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TMI Blog2024 (4) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... y of crude oil/gas by the appellant to ONGC was not achieved. It is further found that admittedly appellant have neither received any consideration nor was entitled to receive any consideration during the period under dispute in absence of achieving the stipulated milestone. It is also held that the determination of taxable turnover under the provisions of section 67 read with the Service Tax (Determination of Value) Rules is erroneous and against the provisions, particularly, proviso to rule 3 of Point of Taxation Rules. Further, addition of notional value towards profit @ 10% is also bad and against the provisions of law - the impugned orders, being in the nature of best judgment assessment are bad under the admitted facts that the appellants have maintained proper records of the transactions and were registered with the department and have regularly filed the returns - the impugned orders are cryptic and nonspeaking. Extended period of limitation - HELD THAT:- The extended period of limitation is not available to Revenue, in absence of conditions stipulated/precedent for invocation. The impugned order set aside - appeal allowed. - HON'BLE MR. ANIL CHOUDHARY , MEMBER ( JUDI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... traction, including distillate and condensate when co-mingled with the heavier hydrocarbons and delivered as a blend at the delivery point but excluding verified natural gas. 3.4. Development Operations means operations conducted in accordance with the Development Plan and shall include, but not be limited to the purchase, shipment or storage of equipment and materials used in developing petroleum accumulations, the drilling, completion and testing of development wells, the drilling and completion of wells for gas or water injection, the laying of gathering lines, the installation of installations, installation of separators, tankages, pumps, artificial lift and other producing an injection facilities required to produce, process and transport petroleum into main oil storage or gas processing facilities, either onshore or offshore, including the laying of pipelines within or outside the contract area, storage and delivery points, the installation of said storage or gas processing facilities, the installation of export and loading facilities and other facilities required for the development and production of the said petroleum accumulations and for the delivery of crude oil and/or g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble parameters exploration and production efforts so far carried out by ONGC and contents in the data package and use in the preparation of assessment and development plan for the field. b) Review, survey, analyse and assess all the wells and well information, well completions, well equipments of wells already drilled, completed and available with ONGC within the defined surface area of this field and use in the assessment and development plan. c) Survey, assess and analyse the location of the field and the locations of delivery points including the delivery points of ONGC for both crude oil and gas and use in assessment and development plan. d) Prepare a detailed assessment plan and program giving full details of type of assessments, methodology with breakup of activities and starting and completion date of each activity, proposed executing agencies for each activities, listing of all major inputs and equipments, estimated costs with breakup of major components of costs and means of financing, expected results of each activity and assessment plan. All the assessment must be based upon Good International Industry Practices and time bound. e) Carry out all necessary drilling both ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill raise monthly bill of service charges based of percent of contractor share as per the service contract to the concerned Asset Manager. The payment thereof shall be effected to the designated bank of the contractor as stated in the invoice. Similarly, ONGC will raise monthly bill to the contractor based on sale of gas to contractor. 3.15. Clause 15.8 provides all payments in respect of delivering crude oil or condensate to ONGC pursuant to the provisions of Article 19 shall be made by ONGC within a period of 30 days from the date of delivery of invoice by contractor as per the terms and conditions of payment 3.16. Clause 15.11 provides all costs under the contract, except costs explicitly indicated herein to be payable by ONGC, shall be borne by the contractor.... .... Payment will be made by ONGC for the services of contractor on delivery of oil and gas as the case may be. 3.17. Clause 15.12 provides payment to contractor will be based on fixed percentage/share price of oil and gas quoted by contractor for his services... ....Payment will be made to the contractor only on delivery of oil/condensate, if any. 3.18. Clause 15.13 provides Payment for delivery of oil: The contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) of the Finance Act, the value shall in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. Further, Rule 3 of Service Tax (Determination of values) Rules 2006 was relied upon which provides with effect from 01.07.2012, where such value is not ascertainable has been substituted for where the consideration received is not wholly or partly consisting of money . (a) The value of such taxable service shall be equivalent to gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration; (b) where the value cannot be determined in accordance with clause (a), the service provider shall determine the equivalent money value of such construction which shall, in no case be less than the cost of provision of such taxable service. 