 "An Oil and Natural Gas Corp's (ONGC) well is pictured in an oil field on the outskirts of Ahmedabad")
ONGC Videsh on Wednesday said it has received five show-cause notices for the period 2006-07 to 2013-14 from the Service Tax Department since October 2011, amounting to Rs 5,789 crore. This was in relation to foreign exchange remittances being reported as 'Expenditure in Foreign Currency' through notes to the financial statement.
Such remittances include cash calls with respect to non-operated projects, remittances to foreign branches, and equity contributions.
OVL said according to its discussions with legal consultants and proceedings in personal hearings, it feels it has a strong case. Representations regarding service tax on cash calls were made to the ministry of petroleum and natural gas and finance ministry, which resulted in a clarification being issued by the Central Board of Excise and Customs on the applicability of service tax on cash calls in joint ventures (JVs).
The circular stipulates that if cash calls paid by members to the JV are merely a transaction in money, they are not considered service and, hence, not taxable. The circular further says that detailed and closed scrutiny of the terms of the JV agreement may be required in each case to determine the service tax treatment of cash calls, the company said.
Replies to all notices have been filed and personal hearings have also been completed in March 2016. The company received one more notice for 2014-15 for Rs 314 crore in March 2016, a reply to which is being filed. "As per our understanding, no order or demand notice with respect to above referred notices has been issued as yet," it said.
The company denied any accounting irregularity. It said financial statements are examined by independent auditors and reviewed by the Comptroller and Auditor General of India. The accounts are further subject to tax audit for Income Tax requirement.
Such remittances include cash calls with respect to non-operated projects, remittances to foreign branches, and equity contributions.
OVL said according to its discussions with legal consultants and proceedings in personal hearings, it feels it has a strong case. Representations regarding service tax on cash calls were made to the ministry of petroleum and natural gas and finance ministry, which resulted in a clarification being issued by the Central Board of Excise and Customs on the applicability of service tax on cash calls in joint ventures (JVs).
The circular stipulates that if cash calls paid by members to the JV are merely a transaction in money, they are not considered service and, hence, not taxable. The circular further says that detailed and closed scrutiny of the terms of the JV agreement may be required in each case to determine the service tax treatment of cash calls, the company said.
Replies to all notices have been filed and personal hearings have also been completed in March 2016. The company received one more notice for 2014-15 for Rs 314 crore in March 2016, a reply to which is being filed. "As per our understanding, no order or demand notice with respect to above referred notices has been issued as yet," it said.
The company denied any accounting irregularity. It said financial statements are examined by independent auditors and reviewed by the Comptroller and Auditor General of India. The accounts are further subject to tax audit for Income Tax requirement.
