2010 (4) TMI 443 - AT - Service Tax

Survey and Exploration Service Adjudicating authority holding shot hole and seismic job services for data acquisition liable under survey & exploration of oil & minerals, gas compression under Business Auxiliary Services and work over operation & development well drilling as under mining of oil & minerals. Interpretation of law involved in respect of activities carried out. Held that prima facie balance of convenience not in favour of assessee. Directed to deposit Rs. 7 crores considering 2.90 crores already deposited.

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of the extended period of limitation.
3. Imposition of interest and penalties.

Issue-Wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:

The primary issue was whether the services provided by the appellant, such as 'shot hole drilling and seismic job charges,' fell under the taxable category of 'survey and exploration of minerals.' The adjudicating authority concluded that these services were indeed taxable under this category, as they were integral to locating mineral deposits. The authority also examined the appellant's contracts and found that the services were for the collection of seismic data, thus falling within the scope of 'Survey & Exploration of Mineral Service' introduced from 1-12-2004. Consequently, Service Tax and Cess were levied on the value of these services provided from 1-12-04 to 31-10-07.

The appellant argued that their activities did not fall under the taxable category of 'survey and exploration of mineral, oil or gas service,' asserting that the definition under Section 65(104)(a) did not apply to them. They contended that their services should be classified under 'site formation and clearance service' or 'mining services,' which were introduced later. The appellant cited the judgment of the Hon'ble High Court of Bombay in the case of Indian National Shipowners' Association v. Union of India to support their argument that their services were not taxable before the introduction of 'mining services' on 1-6-2007.

The adjudicating authority, however, determined that the activities like 'work over operations' and 'development well drilling' were classifiable under 'mining services' and that the appellant was liable for Service Tax under this category. The authority also examined sample agreements and found that the appellant was liable for Service Tax on various activities, rejecting the appellant's plea of non-taxability.

2. Applicability of the Extended Period of Limitation:

The appellant argued that the extended period of limitation could not be invoked in their case, claiming that the demand was time-barred. They contended that no interest or penalty was chargeable as no liability arose.

The adjudicating authority, however, held that the proceedings were not barred by limitation due to the suppression of facts by the appellant. The authority noted that the appellant failed to provide comprehensive details regarding the realization of considerations and that the loss of revenue was unearthed during an audit conducted by the Department. The authority rejected the plea of limitation, emphasizing that without investigation, there would have been an escapement of levy.

3. Imposition of Interest and Penalties:

The adjudicating authority imposed interest under Section 75 of the Finance Act, 1994, and various penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The penalties were imposed for suppressing/concealing the value of taxable services with the intent of evading payment of Service Tax.

The appellant argued that no penalty was payable under Section 76 as they were not liable to pay Service Tax on the composite contract entered into with oil companies. They also contended that they had discharged their liability for the normal period under the category of mining services, and hence, recovery of the demand should be stayed during the pendency of the appeal.

Conclusion:

The Tribunal, after hearing both sides and perusing the records, concluded that the nature of the activities carried out by the appellant required thorough scrutiny and examination. The Tribunal noted that the adjudicating authority had meticulously examined the nature of the contracts and the technicalities involved in the appellant's activities. The Tribunal found no casual approach in the adjudicating authority's examination but acknowledged that interpretation of law and determination of liability period were crucial issues requiring detailed examination during the regular appeal hearing.

Considering the balance of convenience and the need to protect the interest of revenue, the Tribunal directed the appellant to make a pre-deposit of Rs. 7.00 Crores within eight weeks from the date of pronouncement of the order. The appellant was required to comply within one month from the expiry of the eight weeks, failing which the stay on the realization of the balance demand would be lifted. The Tribunal scheduled a compliance hearing for 14-8-2010.

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