TaxTMI 
TaxTMI 
2023 (12) TMI 848
X X X X Extracts X X X X
X X X X Extracts X X X X
....h) of the Finance Act. It needs to be noted that the term 'technical testing and analysis agency' has been defined under section 65(107) of the Finance Act. 3. The appellant was providing services in the exploration and production sector to M/s. Oil and Natural Gas Corporation [ONGC]. These services included the following activities: (a) Wireline logging services (b) Perforation services and other mechanical jobs (c) 'Logging While Drilling' [LWD] services and 'Measurement While Drilling' [MWD] services. 4. These services were provided by the appellant in the mineral oil wells of ONGC at the onshore and offshore locations in the western, eastern and southern regions of India. The appellant contends that for performing these activities below the ground, it has to deploy sophisticated electronic tools which can work in hostile environment with extreme pressures and temperatures. These tools are called logging tools. 5. The activity of wireline logging involves systematic gathering of measurements of characteristics of the underground rock formations and strata traversed by the cased and open holes drilled by the customers. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... tax on the invoices raised on ONGC w.e.f. 01.06.2007. The appellant disclosed this fact to the department and declared the service under the category of 'mining services' in the ST-3 returns. 9. On 23.10.2008, a show cause notice was issued to the appellant alleging that the appellant was providing TTA services and had not discharged service tax liability on such services provided by the appellant to ONGC. The details mentioned in the show cause notice are as follows: Period during which amount was received by the appellant Rate of service tax Alleged taxable value Alleged service tax Education cess SHE cess 14.05.2003 to 09.09.2004 8% 23,98,86,000 1,91,90,880 - - 10.09.2004 to 17.04.2006 10.2% 275,79,36,690 25,57,93,669 55,15,873 - 18.04.2006 to 10.05.2007 12.24% 224,07,05,864 26,88,84,704 53,77,694 - 11.5.2007 to 31.03.2008 12.36% 101,55,35,900 12,18,64,308 24,37,286 12,18,643 Total 625,40,64,454 68,57,33,561 1,33,30,853 12,18,643 Grand Total 70,02,83,057 10. The appellant filed a reply to the show cause....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inding whether the same contains oil or gas or simply hard rock with the help of sophisticated technical instruments and submission of the processed data and report to ONGC for further action. The assessee may require further instruction for continuing further tests, collection of data at more depths in the well if it has the potential of oil/gas bearing or otherwise to abandon its activities if the well is simply consists of rocks. It is not the case that all the wells drilled where the assessee was engaged by ONGC for services as per the contract resulted in oil/gas bearing sites and that the mineral is being extracted therefrom by the assessee. The role of the assessee is not to extract oil or gas from the wells, their activities in relation to the well are before the well starts producing gas or crude oil. Thus the services of the assessee cannot be covered under 'mining services'. Even if the sites are potential wells, the services of the assessee are not related to extraction of oil/gas from the mine, its only restricted to analyzing the properties of the material constituents and making out the processed data and hence their services are not covered under the definit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns: (i) Once a taxable entry has been introduced without any change to the existing entries, the levy cannot sustain under any other category prior to such introduction; (ii) The activities undertaken by the appellant do not qualify as 'technical testing and analysis' services; (iii) Wireline logging, perforation and other mechanical jobs undertaken by the appellant fall under the taxable category of 'mining service'; and (iv) The extended period of limitation could not have been invoked in the facts and circumstances of the case. 14. Dr. Radhe Tallo, learned authorized representative appearing for the department supported the impugned order and submitted that the appeal should be dismissed. 15. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 16. In order to appreciate the contentions, it would be necessary to first reproduce the definitions of the relevant terms. 17. Section 65(106) of the Finance Act defines 'technical testing and analysis' in the following manner: "65(106) "technical testin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....try; to subject to trial and examination; and to prove, as by experiment or by some fixed standard; to refined, as gold or silver, in cupellation; to examine as by the application of some reagent. To make, give or achieve a certain rating or score from an examination; to undergo a trial; to be analyzed." Words and Phrases Permanent Edition Volume 41A: "Testing" means the act of proving the truth, genuineness, or quality of anything by experiment, or by some principals or standard. Ainsworth v. McKay, 175 P. 887, 888, 55 Mont. 270" ANALYSIS Webster's Dictionary "The resolution of a compound object into its constituent elements or component parts: opposed to synthesis; a consideration of anything in its separate parts and their relation to each other; a statement of this; the process of subjecting to chemical tests to determine ingredients." 