Wireline Logging And Perforation For Drilling An Oil Well Is Covered Under Mining Service & Not TTA Services: CESTAT
Mariya Paliwala
3 April 2024 4:00 PM IST
The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the services like wireline logging, perforation, and other wireline-related services involving mechanical jobs like cutting, puncture, plug/packer setting, cable splicing, etc. that were undertaken by the appellant at the time of drilling an oil well are integrally connected with the mining of oil or...
The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the services like wireline logging, perforation, and other wireline-related services involving mechanical jobs like cutting, puncture, plug/packer setting, cable splicing, etc. that 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. June 1, 2007.
The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed 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 technical testing and analysis (TTA services) cannot be charged to the appellant prior to 01.06.2007.
The appellant/assessee was providing services in the exploration and production sectors to M/s. Oil and Natural Gas Corporation and Cairn Oil and Gas, Vedanta Ltd. These services included wireline logging services, perforation services and other mechanical jobs, 'Logging While Drilling' services, and 'Measurement While Drilling' services.
These services were provided by the appellant in the mineral oil wells of ONGC at onshore and offshore locations in the western, eastern, and southern regions of India and in the oil wells of Cairn. The appellant contends that to perform these activities below the ground, it has to deploy sophisticated electronic tools that can work in hostile environments with extreme pressures and temperatures. These tools are called logging tools.
The appellant also examined the service tax applicability and concluded that the newly introduced'mining service' w.e.f. 01.06.2007 was comprehensive enough to cover wireline logging, perforation, and other mechanical jobs provided by the appellant to ONGC, and the service tax on these services paid by the appellant earlier to 01.06.2007 was not payable under the category of TTA services. The appellant registered itself under the taxable category of'mining service' and started discharging service tax on the activities performed for ONGC and Cairn w.e.f. June 1, 2007. The appellant disclosed this fact to the department and declared the service under the category of'mining services' in the ST-3 returns.
The commissioner (Appeals) held that testing and analysis services are specialized ones and are required and used for exploration and exploitation services. This does not alter the basic nature of the said services, does not affect their classification under service tax matters, and must be classified under "technical “testing and analysis services” defined under Section 65(106).
The issue raised was in respect of the classification of activities of wireline logging and perforation during the relevant period from December 2003 to November 2004 under the category of 'technical testing and analysis' services defined under Section 65(106) of the Finance Act and made taxable under Section 65(105)(zzh) of the Finance Act. The term 'technical testing and analysis agency' has been defined under Section 65(107) of the Finance Act.
The tribunal held that the activities carried out by the appellant w.e.f. 01.06.2007 would fall under mining service made taxable w.e.f. 01.06.2007 under section 65(105)(zzzy) of the Finance Act, as admitted to the department also, and so service tax under TTA services cannot be charged from the appellant prior to 01.06.2007.
The tribunal held that the order passed by the Commissioner (Appeals), therefore, cannot be sustained and is set aside, and the appeal is allowed.
Counsel For Appellant: B.L. Narasimhan and Mr. Kunal Agarwal
Counsel For Respondent: P.K. Sinha and Shri Harshvardhan
Case Title: M/s. Schlumberger Asia Services Ltd. Versus Commissioner of Service Tax Delhi
Case No.: Service Tax Appeal No. 172 Of 2010
