Foreign seismic data licensing payments exempt from service tax as services provided outside India

CESTAT Hyderabad held that service tax was not applicable on payments made to foreign entities for licensing seismic data under survey and exploration of mineral services. The appellant obtained off-the-shelf data from US and UK companies through licensing agreements, not engaging them for specific survey activities. Since the data licensing occurred from outside India, service tax was not leviable under Service Import Rules. Additionally, service tax could not be levied on TDS amounts paid by appellant from their own account to government, as TDS was not deducted from gross payment to service providers. Appeal allowed on both issues.

---

---

Issues involved: The appeal deals with whether the Appellant is liable to pay service tax under the head of 'Survey and Exploration of Mineral' for payments made to GX Technologies Corporation, USA (GXT) and GGS Spectrum Limited, UK (GGS) for data usage, and whether service tax is applicable on the income tax deposited under the TDS Scheme for services received from Dynamic Global Advisors Ltd., located outside India.

Issue 1: Liability for Service Tax on Data Usage Payments

The Appellant, engaged in mining of mineral oil or gas, bid for exploration blocks under NELP VII. The data related to geological and seismic quality of the blocks was to be purchased from DGH, who appointed GXT and GGS to analyze the data. The Appellant entered into a contract to license the data from GXT and GGS. The Appellant argued that the payment made was for the licensed rights to use the data, not for carrying out the survey, and thus, service tax should not apply. The Tribunal noted that the seismic data was owned by GXT and GGS and was available off-the-shelf for licensing. The Appellant did not engage GXT and GGS for specific survey activities but procured the data for analysis by DGAL. As GXT and GGS were located outside India and the data was made available from outside India, service tax was deemed not applicable under Rule 3(ii) of the Service Import Rules.

Issue 2: Applicability of Service Tax on TDS

Regarding the service tax on TDS deposited for services received from DGAL, the Appellant contended that the TDS was paid on their own account to the government and service tax should not apply on this amount. The Tribunal, in line with previous judgments, held that service tax cannot be levied on the TDS portion paid to the government by the Appellant. The Tribunal differentiated this case from Sheladia Rites where TDS was deducted from the gross amount payable to the service provider. As the TDS was paid separately by the Appellant, service tax was not applicable on this amount. The appeal was allowed, and the impugned order was set aside.

Judgment: The Appellate Tribunal, CESTAT Hyderabad, ruled in favor of the Appellant, holding that service tax was not applicable on the payments made for data usage and on the TDS amount deposited on their own account. The Tribunal emphasized that the activities of GXT and GGS were not for specific survey purposes for the Appellant, and the data licensing was done from outside India. The Appellant's payment of TDS on their own account exempted them from service tax on that amount. The appeal was allowed with consequential relief.

---