rejection of refund, which the instant appellant contested. The said proceedings give rise to successive orders for rejection of refund.

9. Thereafter, a Show Cause Notice was issued to the appellant on 28.05.2014 [SCN-1] by invoking the proviso to Section 73(1) of the Finance Act, demanding payment of Service Tax of Rs.154,88,28,983/- (including cesses) for the period from 2012-13 and 2013-14 (April, 2013 to December, 2013), along with interest and penalties, on the allegation that the activities undertaken by the appellant were exigible to Service Tax under the category of “mining of mineral, oil or gas services” within the meaning of Section 65(105)(zzzy) of the Finance Act, 1994, as amended and chargeable to Service Tax as per Section 66 of the said Act up to 30.06.2012 and w.e.f. 01.07.2012, chargeable to Service Tax under Section 65B(44) read with Section 66B of the Finance Act, 1994. It was further alleged in the said Show Cause Notice that the appellant was not the owner of coal mines and its role was limited to that of a job worker/service provider providing service of mining to the joint venture companies which were allegedly chargeable to Service Tax in the hands of the appellant. Personal penalties were also proposed upon the appellant’s Director, Sri Bikash Mukherjee and the appellant’s Director and CFO, Shri Purojit Roy. The appellant duly contested the said Show Cause Notice by filing a detailed reply thereto. Vide letter dated June 18, 2014, the Central Board of Excise and Customs, New Delhi directed the appellant to represent its case afresh before the jurisdictional Chief Commissioner of Service Tax. The appellant had promptly acted in terms of such direction and applied before the Chief Commissioner, Kolkata Zone vide its letter dated October 6, 2014, which was followed up by reminders time and again, but no clarifications were provided.

9.1. Another Show Cause Notice was issued to the appellant on 18.10.2016 [SCN-2] by invoking the proviso to Section 73(1) of the Finance Act demanding payment of Service Tax of Rs.197,54,37,566/- for the period from 2013-14 (January, 2014 to March, 2014) to 2014-15 under similar allegations that its activities were purportedly taxable under the category of “mining of mineral, oil or gas services” since the appellant was a service provider to its joint venture companies. The above Show Cause Notice was also contested by the appellant vide their detailed reply filed on 07.02.2017.

10. Both the aforesaid Show Cause Notices were adjudicated by the Ld. Commissioner of Service Tax-II, Kendriya Utpad Shulk Bhawan, 180, Shantipally, Rajdanga Main Road, Kolkata – 700 107 vide his Order-in-Original No.08-09/COMMR/ST- II/KOL/2017-18 dated 21.06.2017 [hereinafter referred to as the “impugned order”] wherein the ld. adjudicating authority has confirmed all the proposed demands of Service Tax totally amounting to Rs.352,42,66,549/-, along with interest. In the said order, the ld. adjudicating authority has also imposed a penalty of Rs.154,88,28,983/- under Section 78 of the Finance Act, 1994, a penalty of Rs.19,75,43,757/-under Section 76 of the Finance Act, 1994 and a penalty of Rs.10,000/- under Section 77(2) of the Finance Act, 1994; the proposals for personal penalty on Shri Bikas Mukherjee, Director of the appellant-company and Shri Purojit Roy, Executive Director & C.F.O. of the appellant-company, were dropped.

11. The appellant was constrained to file a writ petition bearing WPA/7675/2020 (EMTA Coal Limited & Another vs. UOI & Others) before the Hon’ble Calcutta High Court by challenging, inter alia, the impugned order dated 21.06.2017. The said writ proceeding was heard from time to time. During the course of hearing of the aforesaid matter on 17.12.2025 before the Hon’ble Calcutta High Court, the respondents concerned served their Affidavit-in-Opposition in the matter upon the instant appellant. After hearing both sides, the Hon’ble High Court was pleased to grant liberty to the petitioner No. 1 / appellant herein to file its appeal against the impugned adjudication order dated 21.06.2017 before this Tribunal and to direct that the writ petition be treated as withdrawn.

12. In terms of the aforesaid leave granted by the Hon’ble Calcutta High Court on 17.12.2025, the appellant has filed the present appeal before this Tribunal.

13. During the course of hearing, the Ld. Counsel appearing on behalf of the appellant have made various submissions in support of their contentions which can be broadly summarized as under:-

I. There can be no dispute that the indivisible activities of preparation of plans for mining, drilling, mining in open cast or underground, raising of coal, sizing  thereof, exploration and dispatch amount to  manufacture of coal:

(i)The appellant submits that in the instant case there can be no dispute that the appellant had been responsible for the entire activities in connection with preparation of plans for mining, drilling, mining in open cast or underground or both, raising of coal, sizing, dispatching coal, exploration and allied works. The said activities clearly amounted to manufacture of coal on which Central Excise duty was chargeable and also paid. In the decision dated June 4, 2025 in M/s. Integrated Coal Mining Ltd. v. Commissioner of CGST & Central Excise, Kolkata North (ST/75094/2024) this Tribunal has been pleased to hold that the activity of mining and production of coal is covered by the definition of ‘manufacture’ under Section 2(d) of the Central Excise Act, 1944 and demand of service tax thereon is unsustainable. The instant issue arising for consideration in the present appeal stands squarely covered in favour of the appellant- manufacturer. In this behalf the appellant also relies on the decision date December 12, 2023 passed by this Hon’ble Tribunal in M/s Mahanadi Coalfields Ltd. v. Commissioner of Central Excise, Customs & ServiceTax, Bhubaneshwar-I (ST/70139/2013).

(ii) In view of the aforesaid, there does not remain any scope to demand service tax on the self­same activities of manufacture. To do otherwise would be to negate the constitutional provisions and also act contrary to the fundamental principles of indirect taxation. The adverse observations at paragraph no. 4.4 at pages 65-66 of the impugned order cannot sustain.

II. On the self-same production and dispatch of coal to power utilities, appropriate central excise duty had already been paid. It is of no consequence that such  payment of duty had been made by the concerned  joint ventures and not the instant appellant which had  actually undertaken the entire responsibility for production and dispatch of coal:

(i) That the aforesaid activities constitute manufacture and had been so understood both by the revenue and taxpayers alike becomes clear from the fact that the afore-mentioned joint venture companies had already discharged Central Excise duty liability thereon. It was not open to the revenue to recover excise duty on the activity of manufacture of coal and then make an about turn by trying to charge service tax thereon in the appellant’s hands. It was of no material consequence that such Central Excise duties had been paid by the joint ventures and not by the instant appellant which was the actual manufacturer. In this regard, reference is invited to a specimen agreement on captive coal mining project through joint venture dated March 21, 2001, wherefrom it would be evident that the instant appellant had been responsible for the funding, deployment of manpower and machinery and all major obligations of the joint venture entities. It is well-settled principle of law that the tax base is mutually exclusive, in that Excise and Service Tax could not have been confirmed on the very same activities. Otherwise, it would amount to double taxation.

ii. There had been no element of service involved since inception qua the instant appellant and the respective joint venture entities and the impugned demands, whether under the earlier charging provision of the Finance Act, 1994 or Section 66B thereunder, were illegal and arbitrary and deserved to be quashed. Section 2(6) of the Companies Act, 2013 categorized joint ventures as associate companies and in the factual matrix of the instant case it was impermissible for the revenue to ignore the substance of the transaction and insist that separate taxable events were involved solely because the joint venture companies like Bengal EMTA Coal Mines Limited, Panem Coal Mines Limited, Karnataka EMTA Mines Limited etc. constituted separate legal entities. In this regard, the appellant places reliance on the decision of the Tribunal in G. Exploration and Production India Ltd. v. Commissioner of CGST & CX, Navi Mumbai, reported in 2022 (64) GSTL 578 (T).

iii. The Commissioner also failed to acknowledge that the bar under Section 66D(f) of the Finance Act had been attracted.

