2023 (7) TMI 953 - HC - Service Tax

Challenge to Service Tax Circular Deemed Premature by Court, Petition Disposed Without Costs

The Court held that the challenge to Circular No. 80/10/2004-ST regarding service tax on 'survey and exploration of minerals' was premature. It noted that ... Classification of services - survey and exploration of minerals service or not - contracts for drilling work by ONGC and Reliance Industries Ltd. - applicability of Circular No. 80/10/2004-ST dated 17 September 2004 - HELD THAT:- The members of the petitioners are required to be permitted to urge all their contentions before the Departmental Authorities in the event the occasion so arises - It is opined that so far no show cause notices are issued to the members of the petitioner except as recorded in the case of M/s. Transocean Offshore International Ventures Ltd., a copy of which is annexed at Exhibit H. Thus, neither any proceedings are initiated nor any proceedings in regard to the other members are pending before the department. The circular as challenged in the petition, was issued almost 19 years back. The department has also not taken any action and the members of petitioner since 2007 are paying service tax under the category of ‘mining services’. In a petition which is filed by the association, it may not be appropriate to examine the validity of the impugned circular. The same is already subject matter of contention in the show cause notice issued to one of the petitioner’s member M/s. Transocean Offshore International Ventures Ltd., and it would be for such member of the petitioner, who would be entitled to raise all contentions in regard to the circular by raising all permissible contentions in law and on facts. If such contentions are raised, certainly they fall for consideration of the Designated Officer who would, if at all, is to adjudicate the show cause notice. Petition disposed off. Issues involved:The judgment involves the challenge to Circular No. 80/10/2004-ST dated 17 September 2004 regarding the service tax leviable on 'survey and exploration of minerals.' The issues include the expansion of the provision's ambit, interpretation of the provision in light of subsequent legislative amendments, and the legality of a show cause notice issued to a specific member.Details of the judgment:1. The petitioners, an association of drilling contractors, challenged Circular No. 80/10/2004-ST, arguing that it wrongly brought prospecting of minerals under taxable entry Section 65(105)(zzv) of the Finance Act, 1994.2. The petitioners contended that their drilling work contracts with ONGC and Reliance Industries Ltd. did not fall under 'survey and exploration of minerals' as defined, and the circular expanded the provision beyond legislative intent.3. The petitioners' Senior Counsel noted that since 2007, their members were taxed under 'mining services,' except for one member issued a show cause notice in 2008, which raised legal and factual concerns not addressed by the department.4. The case was listed for final hearing, with prayers seeking a declaration that charter hire of vessels for drilling is not taxable under the circular, and to quash the circular and related show cause notices.5. The Court observed that the department had not issued show cause notices to most petitioners' members for 17 years, and the petitioners continued paying service tax under 'mining services.'6. Considering the association nature of the petitioners, the Court deemed it inappropriate to examine the circular's validity, as it was subject to a show cause notice to one member who could raise all contentions before the Designated Officer.7. The judgment ordered that all contentions of petitioners' members could be raised before Departmental Authorities if needed, especially for the member issued the show cause notice in 2008.8. The Court disposed of the petition, keeping all contentions open for further adjudication by the Departmental Authorities, without awarding any costs to either party.