P.KARTHIKEYAN, J. - (1.)APPLICATION No. ST/ROA/58/2010 - This miscellaneous application is filed by the Revenue for restoration of appeal No. ST/48/2009, which was dismissed by the Tribunal for want of clearance from the Committee on Disputes (COD). Revenue has since obtained and produced the clearance from the COD to pursue the appeal before this Tribunal. In view of the above, we allow the miscellaneous application and take up the appeal for disposal along with appeal No. ST/21/2009 filed by M/s. National Geophysical Research Institute, Hyderabad (NGRI in short) against the very same Order -in -Original. Appeal No. ST/21/2009
(2.)VIDE the impugned order dated 25 -9 -2008, the Commissioner held NGRI liable to pay service tax of Rs. 1,22,18,110/ - under the category Scientific or Technical consultancy service rendered by it during the period 1 -10 -2001 to 31 -3 -2005 plus applicable interest. He also imposed penalties on the assessee under various sections of the Finance Act, 1994 (the Act) including an amount of Rs. 1,22,18,120/ - under Section 78 of the Act. He appropriated an amount of Rs. 1,15,08,968/ - deposited by NGRI before adjudication of the show -cause notice. In the appeal filed before us, NGRI seeks to vacate the impugned demand and penalties whereas the Revenue seeks to enhance the service tax on the ground that the Commissioner had wrongly allowed cum -tax benefit in computing the service tax due.
(3.)THE facts of the case are that the officers of DGCEI received intelligence to the effect that NGRI working under organization M/s. Council of Scientific and Industrial Research, New Delhi did not pay service tax due on scientific and technical consultancy services rendered by it during the material period.
3.1 NGRI is an organization engaged in research in the field of Earth sciences. It conducts research in the areas of the projects of exploration of hydrocarbons, mineral exploration and engineering geophysics, exploration, assessment and management of ground water resources, earthquake hazard assessment, lithosphere, earths interior and palaeo -environment, geo -environmental studies, geophysical instrumentation and special activities such as seismotechtonics and geodynamical processes between Antarctica and Southern Indian Peninsula. As part of the research, it conducts survey, either aerial or others, at intermittent periods and by using different geophysical and geological methods like seismic, magnetics, magneto telluric, gravity, airborne, electrical and sampling methods. The acquired data is then processed, analysed, interpreted and provided to the client. The provision of data is in the form of digital map, digital pictures or otherwise. This data is used by the clients engaged in the field of exploring hydrocarbons and minerals etc. The authorities arrived at a tentative conclusion that NGRI undertook sponsored projects for various departments of Government, public sector and private sector units and provided technical advice to them.

3.2 As per the show -cause notice, NGRI undertook several R&D projects classifiable under sponsored projects, collaborative projects, grant -in -aid projects and composite projects. Sponsored projects culminated in generation of intellectual property. Sponsored projects undertaken by NGRI prima facie involved scientific and technical consultancy. The show -cause notice lists out the following sponsored projects carried out by the assessee as constituting scientific or technical consultancy : - (a) M/s. National Centre for Antarctic and Ocean Research, Head land Sadan, Vascoda -Gama, Goa (NCAOR) entered into a MOU with NGRI and entrusted the assessee with tasks related to post processing, interpretation and documentation on the seismic reflection, refraction, gravity and magnetic data acquired during the surveys in the Bay of Bengal and Western Andaman regions. This was part of marine geophysical data acquisition programme carried out by NGRI as a partner of multi institutional Indian Legal Continental Shelf Programme conducted by NCAOR. Coastal countries having continental shelf exceeding 200 nautical miles from their territorial sea baseline were required to submit the requisite scientific and technical data in support of their claim for a extended shelf to International Commission. As per the MOU, NGRI completed the task of scientific data interpretation, preparation of various maps/charts etc., preparation of the technical report and submitted the same to NCAOR in April, 2006. This formed part of the final report prepared by NCAOR delineating the outer limits of the Indian Continental Shelf beyond the 200 nautical miles from the territorial sea base line. (b) M/s. ICI India Ltd., Hyderabad engaged NGRI for conducting geophysical study, which involved study of geophysical strata based on resistivity survey for understanding of geophysical strata of their factory. (c) M/s. Nuclear Power Corporation of India Ltd. (NPCIL) entrusted research project with NGRI for gathering micro earthquake data for installation of Micro earthquake Monitoring Station around Jaitapur Nuclear Power Plant site identifying it with reference to its latitude and longitude. (d) M/s. Hindalco Industries Ltd. placed order on NGRI for carrying out the following projects. Development of water quality database in the watershed covering Alumina plant (i) Detailed water quality analysis for trace metal and major ions (ii) Periodic monitoring of water level and water quality in selected observation wells for two hydrologic cycles (iii) Preparation of ground water quality maps of major ions as well as trace elements and (iv) Post audit of model predicts. (v) Preparation of ground water level and water quality maps. (vi) Assessment of present status of ground water contamination due to red mud and red mud stacking in Alumina Plant premises and prediction of contaminant migration (vii) Assessment of resource potential as well as risk to the natural resource

