B.G. Shirke Oil & Gas India Pvt Ltd Vs Commissioner of Central Tax Visakhapatnam – GST (CESTAT Hyderabad)
The Hon’ble CESTAT, Hyderabad set aside the demand and allowed the appeals. It held: (i) there was no consideration paid by ONGC. There was no invoice.
The appellant is engaged in mining of mineral, oil and gas. It was awarded a contract by ONGC for development, exploration and exploitation of KG basin. The contact provided for supply of petroleum products to ONGC. The contact provided that there would be no payment till supply of petroleum products. Revenue alleged that the cost of over Rs.180 crores has been incurred for development and exploration. The service, therefore, has been provided as point of taxation has arisen in terms of Rule 3 of the Point of Taxation Rules. As the value is not ascertainable, the appellant is liable to pay service tax on cost plus notional profit of 10% in terms of Rule 3(iii) of the valuation rules read with section 67(3) of the Finance Act. Two show cause notices were issued and demand of service tax over Rs.32 crores was confirmed with interest and penalties. Hence, appeals.
The Hon’ble CESTAT, Hyderabad set aside the demand and allowed the appeals. It held: (i) there was no consideration paid by ONGC. There was no invoice. The point of taxation had not arisen as per the contract; the commissioner has misconstrued the contact; (ii) in terms of proviso to Rule 3, the point of taxation was the supply of crude/petroleum to ONGC, which had not arisen; (iii) value cannot be determined in terms of section 67(3) as consideration had been agreed to in the agreement; (iv) addition of notional profit to costs incurred was bad in law and contrary to the rules; (v) extended period of limitation cannot be invoked.