III. The appellant was the manufacturer in law and  the commercial arrangement between the appellant,  its joint venture entities and the power utilities had to  be understood holistically. There was no separately identifiable service involved, which could have been  charged to Service Tax and the appellant had rightly stopped payment of Service Tax:

(i) In this regard, it is submitted that while passing the impugned order the Commissioner ignored the ground realities and artificially sought to split up the indivisible activities constituting manufacture of coal. The adjudicating authority also failed to notice the definition of ‘mining operations’ given in Section 3(d) of the Mines and Minerals (Development and Regulation) Act, 1957. The documentary evidences on record duly support the appellant’s stand that it had discharged all responsibilities of the manufacturer of coal for and on behalf of the joint venture companies and it had also arranged for funding of the said joint ventures, deployment of manpower and machinery etc. No contrary evidence is forthcoming from the revenue’s side to establish that because the mining leases had been granted in favour of the joint venture companies which had sought registration under the Excise law and paid duty, the said joint venture companies were the manufacturers. The method of raising bills by the instant appellant could not have been determinative of the issue. The adverse observations contained in the impugned order are illegal, arbitrary and liable to be interfered with. The said findings are also ex-facie contrary to the Show Cause Notice dated May 28, 2014 wherein it had been recorded that appellant alone undertook the activity of extraction, processing including crushing and sizing and production of coal.

(ii) It is also submitted that integrated activities cannot be vivisected for levying tax, as laid down in the following:

a. Jubilant Industries Ltd. v. Commissioner of C.Ex., Ghaziabad, reported in 2013 (31) STR 181 (T) — appeal therefrom in Jubilant Agri & Consumer Products Ltd. v. CESTAT, reported in 2016 (41) STR 8 (All.);

b. Wagad Infraprojects Pvt. Ltd. v. Commr. of CE & ST, Vadodara, reported in 2022 (59) GSTL 95 (T).

(iii) The factual basis for application of Section 65(105)(zzzy) of the Finance Act via-a-vis the instant appellant had been wholly absent. The adjudicating authority erred by placing reliance upon the purported CBEC letter under F No. 232/2/2006-CX.4 dated November 12, 2007. There could be no justification for raising service tax demands qua the appellant.

IV. Even if the appellant were to be treated as a job worker, it was entitled to exemption under notification  No. 25/2012-ST dated June, 2012:

(i) Without prejudice, it is stated that the appellant ought to be treated as a job worker. The instant situation is akin to the case contemplated by Notification No.214/1986-CE dated March 25, 1986. The construction sought to be placed upon Rule 2(n) of the CENVAT Credit Rules, 2004 by the adjudicating authority cannot be supported. Even if there had been any lapse in following the job work procedure under Central Excise law, such lapse was minor and only procedural in nature.

(ii) Vide sl. 30(c) of Notification no.25/2012-ST dated June 20, 2012 service tax, if any, chargeable on any intermediate production process as job work relating to goods on which appropriate Central Excise duty was payable by the principal manufacturer had been exempted. The appellant is clearly entitled to benefit under the said exemption notification, even if it be contented that the joint venture companies were the manufacturers of coal produced who had discharged Central Excise liability.

V. The Service Tax Department was unclear as to the legal position which becomes evident from the fact that the appellant’s application for clarifications filed with CBEC and the Chief Commissioner had not been  responded to:

(i) It is on record that the Revenue failed to respond to the appellant’s applications filed for clarification. This goes a long way to show that the Service Tax authorities were unclear as to the correct legal position. Without conclusively determining the issues raised in the applications filed before the CBEC, New Delhi and the jurisdictional Chief Commissioner, followed by several reminders, the Revenue should not have proceeded to initiate any proceeding in terms of Section 73 of the Finance Act.

(ii) The purported Show Cause Notices were non­starters. Consequently, the adjudication order passed thereon ought to be set aside and quashed. The Revenue’s acts/omissions were in violation of Section 37B of the Central Excise Act, 1944, as made applicable to Service Tax.

VI. As the principal demand was liable to fail, there can be no reason for confirmation of interest or penal liability. Even otherwise, benefit under Section 80  ought to have extended by deleting penalties under Sections 76 and 77:

i. When the principal tax demand is illegal, the consequential interest demand under Section 75 of the Finance Act or penalty demands cannot sustain.

ii. Further, no concrete reasoning has been assigned in the impugned order so as to justify imposition of penalties under Sections 76 and 77(2) of the Finance Act in the given facts and circumstances. Even otherwise, benefit under Section 80 of the Finance Act, as the said provisions stood during the relevant period, should have been extended.

13.1. In view of the submissions hereinabove, the Ld. Counsel appearing on behalf of the appellant have prayed for setting aside the impugned order and thus, for allowing the present appeal with consequential reliefs.

14. On the other hand, the Ld. Special Counsel representing the Revenue has, inter alia, made the following submissions: –

(i) The appellant i.e., EMTA (Eastern Mineral & Trading Agency) Coal Limited, Kolkata, have provided ‘mining services’ to distinct legal entities, i.e., M/s Bengal Emta Coal Mines Ltd (BECML), M/s Panem Coal Mines Ltd, M/s Karnataka Emta Coal Mines Limited, M/s DVC Emta Coal Mines Limited, incorporated under the Companies Act, of 1956/2013 (referred as Joint Venture Companies) with respective State Government Power Companies/Utilities with equity participation of 26%, EMTA 51% & others remaining. The land leases were granted by State Governments to JVCs for development of mines & to carry out mining activities. The respective JV Companies are registered under the Central Excise Act, 1944 as manufacturer/producer of excisable goods coal, sold & cleared the coal on payment of central excise duties & filed periodical returns. The Department holds that during the period, appellants have received consideration as ‘mining charges’ from the said Joint Venture Companies classifiable as a taxable service ‘mining of mineral, oil or gas Services’ within the meaning of Section 65(105)(zzzy) of the Finance Act, 1994, as amended, and chargeable to Service Tax as per Section 66 of the said Act (upto 30.06.2012) and w.e.f 01.07.12, taxable Service Tax under Sections 65B(51) read with definition of Service under Sec 65B(44) & chargeable to service tax under 66B of the Finance Act, 1994.

ii. The Joint Ventures Companies have entered into separate agreements with Public Sector Power Utilities, for development of open cast captive mines. Development of mines inter-alia includes statutory approvals, land acquisition, construction of railway siding, removal of overburden, excavation of coal, sizing, crushing of coal, transportation of coal from pit head to railway siding & delivery of coal to thermal power station.

iii. In this regard, reference has also been drawn to the relevant clauses of the Agreement dated 05.05.2000 between Punjab State Electricity Board & EMTA, the Agreement on Coal Mining Project Through a Joint Venture dated 21.03.2001, the Coal Purchase Agreement dated 30.08.2006 between Panem Coal Mines Limited (PCML/supplier) & PSEB, Agreement dated 22.01.2002 between Panem Coal Mines Limited (PANEM) & EMTA(Appellants) & Partners of EMTA; that perusal of above contracts reveal that Appellants have rendered composite service activities of mining as defined u/s 65B(44) of the Finance Act,1991 to the PANEM, manufacturer of coal on principle to principal basis.

iv. The Board vide letter F.No.232/2/2006-CX.4 dt. 12.11.2007, have stated that coal cutting or Mineral Extraction and lifting them up to pit head are essential integral processes and part of mining service and has been made taxable:

“ MINING SERVICE [section 65(105) (zzzy)]: Presently, geological, geophysical or other prospecting, surface or sub-surface surveying or map-making services relating to location or exploration of deposits of mineral, oil or gas are leviable to service tax under “survey and exploration of mineral service” [section 65(105)(zzv)]. Services such as-

-site formation and clearance, and excavation and earth moving, drilling wells for production / exploitation of hydrocarbons (development drilling

-well testing and analysis services

-sub-contracted services such as deploying workers and machinery for extraction/breaking of rocks into stones, sieving, grading, etc.

-outsourced services,

provided for mining are individually classified under the appropriate taxable service. Services provided in relation to mining of mineral, oil and gas are comprehensively covered under this proposed service. With this, services provided in relation to both exploration and exploitation of mineral, oil or gas will be comprehensively brought under the service tax net.”

(v) The appellants (a legal entity incorporated under the Indian Companies Act, 1956/2013) and JVCs are separate juridical companies. The appellants are the service providers and the JVCs are service recipients. The mining lease of the coal block is granted to the JVC and the JVC have taken Central Excise Registration, pays Central Excise duty on production of coal. The mining service are provided by the appellants to the JVCs. The appellants while raising invoices to JVCs, vivisected ‘mining charges’ and ‘crushing/sizing charges’. W.e.f. 01.07.2012, the appellants have chosen not to discharge Service Tax on “Mining services”.