(e) M/s. Metmin Finance and Holdings Pvt. Ltd., Mumbai engaged NGRI for survey of specified areas and conduct base metal exploration work for providing data, reports, analysis, maps, working papers and other relevant information.

(f) M/s. Environment Protection Training and Research Institute entrusted NGRI to carry out research necessary to address geological and ground water issues. The research report would be owned by the consortium members including EPTRI.

(g) M/s. Water and Power Consultancy Services (India) Ltd. engaged NGRI for conducting geothermal studies and magneto telluric studies.

(h) NGRI conducted specialized field studies and submitted report to M/s. National Power Thermal Corporation as per the order placed by the client.

(i) M/s. Atomic Minerals Directorate for Exploration and Research (AMD) placed work order on NGRI following which the assessee carried out heliborne surveys over parts of Vindhyan basin along Aron -Narwar -nathi tract, Shivpuri and Gwalior Districts and collected EM, magnetic and Gamma ray spectrometric data for AMD. The assessee processed and interpreted the data collected during the surveys and prepared a technical report along with maps. The data collected was utilized in uranium exploration programme of AMD.

(j) M/s. Gas Transportation Infrastructure Ltd. entrusted NGRI with filed and desktop seismic study regarding the types of faults or lineaments that cross the following routes of the pipelines: (i) Kakinada to Hyderabad and Hyderabad to Uran (ii) Mumbai to Ahmedabad and Karjat to Ahmedabad (iii) Jamnagar to Aburoad (Geological and Seismological studies) (iv) Jamnagar to Aburoad (Surface wave seismic studies) The geological data, interpretation of space imagery, limited ground checks, statistical analysis and report containing the data helped GTIL to determine the design of the pipeline in safe and cost effective manner in seismically active areas,

(k) M/s. Archeological Survey of India (ASI) engaged NGRI for conducting studies on the effects of vibration and noise due to vehicular traffic on Charminar. Based on the report of NGRI, the ASI carried out necessary repairs and development works in relation to the monument.

(l) M/s. Indian National Centre for Ocean Information Services (INCOIS) entrusted NGRI to conduct geological and geophysical investigation for delineating subsurface structure and weak zones as well as conducting resistivity profile and sounding tests in the INCOIS site and adjoining area of the campus to delineate and lineaments favourable for ground water accumulation by deploying geophysical method. The finding of the research helped INCOIS to determine sub -surface structure and site characteristics for the construction of heavy structure and ground water potential in the campus.

3.3 After studying the above projects undertaken by NGRI and recording statements from Shri M.S.N. Murthy, Controller of Administration to the effect that the services provided by NGRI satisfied the definition of scientific or technical consultancy under Section 65(92) of the Act. Show -cause notice was issued proposing to recover service tax on the gross amount charged by NGRI from its above clients.

