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2019 (1) TMI 1958 - AAAR - GSTLevy of GST - Abhivahan Shulk - Road Usage Charges - Fee for ambient air monitoring - Khanij Sampada Shulk - Motor Vehicle Tax - GST applicability on penalty paid by the applicant on unaccounted stock of river bed material (RBM) - Vehicles (pokland, JCB, Dumper 7 Tipper) purchased and used by the applicant in its day to day business activities for movement of goods from one place to another - fall within the definition of motor vehicle under the provisions of GST law or not - input credit of GST paid by the applicant at the time of purchase or repairs including spare-parts w.r.t. above vehicles. Penalty paid on stock of RBM on the orders of DM is outside the scope of supply or in the alternative it is an exempt service under GST and hence not taxable under RCM - HELD THAT - We agree with the contention of the appellant that penalty cannot be considered as a consideration for any service since such an amount is paid for contravention of certain provisions of law made for general public. The penalty imposing/collecting agency is not expected to or is providing any service to the particular person who is paying the penalty. Penalties are inbuilt in provisions of law to ensure its strict compliance and it acts as a deterrent for violators. No quid pro quo, which is an essential ingredient for 'service' as held by a catena of decisions of the Apex Court and also lower judicial forum, is present when a person pays penalty to a government or semi government agency. The penalty is imposed by such an agency in the course of imparting its sovereign responsibilities and it is not done for any commercial consideration or for furtherance of business. Penalty is different from fees' collected by such agencies in as much as the agency is supposed to render certain specific service to a specific class of person in lieu of the fees. It is basically a punishment for violation of law and the monetary element of the penal provision is introduced into it to dissuade and to act as a deterrent and not for any commercial consideration or- for furtherance of business. The penalty so collected, is used by the agency for the good of the general people. Hence, in such cases, the penalty does not satisfy the definition of 'consideration' as contained in GST Act and is therefore not liable to be taxed. In the present case, the said royalty is charged and collected by the Government of Uttarakhand in terms of powers exercised under the Mines and Minerals (Development and Regulation) Act 1957, the Uttarakhand Secondary Minerals Rules 2001 read with Minerals Policy 2015 and is therefore a 'consideration' as defined in GST Act, since in lieu of that the District Geology Mining Department had given him the right to remove and transport RBM and also has ensured the continued availability of the said RBM to the appellant and is therefore undoubtedly subject to levy of GST at the appropriate applicable rates. In fact, the appellants appear to have been paying or at least seem to be aware of, such GST on their legally procured and accounted stock of RBM, as is obvious from para 9 of Annexure-I of the appeal memorandum, wherein they have claimed that since no GST was paid on the purchase of unaccounted stock, so the advance ruling was sought. Therefore, we hold that the payment of ₹ 19658100/- was made by the appellants as royalty which is covered by Heading No. 9973 at entry serial no. 17 of Notification no. 11/2017-CT(R) dated 28.06.2017 and the GST is applicable at the rate prescribed therein. Taxability of Abhivahan Shulk and Khanij Sampada Shulk - HELD THAT - Abhivahan Shulk is paid to TVPV only by the license holders and in lieu of this fee, the govt, agency is ensuring the right of passage as well as continued maintenance of supplies. Similarly, Khanij Sampada Shulk is paid only by the lease holders who have been given the right to extract, transport and sell RBM by the District Geology Mining Department who are providing service to the lease holder through allowing right of mining and passage and ensuring supply and ensuring the fulfilment of all other conditions of the lease agreement. Both these fees are collected from a particular class of people i.e. holders of licence/lease allotted by the respective govt. agencies, who are providing the said services only to those particular group of people and not to the general populace. Thus quid pro quo between the person paying the fee and the collecting agency is very much present and both the cases qualify as 'services' and both the fees are 'consideration' in terms of GST Act definition - both the fees are to be included in the taxable value, as defined in Section 15 of the GST Act 2017, of the service and are taxable to GST at appropriate rates.
Issues Involved:
1. Penalty on unaccounted stock of River Bed Material (RBM). 2. Taxability of Abhivahan Shulk. 3. Taxability of Khanij Sampada Shulk. 4. Availability of input credit on vehicles purchased and used in business activities. Detailed Analysis: 1. Penalty on Unaccounted Stock of River Bed Material (RBM): The appellant argued that the penalty imposed by the District Magistrate for unaccounted RBM should be considered outside the scope of supply or as an exempt service under GST. They contended that penalties do not constitute a supply of services and cited various CBEC circulars and GST provisions to support their claim. The appellate authority agreed that penalties are not a consideration for any service since they are paid for contravention of law and do not involve any quid pro quo. Penalties are imposed to ensure compliance and act as a deterrent, not for commercial consideration. Therefore, penalties do not satisfy the definition of 'consideration' under GST and are not taxable. However, upon examining the notice from the District Magistrate, it was found that the amount of ?1,96,58,100/- was actually royalty for the unaccounted stock, not a penalty. Only ?2,00,000/- was a penalty. The royalty is a consideration for the right to remove and transport RBM, making it subject to GST. The appellate authority ruled that GST is applicable on ?1,96,58,100/- as royalty, but not on the ?2,00,000/- penalty. 2. Taxability of Abhivahan Shulk: The appellant claimed that Abhivahan Shulk paid to Tarai Paschim Van Prabhag (TPVP) should be considered an exempt service under GST. The appellate authority found that Abhivahan Shulk is paid by license holders for the right of passage and maintenance of supplies, which constitutes a service. Since there is a quid pro quo, it qualifies as a service and is subject to GST at the appropriate rates. 3. Taxability of Khanij Sampada Shulk: The appellant contended that Khanij Sampada Shulk paid to the District Geology & Mining Department should be exempt from GST. The appellate authority held that Khanij Sampada Shulk is paid by leaseholders for the right to extract, transport, and sell RBM. This fee is a consideration for the service provided by the government agency, making it subject to GST. The ruling by the AAR that both Abhivahan Shulk and Khanij Sampada Shulk are taxable was upheld. 4. Availability of Input Credit on Vehicles: The initial ruling allowed input credit on the purchase of vehicles like Pokland, JCB, Dumper, and Tipper used in business activities. This aspect was not contested in the appeal and thus remains unchanged. Ruling: The appellate authority partially modified the ruling of the AAR. GST is to be paid on ?1,96,58,100/- as royalty under the Reverse Charge Mechanism at the appropriate rate. No GST is payable on the ?2,00,000/- penalty. The taxability of Abhivahan Shulk and Khanij Sampada Shulk as services subject to GST was upheld. The assessing officer is directed to ensure assessment and recovery of GST in accordance with this ruling.
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