22. Thus, a 'test' must necessarily have an effect of establishing the characteristics of the object tested, either in the sense of quality or qualification. Testing is a process through which the object being tested is examined against various prescribed standards in order to find out whether....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er, rod, or tape marked with standards units and used for measuring. (3) (A measure of) a certain amount or degree of an indication of extent or quality." In Webster's Dictionary "To ascertain the extent, dimensions capacity of, esp. against some standard; to judge the greatness or import of; to value; to proportion; to allot or distribute by measure, to serve as a measure." 27. The word 'measure' would, therefore, relate to determining the quantum or characteristic of a particular thing. It is the act of ascertaining the dimensions, extent or other parameters against a measure or a standard. 28. It would, therefore, be appropriate to examine the scope of the work to be provided by the appellant in the two contracts dated 08.04.2002 and 08.04.2004 entered into between the appellant and ONGC. Under the Agreement dated 08.04.2002, the appellant was required to provide 10 wireline logging units for logging, perforation and related activities. The Agreement dated 08.04.2004 was entered for 'well logging, perforating and other wireline' services. The scope of the work provided in Annexure B of the Agreement is as follows: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ell log 4) a written record of events during drilling a well such as driller‟s pr drilling time log 5) a record of detected imperfections in a pipe inspected by electronic equipment 2. Well log A record of rock and fluid properties with depth in a well. A well log is usually plotted on a long strip of paper with depth in the well in the depth track down the length of the strip... A well log can be either a single type of measurement or several types of measurements plotted together. Some different types of well logs include drilling time, sample or lithologic, mud, and wireline well logs. The wireline well logs are made by lowering sensors in a sonde or tool down the well on a wireline. Wireline well logs include electric, induction, gamma ray, neutron porosity, formation density, caliper, and dipmeter logs. 3. Wireline logging The evaluation of a well using a sonde run into the well on a wireline... The sonde is hoisted onto the drill floor and lowered down the well. Electrical, acoustical, and radioactive properties of the formations and their fluids are measured by remote sensing as the sonde is brought back up the hole under a con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....jobs like cutting, puncture, plug/packer setting, cable splicing, etc., which were undertaken by the appellant at the time of drilling an oil well are integrally connected with the mining of oil or gas and have a direct nexus with the drilling of a well. Thus, these activities would be covered by the taxable category of 'mining service' w.e.f. 01.06.2007. 36. In this connection, reliance has been placed on the decision of the Bombay High Court in Indian National Shipowners' Association vs. Union of India and others - 2009 (14) STR 289, wherein it was held that though the phrase 'in relation to' is of wide import but the context in which the same is used has to be kept in mind and that the services rendered by a person must have a direct or a proximate relation to the subject matter of the taxing entry. The Bombay High Court also held that the context in which the words 'in relation to' are used has to be borne in mind to examine the extent of the scope of an entry which may be of wide amplitude. 37. It has also been contented by the learned counsel for the appellant that when 'mining service' was introduced w.e.f. 01.06.2007 without any cha....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The Coking Coal Mines (Emergency Provisions) Act, 1971 has also defined 'mine' in similar manner. In all the enactments relating to coal mining, washing of coal has been treated as part of the mining activity. As laymen we tend to think that mining means only digging deep into the earth and extracting the minerals. However, in the statutory provisions the definition of mining appears to be very wide. In the Colliery Control Order Section 2(c) defines 'Colliery.' 'Colliery' means any mine or open working where winning or extraction of coal is the principal object of the mining, quarrying or any other operation carried on therein, and includes a plant for the production of coke or for the washing of coal. When the ash content of the coal is very high, the quality is poor. The Mines and Minerals (Development and Regulation) Act, 1957 in the Second Schedule gives the different gradations of coal. Among the gradation, washery grade is clearly indicated. From all this, it is dear that washing of coal is also a part of mining activity. 15. ***** 16. Once it is established that the activity of the appellant is mining, it cannot be taxed under the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of right of possession and effective control of such machinery, equipment and appliances. According to the members of the 1st petitioner, they supply offshore support vessels to carry out jobs like anchor handling, towing of vessels, supply to rig or platform, diving support, fire fighting etc. Their marine construction barges support offshore construction, provide accommodation, crane support and stoppage area on main deck or equipment. Their harbour tugs are deployed for piloting big vessels in and out of the harbour and for husbanding main fleet. They give vessels on time charter basis to oil and gas producers to carry out offshore exploration and production activities. The right of possession in and effective control of such machinery, equipment and appliances is not parted with. Therefore, those activities clearly fall in entry (zzzzj) and the services rendered by the members of the 1st petitioner have been specifically brought to the levy of Service Tax only upon the insertion of this new entry. 