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Survey and Exploration of Mineral, Oil and Gas Services [Sec 65(105)(zzv)]
Effective upto 30th June, 2012
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Landmark Service Tax Judgment - Survey and Exploration of Mineral, Oil and Gas Services
Introduced With Effect From 10th September 2004
 
Contents
Scope
Exemption
Relevant Notifications / Circulars
Accounting Code
Service Tax 00440270
Interest  00440271
Penalty 00441394
 
DEFINITION:

According to Section 65 (105) (zzv), any service provided or to be provided to any person, by any person, in relation to survey and exploration of mineral is a taxable service

According to Section 65 (104a), “survey and exploration of mineral” means geological, geophysical or other prospecting, surface or sub-surface surveying or map making service, in relation to location or exploration of deposits of mineral, oil or gas.

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SCOPE:
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The essential ingredients of these services are geological, geophysical or other prospecting surface or sub-surface, surveying or map making services. Such services must be in relation to location or exploration of deposits of mineral, oil or gas.

Geological means science related to history and development of earths crust , with its successive floras and faunas

Geophysical means study of physics of earth including fields of meteorology, hydrology, oceanography, seismography, volcano logy, magnetism, radioactivity and geodesy.

Prospecting means to search, explore an area or a region by means of experimental drilling or excavation.

Surface means outside part or uppermost layer. Here it means that part of the earth or geologic section lying over the minerals in question.

Sub-surface means relating to or being something located to beneath the surface especially underground

Surveying means that branch of applied mathematics that teaches the art of determining the area of any portion of the surface of the earth, the length and direction of the bounding lines, and the outline of the surface and of accurately delineating the whole on paper.

Exploration means examination and investigation of land supposed to contain valuable minerals by drilling, boring, sinking shafts, driving tunnels and other means for the purpose of discovering the presence of ore and its extent.

Mineral means any natural constituent of the crust of the earth inorganic or fossil homogenous in structure having a definite composition and known crystallization. 

Oil means any of the numerous unctuous combustible substances that are liquid or at easily liquefiable on warming, are soluble in either not in water or leave a greasy stain on paper or cloth.

Gas means a fluid (as air) that has neither independent shape nor volume but tends to expand indefinitely.

Normally the government of India through respective Ministries invited tender for survey and exploration. The person is allotted a specific area for survey and exploration of a particular mineral, oil and gas. The person has to conduct the survey and informs the Government about the result of such survey and exploration. The representative of Managing Committee from the Government of India and the person carrying out survey and exploration is formed to extract the mineral, oil and gas. Such a person is treated as service provider 

Activities such as seismic survey, collection/processing/interpretation of data and drilling or testing in relation to survey and exploration would fall within the ambit of taxable service. Services rendered in relation to survey and exploration is covered and not the actual activity of extraction after the survey and exploration. The transport, refining, processing or production of the extracted products would be taxed under ‘mining services’.

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SERVICE TAX EXEMPTIONS:
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(a)  Small service providers whose aggregate value of taxable services rendered in the previous year has not exceeded the limit of Rs. 10,00,000/-  (Service Tax Notification No. 8/2008-ST dated 01.03.2008)

(b)  Services provided to the United Nations or International Organisations

(c)  Services provided to Special Economic Zones (SEZ) units (including unit under construction) and SEZ developers

(d)  Services which are exported as per ‘Export of Services’ Rules

(e)  Services provided for official or personal use of foreign diplomatic missions and family members of diplomatic missions.

(f)  Services provided by Reserve Bank of India

(g)  Out of total value of service provided proportionate value of goods and material provided by the Service Provider

 
SERVICE SPECIFIC EXEMPTION:

Portion of the value of taxable service is exempt from levy of Service Tax which is received by the service provider from the customer, exhibitor, client or any person, as the case may be, prior to the 10th day of September, 2004.

 
RELEVANT SERVICE TAX NOTIFICATIONS:
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Service Tax Notification No. 18/2004-S.T., dated 10-09-2004 Exemption Notification
 
RELEVANT SERVICE TAX CIRCULARS/INSTRUCTIONS/TRADE NOTICES:
Service Tax CBEC Instruction Letter File No. 334/1/2007-TRU dated 28-02-2007.
Service Tax Circular No. 80/10/2004-S.T., dated 17-09-2004.
 
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Case Laws Related

  • STO 2010 CESTAT 150
  • Service Tax: Survey & exploration of minerals Service: Pre-deposit: Although interpretation of law is involved in this case and a detailed examination of fact is called for, balance of convenience does not tilt in favour of assessee. Not calling for pre-deposit shall cause prejudice interest of Revenue. Taking into consideration that an amount of Rs. 2.9 crores stated to have been deposited by the Appellant and also time bar issue pleaded, the appellant is directed to make further deposit of Rs.7.00 Crores within eight weeks from the date of pronouncement of this order. (para 9)

  • STO 2009 CESTAT 452
  • Service Tax: Service in relation to ‘Survey and Exploration of Mineral, Oil and Gas': Scope: The activity of drilling seismic shot holes in Cauvery basin, was performed in their capacity as sub-contractors of M/s GT and therefore any service tax was not payable by them. The appellants have also raised the plea of revenue neutrality on the ground that CENVAT credit of any service tax which may be paid by them would be available to the main contractor. In a similar case, this Bench granted waiver of pre-deposit and stay of recovery in the case of stay order No. 664/2008 dated 25.7.2008 passed in Appeal No.S/116/2008 of M/s. A.P. Enterprises]. Such a plea was not raised by the appellants before the Commissioner. Amount of Rs.7 lakhs collected by the appellants from their clients towards service tax under the aforesaid category is being retained by them despite their promise to pay it to the exchequer. The appellants in their statement had admitted having collected the above amount of service tax and retained the same with them. There is no evidence of such remittance on record.(Para 1,2).

    Pre-deposit ordered.

  • STO 2009 CESTAT 457
  • Survey and Exploration of Mineral, Oil and Gas: Demand: Stay: Revenue Neutralisation pleaded: any payment of service tax by them would only lead to a revenue-neutral situation inasmuch as CENVAT credit of such payment would be available to the main contractor: Stay granted on the ground of revenue neutrality.

     
     

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