(vi) The Department argues that service tax under the ‘Mining Services’ is not extinguished with the introduction of negative list regime or Sec 66D(f). Had it been the intention of the legislature to consider the activities related to mining/extraction of minerals as a process of manufacture /production, it would not have introduced Mining of mineral, oil or gas Service in the budget of 2007. Mining Services, w.e.f. July 2012 are also covered under definition of “service”& Taxable Service, under Sections 65B(44)/65B(51) of the Finance Act. The arguments advanced by the appellants (that extraction/mining of coal is a process of manufacture /production) is meant to render the whole ‘Mining of mineral, oil or gas Service’ redundant as it would mean to consider mining activity of any mineral as the process of manufacture /production. It is a settled law that an interpretation which would render the statutory provision redundant cannot be accepted. An interpretation which makes the law in-effective is not correct. One of the cardinal principles of statutory interpretation is that no provision in a statute should be interpreted in a manner that renders any part of the legislation redundant, superfluous, or nugatory. Every word and provision incorporated by the Legislature is presumed to have a purpose and function, and courts are obligated to adopt an interpretation that gives meaningful effect to all parts of the statute. The doctrine is rooted in the maxim ut res magis valeat quam pereat—that an enactment should be construed so as to ensure its validity and effectiveness, not futility. The courts have consistently reiterated that no clause, section, or sub-section should be treated as surplusage or ignored unless absolutely necessary. The aim of interpretation is to read the statute as a whole, harmonizing its parts to preserve legislative intent and ensure that each provision performs its intended role.

vii. Furthermore, appellants have never claimed that they are manufacturer of coal, rather for the same service activities they have paid Service Tax prior to 1.7.2012.

viii. The Department’s argument is that the coal mines are never allotted to appellants. The coal mines belong to the Joint Venture Companies & they have correctly taken Central Excise Registration and paid Central Excise Duty being manufacturer/producer of coal. At the instance of Power Utilities/Companies, the mining leases of allotted Coal Blocks were granted in favour of the Joint Venture Companies by the respective State Governments. For supply of coal to the power utilities, the respective Power Utilities entered into “Fuel Supply Agreement” with the JVCs. JVCs supply/sale coal & JVCs received the sale considerations from power utilities. The JVCs also did not consider appellants as the manufacturer/producer of coal. appellants themselves never considered themselves as the manufacturer/producer as they never raised bills or realised amount on sales of coal or paid VAT but instead they raised invoices to realise ‘mining charges’ and ‘crushing/sizing charges’ which are basically mining service charges. From perusal of various Agreements & Fuel Supply Agreement, as discussed ibid, it emanates that appellants are providing mining services to JV Companies & JV Companies are manufacturing/producing coal & supply to Power Utilities Companies.

ix. The service provided by the appellant to the JV Companies is under a composite contract for mining and includes activities of – Removal of the Top-Soil, Ripping or blasting of caprock, Removal of overburden, Extraction of coal (ROM), Crushing/sizing of coal, Screening of crushed sized coal, Benefaction/Washing of screened coal, Loading & Transportation of coal to customer’s site and thus the said activities fall under the category of ‘Mining Services’, which cannot be vivisected to taxable and non­taxable activity.

x. Therefore, the adjudicating authority correctly held that the activities performed by Appellant , under Agreements made with the respective JVCs were taxable service classifiable under ‘Mining of mineral, oil or gas Services’ within the meaning of taxable service under Section 65(105)(zzzy) of the Finance Act, 1994, as amended and taxable Service Tax under 65B(51) & chargeable to service tax under Section 66B & service as defined under 65B(44) of the Finance Act, 1994.

14.1. Thus, the Ld. Special Counsel for the Revenue prayed for dismissal of the present appeal and confirmation of the impugned order.

15. Heard the parties and considered their submissions.

16. After hearing the parties, the following issues emerge: –

a. Whether the activity of production of coal from mines amounts to manufacture and consequently Central Excise Duty is payable or amounts to mining service on which Service Tax is payable.

b. Whether the appellant is providing service to the Joint Venture Companies or not and consequently, whether the appellant is liable to pay Service Tax or not.

Issue (a): Whether the activity of production of coal from mines amounts to manufacture and  consequently Central Excise Duty is payable or amounts to mining service on which Service Tax is payable.

17. The issue as to whether the said activity, i.e., preparation of plans for mining, drilling, mining in open cast or underground or both, raising of coal, sizing, dispatching coal, exploration and other activities, as undertaken by the appellant in this case, amounts to manufacture or not, has been examined by this Tribunal in the case of M/s. Integrated coal Mining Limited v. Commissioner of C.G.S.T. & C.Ex., Kolkata North in Service Tax Appeal No. 75094 of 2024 and the same has been decided by this Tribunal vide Final Order No. 76435 of 2025 dated 04.06.2025, wherein it has been observed as under: –

“7. The facts which are admitted are that the appellant was engaged in the business of mining and sale of coal classifying under Chapter Heading 27011200 of the Central Excise Tariff Act. The coal comes directly from mines after blasting known as the run-of-mine (ROM) coal, are of irregular sizes, including large fragments. The appellant has to supply coal of specifications and quality depending upon the intended use thereof. Since the ROM coal does not conform to the size and specification required to be delivered to the buyers and cannot be sold and transported as such, such ROM coal has therefore to be prepared..  Such preparation
includes segregation of the coal from the stones, whereupon they are crushed/sized as per the desired requirement of the purchasers concerned in the mine area itself through deployment of workers and using pay loaders and dozers, then, the manufacturing coal becomes ready for sale.

Now, the issue arises whether the said activity amount to manufacture of coal or mining services.

The said issue has come before this Tribunal in the appellant’s own case, wherein the facts of the case are as under :

“The facts of the case in brief are

a. ICML is engaged in the business of mining and sale of coal classifiable under Chapter Heading 27011200 of the Central Excise Tariff Pursuant to allocation of a coal mine block by the Goverment of India, Ministry of Coal, for mining of coal, ICML was granted mining leases by the Government of West Bengal, in accordance with the relevant statutory provisions in this regard, for extraction of coal from the said block, known as the Sarshatal Coal Mine.

b. On August 14, 2002 ICML entered into an agreement with CESC Ltd, Kolkata, to mine coal from the said mines and to sell the same to CESC Ltd. (“CESC”) for use in its power projects on terms and conditions specified in the agreement

c. Similar agreement was subsequently entered into by ICML with Crescent Power Ltd. (“CPL”), a wholly owned subsidiary of CESC on March 30, 2010, for sale of certain inferior quality coal, commonly known as “carbonaceous shale” or “shaly coal” (hereinafter referred to as “carbonaceous shale”) from the said coal mine to CPL. on terms and conditions specified in the said agreement dated 30.03.2010.

d. The coal that comes directly from mines, after blasting, known as the run-of-mine coal (“ROM”), are of imegular sizes, including large fragments in terms of the above stated agreements, ICML has to supply coal of specifications and quality, depending upon the intended use thereof, as specified. Since the ROM coal does not conform to the size and specification required to be delivered to the buyers and cannot be sold and transported as such, the said ROM coal has therefore to be prepared. Such preparation includes segregation of the coal from the stones, whereupon they are crushed/sized as per the desired requirement of the purchasers concerned in the mine area itself, through deployment of workers and using pay loaders and dozers. According to ICML the manufacturing job is only then completed and the coal becomes ready for sale and, hence, sizing of coal is an integral part of coal manufacturing or production,

e. Central excise duty was paid by ICML on the assessable value of coal determined by including the crushing and sizing charges, with effect from 24.03.2011, prior to which coal was subjected to zero excise duty

f. In addition, since inception, on the sale price of the coal including the said sizing charges, Value Added Tax (“VAT”) and Central Sales Tax have been deposited as per the relevant statutes of the State and Central Governments respectively, by ICML

g. On 23.08 2012 a show cause notice was issued by the Commissioner requiring ICML to show cause as to why a sum of it under the Proviso to Section 73(1) of the Act, along with interest thereon under Section 75 of the Act and as to why penalties should not be imposed upon ICML under Sections 76, 77(2) and 78 of the Act, on the allegation that during the period from 2007-08 to 2011-12 ICML was engaged in providing the services of sizing of coal to its customers for which ICML recovered additional amount of money as consideration and since the said sizing of coal did not amount to “manufacture” within the meaning of Section 2(f) of the Central Excise Act, 1944 and Section Note I of Section V of the First Schedule to the Central Excise Tariff Act, 1985, the activity of sizing of coal was covered by the expression “production or processing of goods for or on behalf of the client’ in the category of “Business Auxiliary Service” under Section 65(19) of the Act, which was applicable during the period from 2007-08 to 2010-11 and hence was chargeable to service tax as per Section 66 of the Act, as then in force.”