3.4 As per Section 65(92) of the Act, Scientific or Technical Consultancy means any advice, consultancy or scientific or technical assistance, rendered in any manner, either directly or indirectly, by a scientist or a technocrat or any science and technology institution or organization, to a client, in one or more discipline of science or technology. The same is taxable since 16 -7 -2011 in terms of Notification No. 4/2001 -S.T., dated 9 -7 -2001.

3.5 According to Section 65(105)(za) of the Act, the taxable service means any service provided or to be provided to a client by a scientist or a technocrat or any science or technology institution or organization, in relation to scientific or technical consultancy.

3.6 CBEC had clarified the scope of the entry Scientific or Technical Consultancy services vide Circular No. B.II/1/2000 -TRU, dated 9 -7 -2001. It was also clarified that research institutions like CSIR are also covered under the levy in respect of taxable services rendered by them. It was proposed that service tax was recoverable on the amounts collected by the assessee from its clients as consideration for the services rendered.

3.7 Vide the impugned order, the Commissioner rendered the following finding : - 17. I find from the nature of services provided to different clients as narrated in preceding para that NGRI is conducting surface survey, gathering information, geological, geophysical and geochemical services. But the moot point is that NGRI is providing something more in the nature of consultancy. How do we understand consultancy? The answer would lie in determining whether NGRI is giving expert opinion/advice or not. I find from the nature of services provided that in almost all cases after doing survey and map making NGRI is also giving expert opinion and advice suitable to the nature of the work entrusted. NGRIs contention is that they have interpreted the data only which should not be treated as consultancy. I think that this argument is not correct. Accordingly, he held that NGRI is liable for payment of service tax under scientific and technical consultancy for the services rendered by it as proposed in the show -cause notice. He held that the assessee had not filed returns and had taken registration only on 17 -5 -2008 as a provider of survey and exploration of minerals services. NGRI was guilty of suppression of facts. Accordingly, he invoked larger period under Section 73 of the Act as proposed in the show -cause notice. He allowed cum -tax benefit in working out the service tax liability of the assessee.

In the appeal as well as during hearing, NGRI has argued that projects undertaken for various agencies listed in the show -cause notice were research projects. NGRI submitted report containing data as per the work order placed on it by its various clients. The activity undertaken by NGRI did not involve scientific or technical consultancy. NGRI had not rendered any technical advice as a result of the survey and research undertaken by it. The CBEC had clarified the scope of survey and map making service as follows : -

(1) Any service provided or to be provided to any person, by any other person, other than by an agency under the control of, or authorized by, the Government, in relation to survey and map -making is taxable under sub -clause (zzzc) of Section 65(105) of the Finance Act, 1994. Survey and map -making has been defined under clause (104b) of Section 65 of the Finance Act, 1994.

(2) This service covers geological, geophysical, geochemical and other prospecting services by studying the properties of the earth and rock formation and structures. It also includes services providing information on sub -surface earth formations by different methods such as seismographic, gravimetric, magneto -metric methods or other sub -surface surveying methods.

(3) Further, it covers surface surveying, services of gathering information on the shape, position or boundaries of a portion of earths surface by methods such as transit, photogrammetric, or hydrographic, for the purpose of preparing maps. It also includes surveying or collection of data by satellites.

4. 1 All the activities undertaken by the assessee fell within the survey and map making services as per the above clarification. As this service was brought under the tax net w.e.f. 16 -6 -2005, the demand raised for the period prior to 16 -6 -2005 was not sustainable. The Commissioner had invoked larger period for the reason that the assessee had not filed returns and had invoked Section 73(1)(a) as it existed before 10 -9 -2004. As the show -cause notice was issued on 7 -11 -2006, the demand confirmed applying the erstwhile Section 73(i)(a) was not sustainable. The assessee was under the bona fide belief that it had not carried out any activity exigible to service tax under the Act. Therefore, no returns were filed. The assessee was a Central Public Sector Unit and did not benefit from evading tax. It could have paid tax and passed on the same to its clients. Therefore, the assessee had no motive to evade service tax. Larger period of limitation was wrongly invoked by Commissioner. The demand and penalties were not sustainable also on this ground.