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TMI Blog2014 (10) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... SAIPEM at locations known as KG-1, KG-8, KG11 and KG-17. Of these KG-1 and KG-11 were abandoned in 2006 itself. Gas found in KG-8. Operations undertaken by SAIPEM were drilling, casing, coring, testing, formation cutting, measurement of well, completion or abandonment of well and blow-out of fire. 2. Schedule-H of the contract sets out the project specifications and plan programme under the contract, which clearly indicated that the services rendered were in the nature of prospecting of subsurface in relation to exploration of oil gas. Services rendered as above were held to be 'prospecting of subsurface by means of drilling for the purpose of finding oil or gas' and classified under 'Survey and exploration of minerals' in terms of Clause (zzv) of Section 65 of Finance Act, 1994 read with clause 104(a). Aforesaid activities were undertaken within an area of 12 nautical miles from the nearest landmass of India i.e., 'Hope Islands'. Director General, Hydrocarbons, had vide their letter dated 19.4.2006 confirmed the above fact. The same was not disputed. Later, DGH by their letter dated 5.2.2008, informed that the distance was more than 12 nautical miles from the shore base of Kakina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... successful it will be used for mining the oil also. Therefore, the question to be determined is whether the activities undertaken by the appellant can be considered as an exploration activity at all. 6. The learned counsel for the appellants relied upon the decision in the case of M/s. Atwood Oceanics Pacific Ltd. reported in 2012 (12) TMI 425 (CESTAT) to submit that the activity undertaken by them cannot be considered as a prospecting activity at all. Their submission is that the exploration and prospecting activities have already been completed by GSPC and drilling of wells is the second stage. They relied upon the dictionary meaning of 'prospecting' which according to them means (i) to explore an area or inspect a region especially for mineral deposits (Webster's Dictionary) (ii) searching a district for minerals with a view to further operations (Chambers Dictionary). It was submitted that in view of the above, the activity undertaken by them is subsequent to prospecting and prospecting refers to exploration and therefore can be considered as equivalent to each other. It was submitted that prospecting does not involve getting down to specific location of minerals in a particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 contemporanea exposito 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 precursor, which causes overpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot 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/miss-declaration cannot be 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. 7. While the appellants have relied upon the Tribunal's observations from para 11 to 12.3, learned special consultant on behalf of the Revenue relied upon paragraph 12.4. It can be seen that if we do not consider paragraph 12.4, the observations would clearly show that the appellant's case is similar to the one of M/s. Atwood Oceanics Pacific Ltd. and therefore the conclusion in paragraph 12.3 reached by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ched even though in the subsequent paragraph it was said that it was not required to be reached. Paragraph 12.3 takes note of the fact that a well in the case of oil can be exploratory as wells as an actual producing well (mining). Since drilling well is a costly exercise, if it is not preceded by proper studies as enumerated by the special consultant, even exploratory well cannot get drilled. 8.1 Further we also take note of the fact that act of locating the areas where deposits of mining oil or gas are available has been done by GSPC. Moreover some of the provisions in the contract also show that the appellants are not engaged in locating the areas where deposits of mineral, oil or gas are available. Clause 1.4: 'Contractor's Equipment' - shall mean the Drilling Rig and all equipment, appliances, tools, spare parts and supplies specified in Schedule 'B' (equipment list and specification) and all category 1 items set forth in 'Schedule D' (responsibility and applicable rates). Clause 1.7: 'Drilling Rig' - shall mean the drilling rig and associated equipment specified in Schedule 'B'. Clause 4: 'Term of the contract' - The Contractor will make the Drilling Rig available for pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service rendered in relation to survey and exploration only and not on the activity of actual extraction after the survey and exploration is complete. The transport, refining, processing or production of the extracted products would also be out of the ambit of service tax. Activities such as seismic survey, collection/processing/Interpretation of data and drilling or testing in relation to survey and exploration would however, fall within the ambit of taxable service. The last sentence in the paragraph would clearly show that activities such as seismic survey, collection/processing/interpretation of data, drilling or testing in relation to survey and exploration would however fall within the ambit of taxable service. Where the drilling or testing undertaken by the appellants as per the contract with GSPC can be considered as the one as of drilling or testing in relation to survey and exploration is the question that arises in this case. We have to take note of the fact that the detailed seismic study, etc., are conducted by independent agencies and where good chance of finding oil are available, such blocks are put up to be bid for by the companies and thereafter drilling wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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