TaxTMI 
TaxTMI 
2020 (11) TMI 437
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....of "mining of mineral, oil or gas, Mining services" that became taxable w.e.f June 1, 2007. 3. An audit of the records of the appellant was conducted for the period from 2005-06, 2007-08 between June 17, 2009 and June 19, 2009. A view was formed by the Department that the services provided by the appellant were covered under "site formation and clearance, excavation and earthmoving and demolition service", site formation service during the relevant period from April 1, 2006 upto May 31, 2007. Accordingly, a show cause notice dated October 13, 2009 was issued to the appellant proposing a demand of service tax under the category of site formation service on the basis of an allegation which is reproduced below: 3. "the service contract of the Noticee is a composite contract which covers the supply of equipments, supply of consumables and supply of manpower. Further the Noticee is raising bills/invoices to its clients for drilling operations/services of oil/gas well. The sum total of this activity when seen in totality results in rendering of services i.e. drilling service performed at designated place meant for exploration of oil & minerals". 4. The period mentioned in the show ca....
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....vity when seen in totality results in rendering of services i.e. drilling service performed at a designated place meant for exploration of Oil & Minerals. In the instant case, prior to 1.6.2007 the activities performed by the assessee falls under the Site Formation and Clearance. Thus, I find that the activities i.e. drilling undertaken by the assessee amounts to service, classifiable under, taxable category of Service Tax. The services rendered by the assessee were covered under Site Formation and clearance, Excavation and Earthmoving Demolition Services prior to 16.6.2007 which was taxable service from 16.62005 as such they have failed to discharge Service Tax liability along with Education Cess & Higher Education Cess under the said service for the drilling services provided by to its clients." (emphasis supplied) 6. Shri B.L. Narasimhan assisted by Shri Narendra Singhvi, learned Counsel appearing for the appellant made the following submissions: (i) The activities undertaken by the appellant do not fall under site formation service and, therefore, the demand is not sustainable. Site formation service covers those activities which are taken prior to the construction of bu....
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....2007. According to the Department, the appellant had rendered site formation service from April 1, 2006 upto May 31, 2007. 10. Site formation service has been defined under section 65 (97a) of the Finance Act as follows: "65 (97a) site formation and clearance, excavation and earth moving and demolition" includes - (i) Drilling, boring and core extraction services for construction, geophysical, geological or similar purposes; or (ii) Soil stabilization; or (iii) Horizontal drilling for the passage of cables or drain pipes; or (iv) Land reclamation work; or (v) Contamin ated top soil stripping work; or (vi) Demolition and wrecking of building, structure or road, but does not include such services provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovating or restoring of water sources or water bodies;" 11. This site formation service is taxable under section 65 (105)(zzza) of the Finance Act, which is reproduced below: "Section 65(105)(zzza) "taxable service" means any service provided or to be provided to any person, by any other person, in relation to site formation and clearance, excavation and earthmoving....
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....Cementation, Cement Plugging, logging of Wells etc." 15. The roles and responsibilities of Operator and Contractor have been specified in Appendix-II. Point A refers to the preparatory work and point B(iii) refers to the activity of identifying drilling locations, constructing, access road, cellar pits, foundations, oil waste pit and sanitary pits, water pit and internal site hard surfacing fencing at drill site, etc., which are, inter alia, the responsibilities of operatory i.e. ONGC. 16. It is, therefore, clear from the aforesaid agreement that the appellant (Contractor) had been engaged by ONGC (Operator) for conducting the drilling operations in the area specified therein. The depth of each well to be drilled was to be specified in the drilling and completion programme of ONGC. The scope of work involved drilling of 6 core holes upto an average depth range of 1200 to 1500 mtrs., each with at least 1 core role to penetrate the technical basement and 2 test wells to a depth range of 1500 to 1700 mtrs. in the specified blocks. A perusal of the roles and responsibilities of Operator and Contractor also indicates that ONGC had to prepare the site and provide it to the appellant fo....
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....ovides required experienced and qualified manpower and equipment for proper execution of drilling plan. Drilling of well is carried out under the supervision of operator‟s site representative. . 7. Prior to mobilizing Rig to the drilling site, Contractor provides the layout of the proposed Rig to the Operator. On the basis of this layout, the Operator carries out civil work for Site Formation including setting up of storage areas and other premises to make the site suitable and ready for installation of Rig and carry out the drilling activity. In case, the site is at remote area then an approach road is also prepared by the operator for transportation of drillings rigs and other movable properties to the site. . 8. In case oil or gas is struck while drilling Oil or Gas well, Contractor‟s responsibility is to immediately inform the operator or such encounter of Hydrocarbon. Contractor‟s responsibility is to drill hole as per the drilling plan and the operator decides whether to test the well with the same rig or different rig. The Scope of work for the contractor completes once the well is drilled to required depth as per drilling plan. Well is secured and the ....
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....ause (zzza) of section 65(105) of the Finance Act, 1994. "Site formation and clearance, excavation and earthmoving and demolition" has been defined in clause (97a) of section 65 of the Finance Act, 1994. 6.2 The definition of site formation and clearance, excavation and earthmoving and demolition is an inclusive definition and the activities specifically mentioned are indicative and not exhaustive. Prior to construction of buildings, factory or any civil structure, activity of mining or laying of cables or pipes, preparation services of site formation and clearance, excavation and earthmoving or leveling are normally undertaken for a consideration to make the land suitable for such activities. Such services include blasting and rock removal work, clearance of undergrowth, drilling and boring, overburden removal and other development and preparation services of mineral properties and sites, and other similar excavating and earthmoving services. Demolition of structures, buildings, streets or highways is also undertaken for a consideration as a preparatory activity for subsequent construction activity or for clearing the site for any other purpose. All such activities fall within t....