In the said case, on going through the documents placed on record by the appellant, the Tribunal has observed as under :

“7. We find that under the Agreement dated August 14, 2002 between ICML and CESC, there is binding obligation Leon ICML, part to sell and CESC to purchase coal in the quantities and having the qualities specified on the terms and conditions set forth therein. It is further seen that in terms thereof

a. ICM, is responsible for delivery and loading of coal into the railway wagons at the railway siding, which is to be considered as the delivery point. The alternative route is by road, in which case the delivery point is the mine end and the delivery would be completed by loading the coal into the trucks after weighment at that point. Both these situations arise after completion of sizing of coal

b. The ownership of the coal and risk of loss of the coal sold and purchased would pass on from ICML to CESC at the said delivery point and, hence, property in the coal remains with ICML until the same get passed on at the delivery point

c. ICML is required to supply crushed coal of size not exceeding 100 mm.

d. The contracted price comprises of five elements, one of which is sizing charges. Sizing charges, therefore, forms a part of the price of the coal.

(e) The contract is therefore for supply of sized coal, all processes undertaken on such coal prior to delivery thereof as sized coal as per the specification in the Agreement is at all material point of time on ICML’s account as owner of the said goods and not for and on behalf of CESC or anybody else.

7.1 Similarly in the case of sale of carbonaceous shale (inferior quality of coal) by ICML to CPL under the Agreement dated March 30, 2010, it is seen that the sale and purchase of carbonaceous shale takes place on delivery of the goods at the designated place within the power plant premises of CPL, when title/ownership and risk of loss passes from ICML to CPL Until then ICML continues to be responsible for transportation and delivery of the goods to the said designated place The contracted price in this case also includes sizing charges.

7.2 Section 65(19)(v) of the Finance Act includes, as “Business Auxiliary Service”, production or processing of goods “for and on behalf of client”. The requirement for application of this clause is that the goods in question has to belong to the client of the appellant assessee, on which production or processing which does not amount to manufacture of goods within the meaning of Section 2(f) of the Central Excise Act is carried out by the appellant assessee. This requirement is not satisfied in the instant case. At the time when the sizing of coal takes place, they continue to remain ICML’s property and not that of either CESC or CPL. The sale of coal and consequently the title thereof passes on to CESC/CPL only at the delivery point specified in the respective agreements, which is after completion of sizing of the coal. There is therefore no production or processing of goods for and on behalf of any client or customer, as required under Section 65(19)(v) of the Act.

8. In terms of Section 65(19) of the Finance Act, 1994 any activity that amounts to manufacture within the meaning of Section 21f) of the Central Excise Act is excluded therefrom Section 2(f) of the Central Excise Act fines the term “manufacture” to include, inter alia, any process “Incidental or ancillary to the completion of a manufactured product. This Bench of the Tribunal in the case of Avian Overseas Pvt. Ltd Vs. CCE C&ST, 88SR-1 2000 (15) STR 540 (T-Kol) has held that activity of mining and producing coal is covered under the definition of manufacture” under Section 2(f) of the Central Excise Act and demand of service tax thereon under the Act is not sustainable.

8.1 Sizing of coal is an incidental and ancillary process to make coul marketable and thus complete “manufacture of coal and to make it into “excisable goods” as per Section 2(d) of the Central Excise Act. The process of sizing of coal is also therefore outside Section 55(19) of the Act since it is a process in the manufacture of the final product, sized coal.

8.2 We also find from the records of the present proceedings that in respect of exactly the same work undertaken by ICML at the said mines right from the beginning when central excise duty became payable, ICML has been paying central excise duty on the coal manufactured/produced in the mine, upon determination of assessable value/transaction value by including all expenses incurred, including sizing and transportation right up to the place of removal, as per the provisions of the Central Excise Act, for which it was duly registered under the provisions of the Central Excise Act with the jurisdictional Central Excise authorities. Returns under the Act have also been submitted by ICML, which have been finally assessed and differential duty, if any assessed, have also been paid by ICML

8.3 Further, in case of the period from March 24, 2011 to April 24, 2015 proceedings by issuance of show cause notices were initiated by the  jurisdictional Commissioner/Principal Commissioner of Central Excise against ICML alleging undervaluation of the transaction values declared for the said period, of bituminous coal manufactured and cleared from the mine, by non-inclusion of elements, namely, royalty, stowing excise duty, primary education cess. rural employment cess, public works cess, road cess and AMBH fees and thereby short paying “central excise duty” to the extent contained in the show cause notices The proceedings under the said show cause notices have resulted in adjudication orders, passed by the Commissioner of Central  Excise, Kolkata-1 Commissionerate/Principal Commissioner of Central Excise. Kolkata-1, dated 16 12.2014, 14.10.2015 and 27.05.2016 respectively There the stand of the Central Excise Department is that ICML is engaged in the manufacture of bituminous coal classifiable under Chapter Sub-Heading 27011200 of the First Schedule to the Central Excise Tariff Act, 1985, for which it is holder of central excise registration number, and that ICML had manufactured and cleared the said goods on payment of central excise duty computed on the assessable value/transaction value that included the base price, sizing charges, washing charges and transportation charges, but had not paid central excise duty by not including cesses/fees, royalty and stowing excise duty, resulting in short payment of excise duty payable of amounts confirmed by the respective adjudication orders. Even for the periods pertaining to years 2015-16. 2016-17 and 2017-18 (upto June 30, 2017) the assessments under the Central Excise provisions have been finalised by the jurisdictional proper officer and differential central excise duty, as finally assessed, along with interest, were demanded and paid by ICML

9. It is also not disputed that all along ICML has paid value added tax or Central Sales Tax on the coal and shale sold by it to CESC and CPL respectively.

10. In such circumstances, applying the principle laid down by the Supreme Court in Bharat Sanchar Nigam Ltd. Vs UOI, 2006 (2) STR 161 (SC), since scheme of taxation under the Constitution of India provides for mutually exclusive levies, if certain activity amounts to “manufacture”, it cannot become or be contended to be service. This issue is no more res integra.

10.1 in the case of Commr of CE&ST Vs. Mahanadi Coalfields Ltd., Final Order No. 76585/2017 dated 21.08.2017 passed in Appeal No. STA/75816/2014, this Bench of the Tribunal, dealing with the self same issue, has held as follows:

“2. Brief facts of the case are that during the period under consideration, the appellant was engaged in the crushing/sizing of the coal in its own mines. While receiving the consideration from the buyer in addition to the base price, the department is of the view that the crushing/sizing of the coal by the respondents for sale attracts the service tax under the business auxiliary service as per Section 65(19) of the Finance Act, 1994. But by the impugned order, the Commissioner dropped the demand. Being aggrieved, the Department has filed the present appeal.

3………………………………………………………

4. After hearing both the parties it appears that the appellants had paid the sales tax/val and total amount of sale includes crushing charges as well as other charges eg. silo loading charges and the same was shown in the profit and loss account. The Hon’ble Supreme Court in the case of Bharat Sanchar Nigam Ltd. Vs. UOI mported in 2006 (2) STR 161 (SC) observed that sales tax and service tax cannot be made applicable on the same transaction as the same is includible to each other.

5. In the instant case undisputedly, the appellant has paid the sales tax/vat when it is so crushing charges are not leviable. Regarding the payment of sales tax/vat, the Ld. Counsel for the appellant has shown proof to the Ld. Counsel for the Department.

6. By following the ratio laid down by the Hon’ble Supreme Court, we find no reason to sustain the impugned order.”

10.2 This decision has since been followed by the Principal Bench of the Tribunal, in cases involving the same issue

i. Northem Coalfields Ltd. Vs. Commissioner, CGST, CE&C, 2020-TIOL-338-CESTAT-DEL

ii. South Eastern Coalfields Ltd. Vs. CCE&ST, 2018-TIOL-1691-CESTAT-DEL

iii. Northern Coalfields Ltd. Vs. CGST, CC&CE, 2018 (8) TMI 1742-CESTAT-DELHI.

