TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 70
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by them is covered by the head of 'Mining of Mineral Oil and Gas Service', it cannot be covered under the 'Survey and Exploration of Mineral Oil and Gas Service' for the period prior to 01.06.2007. He relied on the following case laws: * Zee Telefilms Ltd. 2006 (4) STR 349 * Kanak Khaniz Udyog 2017 (52) STR 46 (Tri. Del.) * Needwise Advertising Pvt. Ltd. 2011 (21) STR 229 * Hero Motorcorp Ltd. 2016 (42) STR 702 2.3 Learned Counsel pointed out that their activity cannot be called Survey and Exploration by any stretch of imagination. He pointed out that their service was used for extracting and transporting minerals after the completion of the activity of Survey and Exploration. He argued that Survey and Exploration is a precursor of the activity of mining. Their activities are not the activities involving Survey and Exploration for this purpose he took us through the scope of work in a few of their contracts. In their contract with Reliance Industries Limited, the scope of work was as follows: 1.0 Objective/ Scope The scope of work for the Contractor is to provide at the well Site one (1) Air Drilling Rig and Equipment as per Exhibit B for drilling twelve (12) wells i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alma Energy LLC 2014 (35) STR 412, and on the decision of Tribunal in the case of Kanak KhanijUdhyog2017 (52) STR 46. 2.5 Learned Counsel pointed out that the second issue raised in the Show Cause Notice related to the demand of service tax on the service of boosting and compressing the natural gas for ONGC for its use. The appellant provided the required equipment, skilled workers and supervised the activity on day-to-day basis. Learned counsel pointed out that the activity done by them is not provision of any service. He argued that the compression of gas is "Manufacture" as per Note-5 of Chapter 27 of Central Excise Tariff. Since the activity amounts to manufacture it goes out of the purview of the Business Auxiliary Service. The said compressed gas was ultimately used by RIL as fuel and by Amul Dairy for Milk Processing. 2.6 Learned Counsel further pointed out that demand under the head of Business Auxiliary Service has also been raised on the income earned as "Associated Commission".He argued that the Revenue has not shown nor established that such commission was recovered in relation to provision of any service on behalf of clients. He argued that the activities like arrang....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent and done drilling work at the locations identified by the client. In this regard the appellant's observation made in the Tribunal order in case of Atwood Oceanics Pacific Ltd. (supra) are relevant: "11.1 Issue (i) - Revenue's appeal claiming classification of the services under "Survey and Exploration of Mineral, Oil and Gas Service". According to definition, Survey and exploration of Mineral, Oil and Gas means - Geological, Geophysical other prospecting, surface or sub-surface surveying or map making service in relation to location or exploration of deposits of Mineral, Oil or Gas'. 11.2 M/s. Atwood has claimed that they have not undertaken any Geological, Geophysical or other prospecting, surface or sub-surface surveying or map making service and therefore, the services provided by them which is limited to drilling, testing, completion of exploratory wells as specified by the Company i.e. GSPC, cannot be classified under this service. 11.3 Revenue has relied upon the preamble portion of the contract between GSPC and M/s. Atwood which starts with the words -"Company desires to drill, test, complete exploratory wells, as specified by the Company in the east coast offsho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e". The letter goes on to observe that site formation, clearance and excavation and earth moving, drilling wells for production/exploration of Hydrocarbon (developmental drilling) provide d for mining are individually classified under appropriate taxable service. The letter goes on to say that 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 he comprehensively brought under the service tax net. The fact that drilling of wells for production/exploitation Hydrocarbons (developmental drilling) is put along with site formation and clearance and excavation and earth moving, which are not part of Survey and exploration of mineral service, would show that the contemporaneaexposito and intention of the Government that can be derived from the letter in 2004, does not appear to be correct in our view. 12.1 According to Wikipedia, there are five elements of a petroleum prospects : "A prospect is a potential trap which geologists believe may contain hydrocarbons. A significant amount of geological, structural and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....SPC's specification in the location identified after ensuring that the five elements of prospect are existing in the activity subsequent to survey and cannot be said to be a part of the service which is preliminary to mining or drilling activity. 12.4 No doubt, the analysis made by us can be questioned and we are aware of limitations since we are not experts in the field of oil exploration, drilling or survey etc. but the analysis made above with the help of Wikipedia, letters issued by the Ministry and definitions of service would show that it is possible to entertain an opinion that the activity of the M/s. Atwood cannot be considered as a service covered by the definition of service 'Exploration of Mineral, Oil and Gas Service'. It is also settled law that if two views are possible and if an assessee entertains a belief that he is not liable to pay duty or tax, intention to evade duty, suppression/mis-declaration cannot be 6. Revenue has challenged this decision of Tribunal in the Hon'ble Apex Court and appeal has been admitted. We find that on the merits of the issue regarding the classification of the drilling activity the decision in the case of Atwood Oceanics Pacific Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pellant requireto provide three compressors of 40,000 SCMD each to be deployed at specific locations. The said compressors packages of 40,000 SCMD were required to inlet Pressure (At B/L) of 0.5 - 1.5 Kg/cm2 to outlet pressure (At B/L); 35 kg/cm2 of gas. From the contract it is apparent that the job of the appellant was to compress approximately 80,000 SM3 gas per day from 0.5 - 1.5 kg/cm2 to 35 kg/cm2 and supply the same to back to ONGC. Chapter Note 5 of Chapter 27 reads as follows: "5. In relation to natural gas falling under heading 2711, the process of compression of natural gas (even if it does not involve liquefaction), for the prupose of marketing it as Compressor Natural Gas (CNG), for use as a fuel or for any other purpose, shall amount to 'manufacture'." 9. From the said chapter Note, it is apparent that only if the natural gas is compressed for the purpose of marketing it as compressed gas, the activity would amount to manufacture. In the instant case, from the statement of Shri P. Khetan, Deputy General Manager (Production) of M/s ONGC, the impugned order records that Shri Khetan in his statement stated as follows: "The reservoir pressure generally decreases durin....