TMI Blog2021 (11) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... ntical manner - the said demand is set aside and the issue remanded back to Commissioner to decided the matter after examining each contract. Demand under associated commission received from various clients - HELD THAT:- The appellant have claimed that the services are not covered under Business Auxiliary Service as there is no sale or marketing of goods involves in their activities. The said argument has been rejected by Commissioner on the ground that the Business Auxiliary Service not only covered service in relation to marketing or sale of goods but also includes their services including supervision of services on behalf of the client. It is seen that the impugned order does not elaborate as to how the activity done by the appellant amount to providing service on behalf of the client. From the description of services given by Shri Deepak Joshi, Director of the appellant, it is apparent that the services were not given on behalf of the ONGC but given to ONGC. In these circumstances, there is no merit in the argument of the Commissioner in the impugned order - there are no merit in the demand raised under this head and the same is set aside. Service tax under the head of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvey 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 in accordance with the well program decided by RIL. Ten (10) wells with be drilled in two 5-Spot clusters, one each in Sohagpur East (SPE) and, Sonhat (SHN) CBM blocks. Remaining two (2) wells will be drilled in Sohagpur West (SPW) Block to expand existing 5-Spot cluster. The Rig will move to Sonhat to drill the 5-spot and then to Sohagpur West Block. However, this program can be changed at the discretion of RIL in accordance with the well program decided by RIL. The Air Drilling Rig and all Equipment shall conform to the technical specifications detailed in Exhibit B. Rig shall be capable of drilling 7 7/8 hole in Sohagpur East Sonhat Blocks and 8 hole in Sohagpur West block upto 1000 meters depth. Contractor shall be responsible for the entire execution of drilling and related activities. The details pertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ul 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 arranging logistics, liaisoning with various agencies and the like (for which such commission was paid by clients) was not covered under definition of Business Auxiliary Service . 2.7 Demand was also raised under the head of Manpower recruitment and supply agency service. Learned Counsel argued that Revenue has not shown nor established that appellant had supplied any outside manpower to client M/s Cairn Energy and M/s Joshi Technologies. He pointed out that Revenue had accepted that appellant had engaged their own employees for carrying out certain activities for these clients in respect of mining operations. He argued that in view of above, the demand is incorrect. 2.8 Learned Counsel further pointed out that all these actions taken by the appellant were under the bonafide belief and without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices 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 offshore of Andhra Pradesh, India as set for hereinafter. This would show that the contract was for drilling, testing and completion of exploratory wells. Further it was also submitted that the clarification issued by the Board in Letter F. No. B-2/8/2004-TRU, dated 10-9-2004, explained the service at the time of introduction in 2004 as Service rendered in relation to survey and exploration only and not on the activity of actual extraction. Further, the letter also observed that activities such as seismic survey, collection/process/interpretation of data and drilling and testing in relation to survey and exploration would, however, fall within the ambit of taxable service. It was submitted that this was the intention of the Government and therefore this clarification has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvey 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 seismic investigation must first be completed to redefine the potential hydrocarbon drill location from a lead to a prospect. Five geological factors have to be present for a prospect to work and if any of them fail neither oil nor gas will be present. A source rock - When organic-rich rock such as oil shale or coal is subjected to high pressure and temperature over an extended period of time, hydrocarbons form. Migration - The hydrocarbons are expelled from source rock by three density-related mechanisms : the newly-matured hydrocarbons are less dense than their precursors, which causes overpressure; the hydrocarbons are lighter medium, and so migrate upwards due to buoyancy, and the fluids expand as further burial causes increased heating. Most hy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettled 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. (supra) is not very conclusive. The decision itself raises doubts about itself. The appeal against the said order has also been submitted by Hon ble Apex Court. In these circumstances, attributed and therefore, extended period of limitation for demanding duty/tax cannot be invoked. Therefore, even if our finding on classification aspect turns out to be incorrect, extended period of limitation could not have been invoked. In this case, the period is prior to 1-6-2007 and the show cause notice was issued in April 2009. Therefore, the demand for service tax treating the services provided as service of Survey/Exploration of Minerals cannot be sustained. we find that the exact nature of the activity undertaken by the appellant in each contract n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount 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 during production of oil and gas and when the pressure decreases considerably the oil is not able to reach surface due to insufficient reservoir pressure. Under such circumstances high pressure gas is injected into the well to lift the oil from the well and in order to collect produced oil and gas from nearby wells. Group Gathering Station is (GGS) constructed. In GGS all the oil and gas received from the wells is separated and oil is sent to Central Tank Farm (CTF). The produced gas is compressed with the help of Compressor installed by the said assessee, and the compressed gas is sent to the well wherever required to lift the oil. 10. However, from the appeal memorandum it is seen that the appellant has claimed that the compressed gas was u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue relates to service tax under the head of Manpower Recruitment and Supply Service . It was alleged in the notice that the appellant had supplied welders and other individuals to M/s Cairn Energy and other clients at temporary basis under respective contracts and raised the monthly invoices in terms of the respective contracts. Shri Deepak Joshi, the Director, vide his statement dated 02.05.2008 had stated that whatever was dispatched in the invoices has also appearing in the scope of work under the respective contract/ agreement has been carried out by the assessee. Under this head, the demand of ₹ 23,000/- has been raised. The Show Cause Notice does not elaborate exactly how the personnel were deputed for the job. The appellant have asserted that the personnel were deployed for their own work and as per contract. Under these circumstances when the personnel were deployed by the appellant to undertake the jobs involved in the main contracts it cannot be termed as Man Power Recruitment and Supply Service , the demand on this count is set aside. 13 Consequently appeal is partly allowed in above terms. In respect of the issue (i) and (ii) of para 4 above the demand is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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