11.3 In this regard reference is also made to the decision of a coordinate bench of the Tribunal in CCE Vs. Spectron Engineers Pvt. Ltd., 2020 (33) GSTL 223 (T) In para 4 of the order it has been observed as follows:

“4. Having heard both sides, we find ourselves confronted with a dispute in which the jurisdictional central excise authorities seek to levy duties under Central Excise Act, 1944 while respondent claims leviability under Finance Act, 1994. That the respondent had been discharging service tax liability on ‘job work and had been paying VAT on the material component is not in doubt. The original authority has placed reliance on the decision of the Tribunal in Osnar Chemical Pvt. Ltd. V. Commissioner of Central Excise, Bangalore-II [2009 (240) ELT 115 (Tri-Bang.)] to hold that discharge of tax liability under one law precludes the invoking of another law merely for gamering revenue that has thereby escaped one of the jurisdictions. By discharging the tax liability on the job work charges as well as by discharge of VAT liability on ‘brought out’ items used for fabrication at site, the scope for considering the activity as manufacture is eclipsed entirely. In this context of mutually exclusive levies under the scheme of taxation in the Constitution, the activity of the respondent is works contract and hence not leviable to duty under Central Excise Act, 1944″

7.1 Admittedly, in this case, the appellant is paying excise duty w.e.f. 24.03.2011 and prior to which, as no excise duty was payable but the appellant was paying VAT/Central Sales Tax as per Statute of State/Central Government respectively, which is evident from the records where the appellant has raised the invoices showing payment of Central Excise duty and VAT during the impugned period. For better appreciation of facts, the said invoice raised by the appellant and the VAT Returns are extracted herein below :

In that circumstances, the excise duty has been accepted by the Revenue in the activity of manufacture in terms of Section 2 (f) of the Central Excise Act, 1944. In that circumstances, it cannot be termed that the appellant is engaged in the activity of providing mining services of coal. Crushing/sizing of coal itself was held by this Tribunal as manufacturing activity. In that circumstances, we hold that the extraction of coal from the mine including crushing/sizing thereof, are activity of manufacture, on which, the appellant has paid VAT/Excise duty. In that circumstances, no service tax is payable by the appellant under “Mining Service”.

7.2We further take note of the facts that in the case of Sri Rama Vilas Service Limited Vs. Commissioner of Central Excise, Trichy reported in 2019 (25) GSTL 117 (Tri.-Chennai), this Tribunal has held as under :

“5. From the above, it is clear that the activity is a manufacturing activity. The said activity cannot be treated under activity of service merely because the excisable goods manufactured are exempted from excise duty. The department has issued the show cause notice on erroneous understanding of both Central Excise law as well as Finance Act, 1994. The impugned order cannot sustain and requires to be set aside which we hereby do. The appeal is allowed with consequential relief, if any.”

7.3 Admittedly, in the appellant’s own case as reported in 2021 (1) TMI 179-CESTAT, Kolkata, this Tribunal observed that the activity undertaken by the appellant, amounts to manufacture. In that circumstances, no service tax is payable by the appellant.

7.4 In view of this, we hold that as the activity undertaken by the appellant amounts of manufacture, therefore, no service tax is payable by the appellant under the category of “mining service”.

7.5We further take note of the fact that for the period 1^st April, 2008 to 31^st March, 2012, the appellant has paid VAT on the sale of sized coal to CESC/CPL. It is settled position that the levy of VAT and service tax is mutually exclusive and the appellant is paying excise duty from March, 2011 onwards and also clean energy cess since 2010, therefore, the service tax cannot be demanded.

7.6 We further take note of the fact that the activity of raising of coal amounts to manufacture as per Section 2 (f) of the Central Excise Act, 1944, therefore, the appellant is a manufacturer and have been discharging excise duty thereon since 2011 onwards. Therefore, it cannot be said that prior to March, 2011, the activity undertaken by the appellant does not amount of manufacture and is liable to pay service tax. As the activity undertaken by the appellant amounts to manufacture, then, no service tax is payable by the appellant.”

17.1. Therefore, by applying the ratio of the decision in the case of M/s. Integrated Coal Mining Ltd. (supra), the activity undertaken by the appellant amounts to manufacture in terms of Section 2(f) of the Central Excise Act, 1944. In these circumstances, we hold that the appellant is the manufacturer of the coal.

18. Admittedly, in this case, the appellant is extracting the coal being a part of the Joint Venture and the Joint Venture Companies are paying central excise duty thereon, which has been accepted by the respondents. Since, as discussed hereinabove, the said activity undertaken by the appellant amounts to manufacture and consequently excisable, and the appellant being a part of the Joint Venture, the Joint Venture Companies are discharging central excise duty liability thereon since 2011. In view of this, on the same activity, Service Tax cannot be demanded, being a case where the Department has already accepted the central excise duty paid on such activity. Therefore, we hold that the activity undertaken by the appellant in this case cannot invoke Service Tax liability, since the same amounts to manufacture, as observed hereinabove.

19. In view of this, we hold that the demand of Service Tax against the appellant is not sustainable in the eyes of law.

19.1. In this regard, we take note of the fact that, admittedly, in this case, no demand has been raised by the Revenue against the appellant under the Central Excise Act, of central excise duty, and the payment of excise duty on the said activity is not in question before us.

Issue (b): Whether the appellant is providing  service to the Joint Venture Companies or not and consequently, whether the appellant is liable to pay Service Tax or not.

20. With regard to the issue as to whether the appellant is providing any ‘service’ to the Joint Venture Companies or not and whether the appellant would be liable to pay Service Tax in such cases or not, we find that the issue has been examined by the Tribunal in the case of G. Exploration and Production India Ltd. v. Commissioner of CGST & CX, Navi Mumbai [2022 (64) G.S.T.L. 578 (Tribunal – Mumbai)] wherein the Tribunal has observed as under: –

“19. The issue that arises for consideration in these appeals is whether the entitlement towards “Cost Petroleum” and “Profit Petroleum” under the “Production Sharing Contract” can be treated as the “consideration” for rendering “mining services” to the Government of India.

20. Section 65B of the Finance Act that was inserted w.e.f. 1-7-2012 deals with ‘Interpretations’ and sub-section (44) of Section 65B that defines ‘service’ is as follows :

“Section 65B(44) “service” means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include –

(a) an activity which constitutes merely, –

i. a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or

ii. such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or

iii. a transaction in money or actionable claim;

(b) a provision of service by an employee to the employer in the course of or in relation to his employment;

(c) fees taken in any Court or Tribunal established under any law for the time being in force.”

21. Explanation 3(a) deals with unincorporated association and is reproduced below :

“Explanation 3. – For the purposes of this Chapter, –

(a) an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons;

xx                     xx                    xx

22. The show cause notice, after referring to the Production Sharing Contract dated 22-12-1994, mentions that the transaction between the Government of India and the appellant are on principal-to-principal basis in view of the Article 7 of the said contract and, therefore, the appellant and the Government of India are two separate and distinct juridical persons; the appellant provides “mining services” which are received by the Government of India; and the appellant recovers the cost of service from the Government of India by way of deduction from account/book adjustment at the time of profit sharing. It, therefore, proposes that the appellant should have paid service tax on such “mining services” on the aforesaid consideration received by the appellant.

23. According to the appellant, the commercial nature of the transaction under the Production Sharing Contract dated 22-12-1994 between the Government of India, ONGC, RIL and the appellant is a joint venture and the activities undertaken by the co-venturers within the framework of a “joint venture” cannot be considered as rendition of “service”, liable to service tax. The appellant also contends that the components of “Cost Petroleum” and “Profit Petroleum” are inherent and embedded part of the Production Sharing Contract and consequently, such components cannot be treated as “consideration” for the “services rendered” by the appellant.

24. To appreciate the contentions raised on behalf of the appellant and the Department, it would be useful to reproduce the relevant clauses of the Production Sharing Contract between the Government of India, ONGC, RIL and the appellant and they are as follows :-

ARTICLE 1
Definitions

1.21 “Contract Costs” means Exploration Costs, Development Costs, Production costs, and all other costs related to Petroleum Operations as set forth in Section 3 of the Accounting Procedure.

xx                    xx                    xx

1.24 “Cost Petroleum” means the portion of the total volume of Petroleum produced and saved from the Contract Area which the Contractor is entitled to take from the Contract Area in a particular period for the recovery of Contract Costs as provided in Article 13.

xx                    xx                    xx

1.29 “Development Costs” means those costs and expenditures incurred in carrying out Development Operations, as classified and defined in Section 2 of the Accounting Procedure and allowed to be recovered in terms of Section 3 thereof.

xx                    xx                    xx

1.40 “Exploration Costs” means those costs and expenditures incurred in carrying out Exploration Operations, as classified and defined in Section 2 of the Accounting Procedure and allowed to be recovered in terms of Section 3 thereof.

xx                    xx                    xx

1.67 “Production Costs” means those costs and expenditures incurred in carrying out Production Operations as classified and defined in Section 2 of the Accounting Procedure and allowed to be recovered in terms of Section 3 thereof.

xx                    xx                    xx

1.69 “Profit Petroleum” means all Petroleum produced and saved from the Contract Area in a particular period as reduced by Cost Petroleum and calculated as provided in Article 14.

ARTICLE 13

Recovery of Costs

13.1 The Contractor shall be entitled to recover Contract Costs out of the total volume of Petroleum produced and saved from the Contract Area in each Financial Year in accordance with the provisions of this Article, and, in respect of sole risk or exclusive operations, Article VII of the Operating Agreement.

13.1.1 Development Costs incurred by the Contractor in the Contract Area shall be aggregated, and the Contractor shall be entitled to recover out of Cost Petroleum the aggregate of such Development Costs at the rate of one hundred per cent (100%) per annum, provided, however, that, subject to the remaining provisions of this Article 13.1, the Contractor shall not, for the purposes only of determining the volume of Petroleum to which Contractor shall be entitled under Article 13.1 as Cost Petroleum, claim as Contract Costs Contractor’s Development Costs incurred after the Effective Date in connection with Development Operations under the Development Plan for Panna and Mukta Fields (as those Fields are determined in the Development Plan first approved by the Management Committee) which exceed Contractor’s Cost Recovery Limit (as hereinafter defined).

13.1.2 For the purposes of this Article 13.1, Contractor’s “Cost Recovery Limit” means costs incurred after the Effective Date relating to the construction and/or establishment of such facilities as are necessary to produce, process, store and transport Petroleum from within the Existing Discoveries, in order to enable oil production of thirty-eight thousand three hundred barrels per day (38,300 BOPD) in accordance with the Development Plan for the Panna and Mukta Fields. Such costs shall include costs incurred in relation to those items illustrated in Appendix G and matters in connection therewith. Appendix G, Annex G-1, further describes companies’ development concept based on an assumed project start date of 1st July, 1993, and Parties understand and agree that the schedules and activities contained in such assessment shall be revised, subject to Management Committee approval, by the Contractor in Contractor’s Development Plan first submitted pursuant to this Contract.

The Parties agree that for the purposes of this Article 13.1 the Contractor’s Cost Recovery Limit shall be the sum of Five Hundred Seventy-seven Million Five Hundred Thousand U.S. Dollars (U $ 577,500,000).

xx                    xx                    xx

13.2 Exploration Costs (if any) incurred by the Contractor in respect of the Contract Area up to the date of Commercial Productions of Petroleum from the Contract Area shall be aggregated, and the Contractor shall be entitled to recover the aggregated of such Exploration Costs out of the Cost Petroleum from the Contract Area at the rate of one hundred per cent (100%) per annum of such Exploration Costs beginning from the date of such Commercial Production.

xx                    xx                    xx

13.4 The Contractor shall be entitled to recover Exploration Costs as provided in Articles 13.2 and 13.3 in relation to the values of the quantity of Petroleum produced, saved and sold from the Contract Area, in the relevant year, provided that such Exploration Costs once recovered shall not be allowable for recovery against any other contract area.

13.5 Development Costs incurred by the Contractor in the Contract Area up to the date of Commercial Production from the Contract Area shall be aggregated, and the Contractor shall be entitled to recover out of the Cost Petroleum from that Contract Area the aggregate of such Development Costs at the rate of one hundred per cent (100%) per annum of such Development Costs beginning from the date of such Commercial Production from the Contract Area.

13.6 The Contractor shall be entitled to recover out of the Cost Petroleum produced from the Contract Area the Development Costs which it has incurred on such Contract Area after the date of Commercial Production from the Contract Area at the rate of one hundred per cent (100%) per annum of such Development Costs beginning from the date such Development Costs are incurred.

13.7 The Contractor shall be entitled to recover in full during any Financial Year the Production Costs incurred in the Contract Area out of the Cost Petroleum.

13.8 If during any Financial Year the Cost Petroleum is not sufficient to enable the Contractor to recover in full the Contract Costs due for recovery in that Financial Year in accordance with the provisions of Articles 13.1 through 13.7, then, subject to the provisions of Article 13.1.

a. recovery shall first be made of the Production Costs; and

b. recovery shall next be made of the Exploration Costs; and

c. recovery shall then be made of the Development Costs.

The unrecovered portions of Contract Costs shall be carried forward to the following Financial Year and the Contractor shall be entitled to recover such Costs in such Financial Year or the subsequent Financial Years as if such costs were due for recovery in that Financial Year, or the succeeding Financial Years, until the unrecovered costs have been fully recovered out of Cost Petroleum from the Contract Area.

ARTICLE 14

Production Sharing of Petroleum Between Contractor and Government

14.1 The Contractor and the Government shall share in the Profit Petroleum from the Contract Area in accordance with the provisions of this Article. The share of Profit Petroleum, in any Financial Year, shall be calculated for the Contract Area on the basis of the Investment Multiple actually achieved by the Companies at the end of the preceding Financial Year for the Contract Area as provided in Appendix D.

14.2 Profit Petroleum

14.2.1 When the Investment Multiple of the Companies at the end of any Financial Year is less than two (2.0), the Government shall be entitled to take and receive five per cent (5%) and the Contractor shall be entitled to take and receive ninety-five per cent (95%) of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Financial Year.

14.2.2 When the Investment Multiple of the Companies at the end of any Financial Year in respect of any Contract Area is equal to or more than two (2.0) but is less than two and one-half (2.5), the Government shall be entitled to take and receive fifteen per cent (15%) and the Contractor shall be entitled to take and receive eighty-five per cent (85%) of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Financial Year.

14.2.3 When the Investment Multiple of the Companies at the end of any Financial Year in respect of the Contract Area is equal to or more than two and one-half (2.5) but is less than three (3.0), the Government shall be entitled to take and receive twenty-five percent (25%) and the Contractor shall be entitled to take and receive seventy-five percent (75%) of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Financial Year.

14.2.4 When the Investment Multiple of the Companies at the end of any Financial Year in respect of the Contract Area is equal to or more than three (3.0) but is less than three and one-half (3.5), the Government shall be entitled to take and receive forty per cent (40%) and the Contractor shall be entitled to take and receive sixty per cent (60%) of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Financial Year.

14.2.4 When the Investment Multiple of the Companies at the end of any Financial Year in respect of the Contract Area is equal to or more than three and one-half (3.5), the Government shall be entitled to take and receive fifty per cent (50%) and the Contractor shall be entitled to take and receive fifty per cent (50%) of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Financial Year.

ARTICLE 27

Title to Petroleum, Data and Assets

27.1 The Government is the sole owner of Petroleum underlying the Contract Area and shall remain the sole owner of Petroleum produced pursuant to the provisions of this Contract except that part of Crude Oil or Gas the title whereof has passed to each constituent of the Contractor or any other person in accordance with the provisions of this Contract.

25. It would also be useful to refer to the Accounting Procedure contained in Appendix C to the Production Sharing Contract. The relevant sections are as follows :

SECTION 2

Classification, Definition and Allocation of Costs and Expenditures

2.2 Exploration Costs

Exploration Costs are all direct and allocated indirect expenditures incurred in the search for Petroleum in an area which is, or was at the time when such costs were incurred, part of the Contract Area, including expenditures incurred in respect of :

xx                    xx                    xx

2.2.2 Core hole drilling and water well drilling.

2.2.3 Labour, materials, supplies and services used in drilling Wells with the object of finding Petroleum or in drilling Appraisal Wells provided that if such Wells are completed as producing Wells, the costs of completion thereof shall be classified as Development Costs.

xx                    xx                    xx

2.2.5 Any Service Costs and General and Administrative Costs directly incurred on exploration activities and identifiable as such and a portion of the remaining Service Costs and General and Administrative Costs allocated to Exploration Operations determined by the proportionate share of total Contract Costs (excluding General and Administrative Costs and Service Costs) represented by all other Exploration Costs.

xx                    xx                    xx

2.2.7 Any other expenditure incurred in the search for Petroleum not covered under Section 2.3 or 2.4.

2.3 Development Costs

Development Costs are all direct and allocated indirect expenditures incurred with respect to the development of the Contract Area including expenditures incurred on account of :

xx                    xx                    xx

2.4 Production Costs

2.4.1 Production Costs are expenditures incurred on Production Operations in respect of the Contract Area after the start of production from the Field (which are other than Exploration and Development Costs). The balance of General and Administrative Costs and Service Costs not allocated to Exploration Costs or Development Costs shall be allocated to Production Costs.

xx                    xx                    xx

2.6 General and Administrative Costs

General and Administrative Costs are expenditures incurred on general administration and management primarily and principally related to Petroleum Operations in or in connection with the Contract Area, and shall include.

xx                    xx                    xx

SECTION 3

Costs, Expenses, Expenditures and Incidental Income of the Contractor

3.1 Costs Recoverable and Allowable without further Approval of the Government.

Costs incurred by the Contractor on Petroleum Operations pursuant to the Contract as classified under the headings referred to in Section 2 shall be allowable for the purposes of the Contract except to the extent provided in Section 3.2 or elsewhere in this Accounting Procedure, and subject to audit as provided for herein.

