2012 (12) TMI 425 - AT - Service Tax

Tribunal Confirms Service Tax Demand & Interest for Mining Services, Penalties Set Aside

Atwood Oceanics Pacific Ltd. Versus Commissioner of Service tax, Ahmedabad

Atwood Oceanics Pacific Ltd. Versus Commissioner of Service tax, Ahmedabad - 2013 (32) S.T.R. 756 (Tri. - Ahmd.) Issues Involved:1. Classification of services provided by M/s Atwood prior to 01.06.2007.2. Classification of services provided by M/s Atwood from 01.06.2007 onwards.3. Whether the services fall under 'Supply of Tangible Goods' (SOTG) from 16.05.2008.4. Applicability of the extended period of limitation and penalties.Detailed Analysis:Issue 1: Classification of Services Prior to 01.06.2007The Revenue contended that the services provided by M/s Atwood should be classified under 'Survey and Exploration of Mineral, Oil and Gas Service' for the period from November 2006 to May 2007. The definition of this service includes geological, geophysical, or other prospecting, surface or sub-surface surveying, or map-making services related to the location or exploration of deposits of mineral, oil, or gas.M/s Atwood argued that their activities did not involve geological or geophysical prospecting or surveying but were limited to drilling, testing, and completing exploratory wells as specified by GSPC. They contended that these activities did not fall under the 'Survey and Exploration of Mineral, Oil and Gas Service'.The Tribunal noted that the Ministry's letter dated 28.02.2007 clarified that activities such as site formation, clearance, excavation, earth moving, and drilling wells for production/exploitation of hydrocarbons were part of 'Mining of Mineral, Oil or Gas Service'. The Tribunal concluded that the drilling and testing activities performed by M/s Atwood could not be classified under 'Survey and Exploration of Mineral, Oil and Gas Service' as these activities were more aligned with mining services.Issue 2: Classification of Services from 01.06.2007 OnwardsThe Tribunal examined whether the services provided by M/s Atwood from 01.06.2007 onwards should be classified under 'Mining of Mineral, Oil or Gas Service'. According to the definition, any service provided in relation to mining of mineral, oil, or gas falls under this category.M/s Atwood argued that their services should be classified under 'Supply of Tangible Goods' (SOTG) as they provided drilling rigs and equipment without transferring possession or effective control. The Tribunal, however, noted that the drilling activities were directly related to mining operations and thus fell under 'Mining of Mineral, Oil or Gas Service'.The Tribunal further clarified that the introduction of SOTG service in 2008 did not imply that the same service was not taxable under another category earlier. The Tribunal affirmed that prior to 16.05.2008, the services provided by M/s Atwood were covered under 'Mining of Mineral, Oil or Gas Service'.Issue 3: Classification Under 'Supply of Tangible Goods' (SOTG) from 16.05.2008M/s Atwood contended that their services should be classified under SOTG from 16.05.2008, as they provided equipment for use without transferring possession or effective control. The Tribunal agreed with this contention, noting that the equipment remained under M/s Atwood's control and was provided for a specified term rather than for drilling a predefined number of wells.The Tribunal concluded that from 16.05.2008 onwards, the services provided by M/s Atwood should be classified under SOTG.Issue 4: Applicability of Extended Period of Limitation and PenaltiesThe Tribunal considered whether the extended period of limitation was applicable and whether penalties should be imposed on M/s Atwood. The Tribunal noted that M/s Atwood had cooperated with the department and had paid the service tax along with interest before the issuance of the show cause notice. The Tribunal found that the reasons for non-payment of service tax were technical/legal rather than wilful suppression with intent to evade tax.The Tribunal invoked the provisions of Section 80 of the Finance Act, 1994, to waive the penalties imposed under Sections 76, 77, and 78. The Tribunal also noted that the provisions of Section 73(3) of the Finance Act, 1994, were applicable, which provided protection from penalties if the service tax was paid before the issuance of the show cause notice.Conclusion:The Tribunal confirmed the demand for service tax with interest for the period from 01.06.2007 onwards under 'Mining of Mineral, Oil or Gas Service' up to 16.05.2008 and thereafter under SOTG service. Penalties imposed on M/s Atwood were set aside. The appeals filed by the department were rejected, and the cross-objections were disposed of.