TaxTMI 
TaxTMI 
2023 (12) TMI 848
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....ed 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. This activity is performed by deployment of logging tools on wires in....
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....osed 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 notice and denied the allegations. The appellant categorically asserted that the newly introduced 'mining services' w.e.f. 01.06.2007 was comprehensive enou....
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....ion. 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 definition of 'mining services'." 12. Regarding the invocation of the extended period of limitation, the Commissioner observed: "46. I find that the assessee has stated that after intr....
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....taken 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 testing and analysis" means any service in relation to physical, chemical, biological or any other scientific testing or analysis of goods or material or information technology software or any immovable property, but does not include any testing or....
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....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 it confirms to the standards or not. 'Analysis' has the character of detailed examination, and would predominantly involve the interpretation of collected data. Analysis seeks to discover the underlying nature of data and the implications of the data. 23. The contention of the appellant is that 't....
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....asure." 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: "Scope of Work The Contractor shall carry out Well Logging and Perforating Services and other wireline operations in on-land exploratory, development and work over wells drilled in the "Area of operations" in India as determined by Corporation by mobilizing its logging unit/tool/ equipment(s), material and personnel capable of operating such Equipment(s) efficiently." 29. It would be seen that the appellant h....
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....ements 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 constant speed. Different sondes are run at different speeds, and some sensors can be combined on the same sonde. The measurements are recorded on a film with a depth scale and on magnetic tape in the logging truck. Perforation 1. Perforate To shoot holes or perforations in casing or liner, cement, and producing formation to complete or recomplete a well. Either shaped explosive charges or, less commonly, projectiles or bullets are fired from a perforating gun. 2. Perforating gun A do....
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....nd 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 change to the existing entries, then levy cannot sustain under any other category including TTA prior to such introduction w.e.f. 01.06.2007. 38. The issue that needs to be decided is whether the activity carried out by the appellant would fall under TTA services prior to 01.06.2007. According to the appellant, the said activity will be covered under the scope of mining related services under section 65 (105)(zzzy) of the Act w.e.f. 01.06.2007. The contention is that on introduction of such a service from 01.06.2007, there w....
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....e 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 Business Auxiliary Service for the period prior to 1-6-2007. Even when we examine the definition of business auxiliary service, it is seen that production which does not amount to manufacture comes under business auxiliary service. The beneficiation of coal does not amount to production of coal because beneficiation is a process, which enhances the quality of the coal. However, in the definition of business auxiliary service, an amendment was carried out to include process also w.e.f. 16-6-2005. The appellant has made an alternative submission th....
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....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). Such a result is difficult to comprehend because entry (zzzzj) is not a specie of what is covered by entry (zzzy). Introduction of new entry and inclusion of certain services in that entry would presuppose that there was no earlier entry covering the said services. Therefore, prior to introduction of entry (zzzzj), the services rendered by the members of the 1st petitioner were not taxable. Creation of new entry is not by way of amending the earlier entry. It is not a carve out of the earlier entry. Therefore, the services rendered by the members of the 1st petitioner c....
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....roduced 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 counsel for the appellant that in the facts and circumstances of the case the extended period of limitation could not have been invoked. 47. What transpires from the records is that the appellant has been paying service tax under the category of 'mining services' w.e.f. 01.06.2007 which was the date on which it was introduced. Prior to this date the appellant was not discharging service tax on the service of wireline logging, perforation and data processing under the category of TTA and this fact was communicated by the appellant to the department by a letter dated 23.12.2004 sent to the De....
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....ion. 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 performed by the appellant would not fall under the TTA services. It was only on 23.10.2008 that the department issued a show cause notice to the appellant invoking the extended period of limitation. It is in this context that it has to be examined whether the department is justified in invoking the extended period of limitation. 51. The issue, therefore, that arises for consideration is whether the Commissioner was justified in holding that the extended period of limitation contemplated under section 73(1) of the Finance Act was correctly invoked in the facts and circumstances of the case. 52. The contention of the learned counsel for the appellant is that the necessary ingredients for invoking the larger period of limitation contemplated under the....
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....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 thereunder;" 56. It is correct that section 73 (1) of the Finance Act does not mention that suppression of facts has to be "wilful' since "wilful' precedes only misstatement. It has, therefore, to be seen whether even in the absence of the expression "wilful" before "suppression of facts" under section 73(1) of the Finance Act, suppression of facts has still to be wilful and with an intent to evade payment of service tax. The Supreme Court and the Delhi High Court have held that suppression of facts has to be "wilful' and there should also be an intent to evade payment of service tax. 57. Before adverting to the decisions of the Supreme Court and the Delhi High Court, it would be useful to reproduce the proviso to section 11A of Central Excise Act, 1944, as it stood when the Supreme Court explained "suppression of facts" in Pushpam Pharm....
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....s 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 taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." (Emphasis Supplied) 59. This decision was referred to by the Supreme Court in Anand Nishikawa Company Ltd. vs. Commissioner of Central Excise 2005 (188) E.L.T. 149 (SC) and the observations are as follows: "26 ........... This Court in the case of Pushpam Pharmaceutical Company v. Collector of Central Excise, Bombay, while dealing with the meaning of the expression "suppression of facts" in proviso to Section 11A of the Act held that the term must be construed strictly. It does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court, further, held:- "In taxation, it ("sup....
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....ould 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 latter implies making of an incorrect statement with the knowledge that the statement was not correct." (Emphasis Supplied) 62. The Delhi High Court in Bharat Hotels Limited vs. Commissioner of Central Excise (Adjudication) 2018 (12) GSTL 368 (Del.) also examined at length the issue relating to the extended period of limitation under the proviso to section 73(1) of the Finance Act and held as follows; "27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word "suppression' in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. "fraud, collusion, wilful misstatement". As explained in Uniworth (supra), "misstatement or suppression of facts" does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a po....
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....e 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" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or Rules" are again qualified by the immediately following words "with intent to evade payment of duty". It is, therefore, not correct to say that there can be a suppression or mis-statement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Misstatement or suppression of fact must be wilful." 64. Very recently, the Delhi High Court in Mahanagar Telephone Nigam Ltd. vs. Union of India and others [W.P. (C) 7542/2018 decided on 06.04.2023] after referring to the decisions of the Supreme Court in Pushpam Pharmaceutical, Anand Nishikawa, Cosmic Dye Chemical, Uniworth Textile Limited and Bharat Hotels Limited observed as follows: "41. In the facts of this case, the impugned show cause notice does not disclose any material that could suggest that MTNL had knowingly and with a deliberate intent to evade the service tax, which ....