3.1.1 Surface Rights

3.1.2 Labour and Associated Costs

3.1.3 Transportation Costs

3.1.4 Charges for Services

3.1.5 Communications

3.1.6 Office; Shore Bases and Miscellaneous Facilities

3.1.7 Environmental Studies and Protection 3.1.8 Materials and Equipment

3.1.9 Duties, Fees and Other Charges

3.1.10 Insurance and Losses

26. It would be seen from the aforesaid terms of the Production Sharing Contract that it deals with both “Cost Petroleum” and “Profit Petroleum”.

27. In so far as “Cost Petroleum” is concerned, Contract Costs means Exploration Costs, Development Costs, Production Costs, and all other costs related to Petroleum Operations as set out in Section 3 of the Accounting Procedure. Development Costs means those costs and expenditures incurred in carrying out Development Operations, as classified and defined in Section 2 of the Accounting Procedure and allowed to be recovered in terms of Section 3 thereof. Exploration Costs means those costs and expenditures incurred in carrying out Exploration Operations, as classified and defined in Section 2 of the Accounting Procedure and allowed to be recovered in terms of Section 3 thereof. Production Costs means those costs and expenditures incurred in carrying out Production Operations as classified and defined in Section 2 of the Accounting Procedure and allowed to be recovered in terms of Section 3 thereof. “Cost Petroleum” means the portion of the total volume of Petroleum produced and saved from the Contract Area which the Contractor is entitled to take from the Contract Area in a particular period for the recovery of Contract Costs as provided in Article 13.

28. Article 7.1(a) provides that the Contractor shall have the right to recover costs and expenses as provided in this Contract. Article 7.3(a) stipulates that the Contractor shall conduct all Petroleum Operations at its sole risk, cost and expense and provide all funds necessary for the conduct of Petroleum Operations. Articles 13.1 to 13.5 states that the Contractor shall be entitled to recover Contract Costs namely Development Costs, Exploration Costs and Development Costs. Article 13.8 provides the manner of recovery of Contract Costs where the “Cost Petroleum” is insufficient to enable the Contractor to recover the Contract Costs.

29. In so far as Profit Petroleum is concerned, “Profit Petroleum” means all Petroleum produced and saved from the Contract Area in a particular period as reduced by “Cost Petroleum” and calculated as provided in Article 14.

30. Article 14 read with Appendix D states that the Government of India and the Contractor will share

“Profit Petroleum” in accordance with following pre­defined percentages/Investment Multiple.

Sr. No.	Investm ent Multiple	Government of India Share of “Profit Petroleum”	Contractor Share of “Profit Petroleum”
1.	Less than 2	5%	95%
2.	Between 2.0-2.5	15%	85%
3.	Between 2.5-3.0	25%	75%
4.	Between 3.0-3.5	40%	60%
5.	More than 3.5	50%	50%

31. The Order dated 31-12-2018 makes reference to an illustrative calculation of the recovery of “Cost Petroleum” and “Profit Petroleum” by the Contractors pursuant to the Production Sharing Contract, basis the reports filed for the quarter and year ending 31 March, 2014 with the Director General of Hydrocarbon. This illustrative calculation which exemplifies the method of calculation of “Cost Petroleum” and “Profit Petroleum” is reproduced below :

Description	Amount in USD
Revenue from sale of Crude Oil and Natural Gas from Panna Mukta Contract Area from FY 2013-14	1,181,042,280
Total Revenue	1,181,042,280
Costs including Development, Exploratory Drilling, Production facilities, EPOD, Operating Costs, Administrative Costs, Royalty and Cess.
Contract Costs from April 1, 2013 to June 30, 2013	123,448,753
Contract Costs from July 1, 2013 to September 30, 2013	123,846,146
Contract Costs from October 1, 2013 to December 31, 2013	86,398,685
Contract Costs from January 1, 2014 to March 31, 2014	109,322,029
Total Costs (Cost Oil)	443,015,613
Profit Oil	744,306,729
Government of India’s share of Profit Petroleum	186,076,682	25%
Government Profit’s share as a percentage of Actual Revenue		15.76%

–

Share	BG Exploration	RIL	ONGC
Share of Profit Oil	30% of the remaining Profit Oil after GOI’s share	30% of the remaining Profit Oil after GOI’s share	40% of the remaining Profit Oil after GOI’s share
Share of Cost Oil	30% of the Cost Oil of 443,015,613	30% of the Cost Oil of443,015,613	40% of the Cost Oil of 443,015,613

32. The contention of the appellant is that from a conjoint reading of the various clauses of the Production Sharing Contract, the true commercial nature of the transaction between the Government of India, the appellant, RIL and ONGC is a Joint Venture and involves no rendition of service.

33. This precise issue was examined at length by the Division Bench of the Tribunal in the decision rendered by the Tribunal on 6-10-2021, in the case of the appellant itself, which decision is reported in 2021 (10) TMI 306-CESTAT (Mum). The Tribunal, after referring to the earlier decision of the Tribunal rendered on 11-6-2020 in the case of the appellant, which decision is reported in 2020 (10) TMI 579-CESTAT (Mum), the decision of the Tribunal in Mormugao Port Trust and the decision of the Supreme Court in Faqir Chand Gulati and after noticing that an appeal had been filed by the Department in the Bombay High Court against the decision of the Tribunal rendered on 11-6-2020, observed that the Government of India with the appellant, RIL and ONGC had entered into a joint venture agreement, whereunder each co-venturer had its own set of obligations and the responsibility discharged by each of the co-venturers towards the venture was not by way of any service rendered to the joint venture, but in their own interest in furtherance of the common objective of the joint venture. Service tax liability, therefore, could not have been fastened upon the appellant. The paragraphs of the decision relevant for the purpose this order are as follows :

“21. The question as to whether the appellant was rendering any services to the PMT-JV, of which it was a constituent member, has been dealt with earlier by Tribunal in the decision rendered on 11-6­2020 in the case of the Appellant. xx

xx                  xx

22. It is an admitted fact that though an appeal has been filed before the Bombay High Court against the order dated 11-6-2020 of the Tribunal, but the said order has neither been stayed or set aside. It is also evident from the contentions urged by the Department that there is no dispute on the proposition that the Contract is an example of public private partnership in which the Government and private enterprises are in a joint venture for the purpose of achieving a common objective and sharing the profits arising from such operations. Under the Contract in question, the Central Government was to bring in its rights over the resources, while ONGC was to handle contracts and documentation, RIL was to manage financial and commercial requirements and the appellant was vested with the responsibility of undertaking the technical operations. The man power deployed by the appellant was in furtherance of its own interest as also that of the joint venture and not by way of any service to unincorporated joint venture. Also, the cost incurred by the appellant for this purpose was its capital contribution to the joint venture and it cannot be said that consideration was received by the appellant for arranging man power.

23. It is natural that in such public private partnerships, the public enterprise generally brings in the resource over which it has exclusive rights, such as the waterfront or the right to exploit the minerals, while the private party brings in the required capital, either in monetary terms or in kind or by way of equity. The equity brought in by the co-venturer, in this case by making available man power, cannot be considered as a service rendered to the unincorporated joint venture. It is this capital contribution along with the capital contribution made by others which forms the hotchpotch of the unincorporated joint venture.

