The Hyderabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the gross amount charged by the service provider under Section 67 of the Finance Act, 1994, will only attract service tax and not on the Tax Deducted at Source (TDS) amount.
GVK Oil & Gas Ltd, the appellant assessee was engaged in the business of ‘mining of mineral oil or gas’ and had submitted a bid for oil and gas exploration blocks, offered under New Licensing Exploration Policy VII (NELP VII), by the Ministry of Petroleum and Natural Gas, Government of India and required to purchase data related to the geological and seismic quality of the blocks from the ‘Director General of Hydrocarbons (DGH)’ and granted rights by the Government of India to survey concerning the availability of Hydrocarbons in the territory of India.
The assessee had entered into a contract with another entity called ‘Dynamic Global Advisers Limited (DGAL)’ located outside India, for ‘analysis and interpretation of the data’.
The assessee appealed against the order passed by the adjudicating authority for demanding service tax under the ‘survey and exploration of the mineral category’ for the payment of acquiring the licensing rights of the data.
Prasad Paranjape, the counsel for the assessee contended that the the gross amount charged as stipulated in Section 67 of the Finance Act was $100, and the assessee having paid service tax on the same, they are not liable to pay service tax on TDS portion, which was paid to the Government on its account.
AVLN Chary, the counsel for the department contended that the assessee was liable to pay the demand which was raised by the department.
The Bench observed that in the case of Hindustan Oil Exploration Co. Ltd., Vs Commissioner of GST, the court held that the service tax cannot be levied on the portion of TDS not deducted and remitted to the government.
The two-member bench comprising Anil Choudhary (Judicial) and A K Jyothishi (Technical) held that the TDS was paid by the assessee on its account (out of pocket) and service tax will not be applicable on the TDS deposited by the assessee on their account and paid to the Government.
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