8. It further appeared that the appellant were required to discharge service tax liability on the expenditure incurred (which was nothing but cost of provision of service) as per section 67(1)(iii) of the Finance Act read with Rule 3(b) of Service Tax (de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice since 19.09.2007 (from the date of taking possession of the field). The appellant failed to take registration within the stipulated of 30 days from the date of commencement of the activity. b) The appellant being a limited company failed to discharge the service tax liability within the stipulated time. c) The appellant for the period prior to 01.07.2012 had failed to file the returns within the stipulated time. d) The issuance of non-payment of service tax by the appellant came to light only due to efforts of the departmental officers upon enquiry and verification. Had the Department not verified and enquired into the affairs the tax liability would have escaped. The appellant never informed the Department about the fact that they had entered into a service contract with ONGC during to the year 2007 for development of onshore marginal gas field Rajamahendravaram Asset, and carried out exploration and development operations since 19.09.2007. Further urges that the activities were in relation to main service i.e., Mining of Mineral, Oil or Gas service, which was a taxable service. Appellant had taken registration in October 2012 and paid service tax on the services received un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt basis, under a contract, for a period exceeding 3 months with the obligation for payment periodically or from time to time, or where the Government by notification in the official Gazette, prescribes provision of a particular service to be a continuous supply of service, whether or not, subject to any condition. 16. The said fact of continuous supply has been recorded by the Commissioner in the impugned order. Further, the Commissioner also noticed that appellant is not entitled to receive any remuneration/consideration until and unless they achieved the milestone i.e., production of gas/oil and supply of same to ONGC. Admittedly, during both the periods under dispute, this milestone was admittedly not achieved. 17. Learned counsel further refers to the proviso under Rule 3 of Point of Taxation Rules, which reads as under: Provided that for the purposes of clauses (a) and (b) , - (i) in case of continuous supply of service where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the receiver of service to make any payment to service provider, the date of completion of each such event a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n percentage of contractor share as per the contract on the basis of supply of gas/oil to ONGC. Further Clause 15.11 of the contract explicitly provides that all costs have to be borne by the contractor and payment will be made by ONGC for services of the contractor on delivery of oil and gas, as the case may be. Further, the payment to contractor will be based on percent fixed share price of oil and gas quoted by the contractor for his services. Further provides payment will be made to the contractor only on delivery of oil/condensate, if any. 22. Thus, it is evident from a plain reading of the contract that appellant is not entitled to receive a single naya paisa or rupee from ONGC until and unless it achieves the milestone and is able to supply gas/oil to ONGC. Admittedly, there is no allegation that in the period, under dispute under both the SCNs, appellant has achieved this milestone. 23. It is further urged that the determination of taxable turnover in the impugned order by the Commissioner is wholly illegal and is in clear conflict with the provisions of Point of Taxation Rules. 24. Without prejudice to the above submission, learned counsel further urges that no service is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in the facts and circumstances that the appellant was registered with the department, have maintained proper books of accounts in the ordinary course of business, have regularly filed their ST3 returns and also furnished the details from time to time as requisitioned by the Department, there was no scope for making the best judgement assessment. It is also urged that audit report cannot be the sole basis for the demand. Evidently, SCNs were issued without verifying the factual position, assuming the audit report as gospel truth. 29. It is further urged that under the facts and circumstances, extended period of limitation is not invokable. Admittedly, appellant have maintained proper books of accounts and records of the transactions, the work done is under the proper contract with ONGC PSU; admittedly, appellant was registered and they have filed their returns and made other compliances like paying service tax on reverse charge basis; No case of any malafide, concealment, mis-representation, etc., has been made out. This is also evident from the list of RUDs as mentioned in Para 21 of the SCN: a) Service Contract bearing No. MR/WOB/MM/NMFD/68/2005/EB-2130, dt.16.07.2007 for Deve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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