24. The Tribunal in Mormugao Port Trust, explained that public private partnerships between the Government/Public Enterprises and Private parties are in the nature of joint venture, where two or more parties come together to carry out a specific economic venture, and share the profits arising from such venture. Such public private partnerships are at times described as collaboration, joint venture, consortium or joint undertaking. Regardless of the name or the legal form in which the same are conducted, they are essentially in the nature of partnership with each co-venturer contributing some of the resources for the furtherance of the joint business activity. The Tribunal held that such public private partnerships meet the test laid down by the Supreme Court in Faqir Chand Gulati v. Uppal Agencies Pvt. Ltd., for ascertaining whether or not the arrangement is one of joint venture.

25. The Civil Appeal filed by the Department (Commissioner v. Mormugao Port Trust) against the aforesaid decision of the Tribunal was dismissed by the Supreme Court both on the ground of delay as well as on merits and the judgment is reported in 2018 (19) G.S.T.L. J118 (S.C.).

26. There is no dispute that the joint venture in the present case has been constituted in terms of the Contract, which is a contractual arrangement between the Government of India, the appellant, ONGC and RIL. The said joint venture was entered into for maximizing the extraction of crude petroleum/natural gas from the identified blocks and to share the profits from the venture. The management committee comprising of representatives of the Government of India, the appellant, ONGC and RIL undertook all the strategic, financial and other operative decisions with respect to the venture. Thus, all the pre­requisites of being a joint venture are clearly met. In this backdrop, it is clearly impermissible to hold that the contribution made by a co-venturer (partner) in the course or furtherance of the joint-venture is a service rendered to the joint venture for a consideration. It is not in dispute that in a partnership or a joint venture, whatever a partner does for the furtherance of the business, he does so also for advancing his own interest, as he has a stake in the venture. All the resources contributed by the partners enter into a common pool required for running of the enterprise. There is no contractor-contractee or principal-agent relationship between the co-venturer and the joint-venture, which is a pre-requisite for a service to be liable to tax under the Finance Act.

27. As is evident from the submissions made by the Department, the decision of the Tribunal rendered on 11-6-2020 in the appellants case has been assailed on the grounds that :

a. The same had relied upon another decision of the Tribunal in the case of Cricket Club of India, which has since been affirmed by the Supreme Court in Calcutta Club. However, while doing so the Supreme Court has held that the principle of mutuality would not apply to a unincorporated club or association. The PMT-JV being an unincorporated association of persons, the principle of mutuality was inapplicable for services between the JV and the co-venturer; and

b. The same had relied upon the decision in the case of Mormugao Port Trust, which had been distinguished by the Tribunal in the case of Badve Helmets Pvt. Ltd. v. CCE [2018 (10) G.S.T.L. 435].

28. This contention of the Department is entirely misplaced inasmuch as the order dated 11-6-2020 of the Tribunal is not premised on the principle of mutuality. Further, the Department has assumed that merely because the unincorporated association and its members are deemed to be distinct persons, this by itself is enough to establish that a service has been provided by the appellant to the unincorporated joint venture. This presumption is not tenable as the burden to prove that there was a rendition of service for a consideration is a sine qua non for any liability to service tax being attracted. No evidence has been led by the Department to establish this fact. On the contrary, the Tribunal in the decision rendered on 11-6­2020, arrived at a finding of fact to the effect that the Government of India along with the appellant, RIL and ONGC had entered into a joint venture agreement, whereunder each co-venturer had its own set of obligations and the responsibility discharged by each of the co-venturers towards the venture was not by way of a service being rendered to the joint venture, but in their own interest, in the course or furtherance of the common objective of the joint venture.

29. It is also pertinent to note that the decision of the Tribunal in Cricket Club of India had been relied upon by the Tribunal not in support of the proposition that there cannot be a levy to service tax by applying the principle of mutuality, but on the point that a mere flow of money by itself is not enough to fasten a service tax liability. It is obligatory on the part of the Department to show that the said flow of money is a consideration for rendition of a service, in which case alone there can be a liability to service tax. The said burden has not been discharged in the facts of the present case. The relevant findings of the Tribunal in Cricket Club of India, which were relied upon by the Tribunal in the case of the appellant, are reproduced herein below :

“11 ……………………… Consideration is, undoubtedly, and essential ingredient of all economic transactions and it is certainly consideration that forms the basis for computation of service tax. However, existence of consideration cannot be presumed in every money flow. Without an identified recipient who compensates the identified provider with appropriate consideration, a service cannot be held to have been provided. In a taxation scheme that specifies the particular targets of taxation, tax liability will arise when a provider conforming to the relevant description in the charging section performs an activity that conforms to the relevant description in the charging section on the request, and for the benefit, of a recipient conforming to the relevant description in the charging section. Service, its taxability and the provision of the taxable service to a recipient, in that order, are necessary pre­requisites to ascertaining the quantum of consideration on which ad valorem tax will be levied. This fundamental will not after in the scheme of the negative list too; a service that is clearly identifiable has to be provided or agreed to be provided before it can be taxed. The factual matrix of the existence of a monetary flow combined with convergence of two entities for such flow cannot be moulded by tax authorities into a taxable event without identifying the specific activity that links the provider to the recipient.”

30. The arrangement in question can also be viewed from another perspective i.e. the appellant had entered into employment contracts on behalf of the unincorporated joint venture as the latter was incapable of entering into contracts in its own name. All activities of the unincorporated joint venture are conducted in the name of its constituent members. Unless such an activity is undertaken by a constituent member as an independent service provider for the joint venture for a consideration, there is neither a rendition of service nor can there be any liability to service tax. This position also evolves from paragraph 4.2 of the Circular dated 24-9-2014, wherein it has been clarified that a member of a joint venture may provide support services to the joint venture for a consideration either in cash or in kind, which alone would be leviable to service tax.

31. Insofar as the decision of the Tribunal in Badve Helmets is concerned, the same is based on entirely different facts. In that case M/s. Vemmar SRL Italy, who was a equity holder had transferred know-how for a consideration of US $ 1,00,000/-. The said transfer of know-how was not in the course or furtherance of the venture nor was it by way of a capital contribution. Undisputedly, M/s. Vemmar SRL was acting as a independent service provider to the joint venture and was rendering services for a consideration. The facts in the case of Badve Helmets, being completely different with that of Mormagao Port Trust, as also those in the present case, the said decision cannot be relied upon nor does the same in any manner dilute the ratio laid down in Mormagao. In fact the Tribunal had in Mormagao specifically recorded that there can be situations where a co-venturer or a partner can render taxable service to the joint venture/firm under an independent contract between the co-venturer/partner and the joint venture/ partnership and that such a contract should have been entered into in individual capacity, independent as a co-venturer, for a specific consideration.

32. Unlike in the case of Badve Helmets, where one of the co-ventures had entered into a separate and independent agreement with the joint venture for a specific consideration, in the facts of the present case there is no such agreement outside the scope of the joint venture that had been entered into between the appellant and the PMT-JV. The making available of man-power was the appellant’s obligation as a co-venturer to the venture, by way of capital contribution and was not an independent service for a consideration being rendered by the appellant to the PMT-JV.

33. It can safely be concluded that the Government of India with the appellant, RIL and ONGC had entered into a joint venture agreement, whereunder each co-venturer had its own set of obligations and the responsibility discharged by each of the co-venturers towards the venture was not by way of any service rendered to the joint venture, but in their own interest in furtherance of the common objective of the joint venture. Service tax liability, therefore, could not have been fastened upon the appellant.”

[Emphasis supplied]

21. In this case, the appellant is a part of the Joint Venture and each co-venturer has its own obligations, responsibilities and liabilities, which have been discharged by each of the co-venturers towards the venture. Such discharge of obligations/responsibilities by each of the co-venturers were in their own interest, in furtherance of the objective of the Joint Venture and not by way of any ‘service’ to the Joint Venture. Thus, Service Tax liability does not arise upon the appellant.

22. In view of the above observation and by following the decision in the case of G. Exploration and Production India Ltd. (supra), we hold that the appellant, being a co-venturer of the Joint Venture, is not liable to pay Service Tax.

23. Therefore, in view of the discussions hereinabove, we hold that the demand of Service Tax against the appellant, as per the impugned order, is not sustainable in the eyes of law. Consequently, no penalty can be imposed on the appellant.

24. In the result, we set aside the impugned order and allow the appeal, with consequential reliefs. The miscellaneous application filed by the appellant stands disposed of, as already discussed hereinabove.

(Order pronounced in the open court on 16.04.2026)