Mumbai — Oil and Natural Gas Corporation Ltd. (ONGC) has announced that it has received a service tax demand and penalty order totaling over ₹111.55 crore from the Commissioner of CGST & Central Excise, Navi Mumbai Commissionerate. The demand has been raised under the Reverse Charge Mechanism for services rendered between April 2006 and May 2007.
Details of the Tax Demand
The penalty stems from two service categories — ‘Survey and Exploration of Mineral, Oil or Gas’ and ‘Support Services of Business or Commerce’ — allegedly provided to ONGC during the following periods:
- ₹45.15 crore for services rendered between April 19, 2006 and May 31, 2007
- ₹66.40 crore for services rendered between May 1, 2006 and May 31, 2007
- Total penalty imposed: ₹111.55 crore
These services were provided by third-party contractors, and the tax liability has been attributed to ONGC under the Reverse Charge Mechanism.
ONGC’s Response and Legal Position
ONGC has strongly contested the basis of the tax demand, stating:
- The services in question were performed beyond 12 nautical miles from the Indian coastline — an area considered outside the taxable territory of India under Indian tax laws at the time.
The company contends that the services are more appropriately classifiable as either:
- ‘Mining Services’, or
- Supply of Tangible Goods for Use Services’ — both of which were not taxable during the relevant period.
Accordingly, ONGC maintains that it is not liable to pay service tax for these transactions.
The company further stated that it will review the order in detail and file an appeal with the appropriate appellate authority within the stipulated legal timeframe.
Broader Implications
This development adds to a series of historical tax disputes faced by ONGC and other major PSUs amid evolving interpretations of legacy service tax regulations. While the financial impact of this specific order is manageable given ONGC’s size, the company’s legal response will set an important precedent for similar offshore service classifications.
Read Also: CAG Report: Energy & Finance PSUs Drive Rs 2.69 Lakh Crore Profit in FY22; ONGC, IOCL, NTPC Lead
About ONGC
Oil and Natural Gas Corporation Ltd. (ONGC) is India’s largest crude oil and natural gas company, accounting for approximately 70% of the country’s domestic production. A Maharatna PSU under the Ministry of Petroleum and Natural Gas, ONGC plays a pivotal role in ensuring India’s energy security.
