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M/s. Shiv-Vani Oil & Gas Exploration Services Ltd. Versus CST, New Delhi

2016 (10) TMI 878 - CESTAT NEW DELHI

Classification of shot hole drilling activity - taxable under ‘survey and exploration service’ or not? - reliance placed on the decision of Saipem (Portugal) Comercio Maritimo vs. CCE, ST & CUS., Visakhapatnam II [2014 (10) TMI 94 - CESTAT BANGALORE] - Held that: - is not relevant to the facts of the present case. The terms of agreement in the present case are much more elaborate and specific. The Tribunal held in terms of the agreement in that case that the appellant were not involved in explor .....

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rwise activity related to location or exploration of minerals. This fact is already admitted by the assessee in their written submissions, wherein they have opined that it is ONGC who are conducting survey operations. However, the activities conducted by the assessee even in isolation depict that are being carried out in the direction related to location or exploration of minerals. It is also matter of fact and evidence that shot hole drilling is an activity per se without which the activity of .....

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t holes, which are technically highly important, based on sound technology and expertise. Thus, in the entirety of the issue, it is also observed that the purposes conducted by the assessee and by their clients the processes are inter-linked, inter-depended and inter-related which are in relation to the location or exploration of minerals. Hence, it is not the issue of mere drilling of a hole, rather involves several process for the said purpose and are not ordinary holes. - Extended period .....

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ection 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 - reliance placed on the decision of Cosmic Dye Chemical vs. CCE, Bombay [1994 (9) TMI 86 - SUPREME COURT OF INDIA] where it was held that It is not correct to say that there can be a suppression or mis-statement of .....

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lty on delayed payment will be sustainable. - Appeal disposed off - decided partly in favor of appellant. - Service Tax Appeal No. 258 of 2009 - Final Order No. 53949/2016 - Dated:- 5-10-2016 - Shri Dr. Satish Chandra, President & Shri B. Ravichandran, Member (Technical) Appearance Shri B.L. Narsimhan, Advocate - for the appellant. S/Shri Govind Dixit and Sanjay Jain, Authorized Representative (DR) - for the Respondent. Per. B. Ravichandran :- The appeal is against order dated 31/12/20 .....

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the liability of the appellant for service tax in respect of various activities undertaken by them. On completion of scrutiny, proceedings were initiated against the appellant by issue of show cause notice dated 30/5/2008. The show cause notice proposed demand of service tax of ₹ 43,82,72,086/-. The notice also proposed imposition of various penalties and collection of interest on service tax not paid. After due process, the Commissioner adjudicated the case, vide the impugned order he hel .....

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velopment well drilling, the appellants are contesting mainly their tax liability with reference to their activity of shot hole drilling undertaken for ONGC. The learned Counsel during the argument as well as their written submission mainly contested the service tax liability of the appellant on shot hole drilling on merit as well as on the question of time bar. The main points of the arguments are :- (a) shot hole drilling activity is not taxable under survey and exploration service under Secti .....

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llant in this regard. (b) extended period of demand cannot be invoked in the present case. The appellants have recorded all the transactions in their statutory records and there can be no allegation of fraud or suppression on their part. The appellant has all along had a bonafide view regarding non-taxability of their activities. Since it is ONGC who are involved in survey and exploration of minerals the appellants are not in the said taxable activity. Hence, the extended period is not invokable .....

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d out by the appellants are essentially in relation to survey and exploration of minerals. In fact, without shot hole drilling ONGC cannot undertake their survey and exploration of minerals. Regarding demand for extended period, the learned AR submitted that the appellants had similar contract with Oil India Limited (OIL) and also have been discharged tax on the activity. However, they have stopped later the payment of tax and in respect of present contracts also they have not discharged tax. In .....

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hole drilling under the category of survey and exploration of minerals . The statutory definition relevant to the present case is as below :- Section 65 (104a) of the Act and Section 65 (105) (zzv) of the Act read as under : Section 65 (104a) of the Act Survey and exploration of minerals means geological, geophysical or other prospecting, surface or sub-surface surveying or map making service, in relation to location or exploration of deposits of mineral, oil or gas . Section 65 (105) (zzv) of .....

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plosives to the desired depth. As per the scope of work under the above said contract, the appellant has to provide clear shot holes of specified depth and quantities (with its personnel, instruments, equipments, all kinds of materials, stores and services) as per the programme supplied in advance by ONGC. As per the scope of work the Appellant had to drill shot holes of predetermined depth at specified regular intervals along the pre-surveyed lines for loading the explosives by ONGC for the pur .....

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boulders and pebble formation and that the Appellant must ensure drilling of shot holes of the desired depths in such areas by putting its best efforts. 1.3 Under the second contract, the Appellant has to execute the work as per the programme intimated by ONGC through its geophysical party-chief. In the said contract, in Clause 4.2, it has been specifically stated that ONGC is conducting the seismic survey for hydrocarbon exploration and desires to get the seismic job services and shot hole dri .....

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they are not in the business of survey and exploration of minerals. The Department is holding that the services as explained above rendered by the appellant is very much in relation to survey and exploration of minerals. We note that the appellants are emphasizing on the legal definition of scope of service in terms of Section 65 (104a) and argued that when the appellants are not engaged in such activity, the definition of taxable service in terms of Section 65 (105) (zzv) cannot expand the sco .....

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y much in relation to survey and exploration of minerals. It is also clear that any person providing service to any other person in relation to survey and exploration of minerals is liable to service tax. In other words, the taxable service does not restrict only to the list of activities under Section 65 (104a) but service provided in relation to such activities. It is nobody case that shot hole drilling service provided by the appellant has no relationship to the survey and exploration activit .....

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ves and after the shot (emphasis provided). It is observed that the purpose of such drilling a hole is linked with technicalities involved and related to seismic survey for locating or exploration of minerals. In other words shot hole drilling is activity found to be essential for the purposes of locating suitable place of availability of minerals in the given area. This is also fortified by the fact that if the holes are not made as required by the clients the assessee would be liable for damag .....

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y related to location or exploration of minerals. This fact is already admitted by the assessee in their written submissions, wherein they have opined that it is ONGC who are conducting survey operations. However, the activities conducted by the assessee even in isolation depict that are being carried out in the direction related to location or exploration of minerals. It is also matter of fact and evidence that shot hole drilling is an activity per se without which the activity of further surve .....

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ich are technically highly important, based on sound technology and expertise. Thus, in the entirety of the issue, it is also observed that the purposes conducted by the assessee and by their clients the processes are inter-linked, inter-depended and inter-related which are in relation to to the location or exploration of minerals. Hence, it is not the issue of mere drilling of a hole, rather involves several process for the said purpose and are not ordinary holes . 7. The dictionary meaning a .....

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ld in terms of the agreement in that case that the appellant were not involved in exploring for oil or for prospecting for oil in terms of the agreement. The shot hole drilling activity undertaken in the present case is sought to be taxed as an activity in relation to survey and exploration of minerals. This ground of appeal is dismissed. 8. Regarding the demand for extended period, we find the reason given by the Original Authority is not legally sustainable. In fact he recorded that in terms o .....

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