2024 (4) TMI 36 - AT - Service Tax

Classification of service - classification of activities of wireline logging and perforation - period from December 2003 to November 2004 under the category of technical testing and analysis (TTA services) - HELD THAT - The activities undertaken by the appellant do not involve testing or analysis. It is the data procured by the appellant that is communicated to ONGC which, thereafter, independently analyses the same for determining the course of action. The function required to be performed by the appellant is strictly limited to the scope of measuring different parameters related to the oil rigs, and additionally, perforation, which has no relation to testing and analysis services. The services like wireline logging, perforation and other wireline related services involving mechanical jobs like cutting, puncture, plug/packer setting, cable splicing, etc., which were undertaken by the appellant at the time of drilling an oil well are integrally connected with the mining of oil or gas and have a direct nexus with the drilling of a well. Thus, these activities would be covered by the taxable category of mining service w.e.f. 01.06.2007. Reliance has been placed on the decision of the Bombay High Court in INDIAN NATIONAL SHIPOWNERS' ASSOCIATION VERSUS UNION OF INDIA 2009 (3) TMI 29 - BOMBAY HIGH COURT , wherein it was held that though the phrase in relation to is of wide import but the context in which the same is used has to be kept in mind and that the services rendered by a person must have a direct or a proximate relation to the subject matter of the taxing entry. The Bombay High Court also held that the context in which the words in relation to are used has to be borne in mind to examine the extent of the scope of an entry which may be of wide amplitude. The issue that needs to be decided is whether the activity carried out by the appellant would fall under TTA services prior to 01.06.2007. According to the appellant, the said activity will be covered under the scope of mining related services under section 65 (105)(zzzy) of the Act w.e.f. 01.06.2007. The contention is that on introduction of such a service from 01.06.2007, there was no amendment in the definition of TTA services and, therefore, the activity covered under a new category of mining related services cannot be classified under the existing category of TTA services prior to 01.06.2007. Thus, it has to be held that as the activity undertaken by the appellant w.e.f. 01.06.2007 pertains to mining services made taxable under section 65(105)(zzzy) of the Finance Act, service tax under TTA services cannot be charged from the appellant prior to 01.06.2007. Thus, the activities undertaken by the appellant cannot be classified under technical testing and analysis service (TTA services) as defined under section 65(106) of the Finance Act and deserve classification under mining services made taxable under section 65(105)(zzzy) of the Finance Act w.e.f. 01.06.2007 - impugned order set aside. Appeal allowed.

Summary

Issues Involved:

1. Classification of activities of wireline logging and perforation under 'technical testing and analysis' (TTA) services.
2. Applicability of service tax on wireline logging, perforation, and other mechanical jobs.
3. Refund claims under section 11B of the Central Excise Act, 1944.
4. Introduction of 'mining service' and its impact on the classification of the appellant's activities.
5. Invocation of the extended period of limitation.

Summary:

Classification of Activities:
The primary issue pertains to the classification of wireline logging and perforation activities under the category of 'technical testing and analysis' (TTA) services as defined u/s 65(106) of the Finance Act. The appellant provided services to ONGC and Cairn, including wireline logging, perforation, and other mechanical jobs. The Commissioner (Appeals) held that these activities involved testing by measuring various technical parameters and analyzing them, classifying them under TTA services. However, the Tribunal concluded that the activities undertaken by the appellant do not involve testing or analysis but are limited to measuring different parameters and perforation, which are more aligned with 'mining services' introduced w.e.f. 01.06.2007.

Applicability of Service Tax:
The appellant initially registered under TTA services and paid service tax but later stopped upon being informed by ONGC that wireline logging services were not covered under TTA services. The appellant filed for a refund of the service tax paid. The Tribunal found that the activities of wireline logging and perforation are not classifiable under TTA services but fall under 'mining services' introduced w.e.f. 01.06.2007. Therefore, service tax under TTA services cannot be charged for the period prior to 01.06.2007.

Refund Claims:
The appellant filed refund claims for the service tax paid during the period December 2003 to November 2004. The Assistant Commissioner rejected these claims, and the Commissioner (Appeals) upheld this decision. The Tribunal, however, set aside the order, holding that the activities should be classified under 'mining services' and not TTA services, thus entitling the appellant to a refund with applicable interest.

Introduction of 'Mining Service':
The appellant argued that the introduction of 'mining service' u/s 65(105)(zzzy) of the Finance Act w.e.f. 01.06.2007, without any change to the existing entries, implies that the activities should not be classified under TTA services prior to this date. The Tribunal agreed, stating that the activities carried out by the appellant are integrally connected with mining and should be classified under 'mining services' from 01.06.2007 onwards.

Extended Period of Limitation:
The appellant contended that the extended period of limitation could not have been invoked. The Tribunal did not specifically address this issue in detail, but the overall conclusion favored the appellant, granting the refund claim.

Conclusion:
The Tribunal concluded that the activities undertaken by the appellant cannot be classified under 'technical testing and analysis' services as defined u/s 65(106) of the Finance Act and should be classified under 'mining services' made taxable u/s 65(105)(zzzy) of the Finance Act w.e.f. 01.06.2007. The order dated 30.10.2009 by the Commissioner (Appeals) was set aside, and the appeal was allowed, entitling the appellant to a refund with applicable interest.