38. If the Department's contention is accepted that would mean that the activities of the members of the 1st petitioner are covered by entry (zzzy) and entry (zzzzj). Suc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in case of introduction of new tax entry without amending the preexisting tax entry it cannot be said that the same activity will be liable to tax under pre-existing as well as new entry. Following the said ratio, which has been adopted in many other cases by the Tribunal, we hold that there is no merit in the contention of the Revenue for the tax liability of the appellant in respect of supply of tangible goods prior to 16/05/2008." (Emphasis Supplied) 44. In the instant case, the definition of TTA did not undergo any change when a new service 'in relation to mining' was introduced w.e.f. 01.06.2007. The department admits that w.e.f. 01.06.2007, the activity carried out by the appellant is covered under the category of service in relation to mining. This activity could not, therefore, have been categorized under TTA service prior to 01.06.2007. 45. As it has been found that the activity undertaken by the appellant w.e.f. 01.06.2007 pertains to mining services as made taxable under section 65(105)(zzzy) of the Finance Act, service tax under TTA services cannot be charged from the appellant prior to 01.06.2007. 46. It has also been contended by the learned couns....
X X X X Extracts X X X X
X X X X Extracts X X X X
....equested to acknowledge receipt of the same. Thanking you, Your sincerely, For Schlumberger Asia Services Limited" (Emphasis Supplied) 48. These facts were again communicated by the appellant to the Office of the Deputy Commissioner of Service Tax by letters dated 06.03.2005, 09.11.2005, 09.03.2007, 25.04.2007 and subsequently after 'mining services' was introduced w.e.f. 01.06.2007, the appellant informed the Office of the Deputy Commissioner of Service Tax by a letter dated 25.10.2007 that wireline logging services would not fall under the TTA service but because mining services was introduced w.e.f. 01.06.2007 the appellant had also sought registration of mining services in the service tax registration. 49. It is also not in dispute that w.e.f. 01.06.2007 the appellant has been paying service tax on mining services. 50. It also transpires from the records that the appellant had filed refund applications in 2005 since the appellant was not required to deposit service tax under the TTA services. The returns filed by the appellant from 2004 onwards show that the appellant has consistently informed the department that the services perfo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een from a perusal of sub-section (1) of section 73 of the Finance Act that where any service tax has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice on the person chargeable with the service tax which has not been levied or paid, requiring him to show cause why he should not pay amount specified in the notice. 55. The 'relevant date' has been defined in section 73 (6) of the Finance Act as follows; "73(6) For the purpose of this section, "relevant date" means,- (i) In the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short paid- (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....served that since "suppression of facts' has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty. The observations are as follows; "4. Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of court the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vs. Commissioner of Central Excise, Raipur 2013 (288) E.L.T. 161 (SC) and the observation are: "18. We are in complete agreement with the principal enunciated in the above decisions, in light of the proviso to section 11A of the Central Excise Act, 1944." 61. The Supreme Court in Continental Foundation Joint Venture Holding vs. Commissioner of Central Excise, Chandigarh-I 2007 (216) E.L.T. 177 (SC) also held: "10. The expression "suppression" has been used in the proviso to Section 11A of the Act accompanied by very strong words as 'fraud' or " collusion" and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The la....
X X X X Extracts X X X X
X X X X Extracts X X X X
....riod as well as for imposing penalty under Section 78, the legal provisions are identical. The words used like fraud, collusion, willful mis-statement, suppression of fact or contravention of any provisions of Chapter V of Finance Act, 1994 or of the Rules made thereunder with intent to evade the payment of Service Tax, will show that the ingredient of mala fide is a pre-requisite to invoke both the legal provisions (proviso to Section 73 and Section 78). The Original Authority recorded that it may be true that the assessee has not contravened any provisions with intend to evade payment of service tax, however, he proceeded to confirm the demand for extended period and to impose penalty of an equal amount under Section 78. We find that Hon'ble Supreme Court in Cosmic Dye Chemical v. CCE, Bombay reported in 1995 (75) E.L.T. 721 (S.C.) held as below:- Now so far as fraud and collusion are concerned, it is evident "6. that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word "wilful" preceding the words "mis-statement or suppression of facts" w....