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Exploration Services - Taxability of Drilling of Shot Hole

Service Tax - By: - CA Akash Phophalia - Dated:- 16-2-2017 Last Replied Date:- 16-2-2017 - Survey and exploration activity is chargeable to service tax. However, one of the activities which is related to it is shot hole drilling activity. Department proposed to collect service tax on the impugned activity by covering it under the survey and exploration activity which is in contravention to the argument of assessee. The taxability is discussed here in regard to one recent case of Shiv-vani Oil an .....

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sessee 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 other company. As per the scope of work the assessee had to drill shot holes of predetermined depth at specified regular intervals along the pre-surveyed lines for loading the explosives by the other company for the purposes of the seismic surveys conducted by other company. The locations, a .....

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the assessee must ensure drilling of shot holes of the desired depths in such areas by putting its best efforts. Further, the assessee has to execute the work as per the programme intimated by the other company through its geophysical party-chief. In the said contract, it has been specifically stated that the other company is conducting the seismic survey for hydrocarbon exploration and desires to get the seismic job services and shot hole drilling services as per the specification and scope of .....

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ey and exploration service under Section 65(105)(zzv) read with Section 65(104a) of the Finance Act, 1994. The taxable service means services provided or to be provided in relation to survey and exploration of minerals. Since the assessee had never engaged in survey and exploration of minerals it was not liable to any Service Tax. Before discussing further, let s have a look at the relevant definitions of the Finance Act 1994. Deparmtent s Submissions The Department contended that the services a .....

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tion of minerals. In other words, the assessee submitted that the term in relation to cannot be given a scope to indefinitely expand the main tax entry of survey and exploration of minerals. The arguments of the assessee in this context is mis-placed. From the very nature of the work undertaken by them it is very clear that these activities are very 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 .....

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at the activity of shot hole drilling involves a composite process of clearances of nearby areas, undertaking the drilling work as specified by the other company, tamping the same with requisite materials prior to shot, after loading of explosives 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 .....

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ies of both the assessee and clients, therefore can be considered as an act of survey related to location or exploration of minerals. Undoubtedly, the entire activity, partly done by the assessee and remaining done by the other company, is otherwise 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 the other company who are conducting survey operations. However, the activities c .....

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