No Service Tax Leviable on Purchase of Data related to Geological and Seismic quality of blocks performed outside India: CESTAT [Read Order]

The Hyderabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that the service tax cannot be levied on the purchase of data related to the geological and seismic qualities of blocks performed outside India. 

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 with respect to 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 since the activities of GX Technologies Corporation (GXT) and GGS Spectrum Limited (GGS) – entities located outside India are performed outside India, the same will not be liable to service tax in India and the actual collection of data which will be carried out from within India was done by GXT and GGS for self, which was not a service to the assessee. 

AVLN Chary, the counsel for the department relied on the decisions made by the lower authorities and contended that the assessee was liable to pay service tax under the head – ‘Survey and Exploration of Mineral’ for payment made to GX Technologies Corporation, USA (GXT) and GGS Spectrum Limited, UK (GGS) for use of the data collected by them under an agreement with DGH of Government of India. 

The Bench observed that because of Rule 3(ii) of Taxation of Services (provided from outside India and received in India) Rules, 2006, since the activities of GXT and GGS – entities located outside India are performed outside India, the same will not be liable to service tax in India. 

The two-member bench comprising Anil Choudhary (Judicial) and A K Jyothishi (Technical) held that the assessee was not liable to pay the service tax which was performed outside India while allowing the appeal filed by the assessee. 

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates