2021 (11) TMI 70 - AT - Service Tax

Classification of services - Mining of Mineral, Oil or Gas Service or Survey and Exploration of Mineral Oil and Gas Service - Business Auxiliary Service or not - activity of gas compression carried out by the appellant for their clients - associated commission received by the appellant - manpower recruitment and supply service - period prior to 01.06.2007. Demand under the head of Survey and Exploration of Mineral Oil and Gas Service - HELD THAT - The exact nature of the activity undertaken by the appellant in each contract needs to be examined to ascertain whether it would fall under the category of mining service. It is seen from the Show Cause Notice that it examines in detail the activities undertaken contract wise. However, the impugned order does not examine the activities undertaken contract-wise to ascertain the exact nature of service provided in each contract - It can be seen that the language in the contract for the nature of service being provided is quite different in each contract, and therefore, all the contracts cannot be dealt summarily in identical 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 Manpower Recruitment and Supply Service - HELD THAT - 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. Appeal allowed in part.

Summary

Issues Involved:

1. Classification of services under 'Survey and Exploration of Mineral Oil and Gas Service'.
2. Classification of services under 'Business Auxiliary Service' for gas compression.
3. Classification of services under 'Business Auxiliary Service' for associated commission.
4. Classification of services under 'Manpower Recruitment and Supply Services'.
5. Invocation of extended period of limitation.

Detailed Analysis:

1. Classification of Services under 'Survey and Exploration of Mineral Oil and Gas Service':

The appellant argued that their activities do not fall under 'Survey and Exploration of Mineral Oil and Gas Service' but rather under mining activities, which began after the survey and exploration were completed. The Tribunal noted that the appellant's contracts involved drilling and related activities at locations identified by clients, not geological or geophysical prospecting. The Tribunal referenced the case of Atwood Oceanics Pacific Ltd., where similar activities were not classified under 'Survey and Exploration of Mineral Oil and Gas Service'. However, due to the varied language in the appellant's contracts, the Tribunal remanded the issue to the Commissioner for a contract-wise examination to ascertain the exact nature of services provided.

2. Classification of Services under 'Business Auxiliary Service' for Gas Compression:

The appellant contended that compressing gas amounts to "manufacture" per Note-5 of Chapter 27 of the Central Excise Tariff, thus excluding it from 'Business Auxiliary Service'. The Tribunal noted a discrepancy between the appellant's claim that the compressed gas was marketed to RIL and Amul Dairy and the impugned order's finding that the gas was used by ONGC for oil lifting. The Tribunal remanded the issue to the Commissioner to verify the actual use of the compressed gas and determine if it qualifies as manufacture.

3. Classification of Services under 'Business Auxiliary Service' for Associated Commission:

The appellant argued that the commission received for local assistance services like logistics and liaisoning did not involve marketing or sale of goods, thus not falling under 'Business Auxiliary Service'. The Tribunal found that the impugned order failed to demonstrate how the appellant's activities constituted providing services on behalf of clients. The Tribunal concluded that the services were provided to ONGC, not on behalf of it, and set aside the demand under this head.

4. Classification of Services under 'Manpower Recruitment and Supply Services':

The appellant asserted that the personnel deployed were for their own work under the contracts, not supplied to clients. The Tribunal noted that the Show Cause Notice lacked details on how the personnel were deputed and accepted the appellant's assertion. Consequently, the Tribunal set aside the demand under this head.

5. Invocation of Extended Period of Limitation:

The appellant claimed that their actions were under a bona fide belief without any mens rea, arguing against the invocation of the extended period of limitation. The Tribunal did not explicitly address this issue in the final judgment, but the remand for further examination implies that the extended period may not be applicable if the appellant's classification arguments are upheld.

Conclusion:

The appeal was partly allowed. The demands under 'Survey and Exploration of Mineral Oil and Gas Service' and 'Business Auxiliary Service' for gas compression were set aside and remanded to the Commissioner for fresh adjudication. The demands under 'Business Auxiliary Service' for associated commission and 'Manpower Recruitment and Supply Services' were set aside.