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2021 (3) TMI 601 - HC - GSTLevy of service tax / GST on royalty - scope of the term taxable service - royalty in quarrying stones - minerals 'removed or consumed' by the holder of a mining lease from the leased area, at the rate specified - also seeking declaration that Notification No. 22/2016-ST dated 13.04.2016 and its clarification is ultra-vires the provisions of the Finance Act, 1994 - HELD THAT - The legal issues concerning the leviability of the tax can be answered after considering the response of the respondent CGST and the State. The challenge in these writ petitions are in two parts. One relating to levy of service tax on royalty till the coming of the GST regime. The other writ petitions relate to challenge to both service tax and GST upon royalty in case of the respective petitioners or JGST in three writ petitions referred to earlier. Finance Act, 1994 brought into force the concept of service tax. The GST Act was introduced from 01.07.2017. Both are separate enactments with detailed provisions relating to charging section and the measure of tax and machinery. It appears that in similar challenges made to the levy of service tax on royalty paid on minerals, the matter went up to the Apex Court in the case of Udaipur Chambers of Commerce and Industry and Others 2018 (8) TMI 287 - SC ORDER , arising out of a judgment of the High Court of Judicature for Rajasthan at Jodhpur 2017 (10) TMI 975 - RAJASTHAN HIGH COURT - It was held by Apex Court that Until further orders payment of service tax for grant of mining lease/royalty by the petitioners shall remain stayed. Other High Courts have passed more or less similar interim orders relating to payment of service tax on royalty as noticed hereinabove. The High Court of Bombay at Goa in GOA MINING ASSOCIATION ANR VERSUS UNION OF INDIA ORS. 2017 (8) TMI 1632 - BOMBAY HIGH COURT has stayed the imposition of service tax on royalty, but at the same time clarified that it would not come in the way of the revenue for conducting and completing its assessment and enquiry. While the revenue is not restrained from conducting and completing the assessment proceedings, until further orders recovery of service tax for grant of mining lease/royalty from the petitioners shall remain stayed. However, we are not satisfied at this stage that any case for granting interim protection is made out so far as the levy of CGST and/or JGST is concerned - Let these matters appear in the week of 26th April, 2021.
Issues Involved:
1. Leviability of service tax on royalty under the Finance Act, 1994. 2. Validity of Notification No. 22/2016-ST dated 13.04.2016. 3. Leviability of CGST and JGST on royalty and District Mineral Fund contribution. 4. Interim protection from recovery of service tax and GST. Detailed Analysis: 1. Leviability of Service Tax on Royalty: The petitioners, lessees of minor minerals, argued that royalty is not a payment for any taxable service as it is imposed under Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957. They contended that royalty does not constitute consideration for any service under the Finance Act, 1994, and therefore, no service tax is leviable on royalty. They relied on the Supreme Court's decision in "India Cement Limited and Others Vs. State of Tamil Nadu and Others" which categorized royalty as a tax, thus making service tax or GST inapplicable. The petitioners also referenced the pending decision before a nine-judge bench in "Mineral Area Development Authority and Others Vs. M/s. Steel Authority of India and Others" to support their stance. 2. Validity of Notification No. 22/2016-ST: The petitioners challenged the validity of Notification No. 22/2016-ST dated 13.04.2016, asserting it is ultra vires the Finance Act, 1994. They argued that the amendment to Section 66D of the Finance Act, 1994, which substituted 'support service' with 'any service,' did not justify the imposition of service tax on royalty. 3. Leviability of CGST and JGST: The petitioners also contested the levy of CGST and JGST on royalty and District Mineral Fund contributions, arguing that royalty should not be considered as 'consideration' under the GST regime. They cited provisions under the CGST Act, 2017, including Section 2(31) ('consideration'), Section 7 ('scope of supply'), Section 9 ('levy and collection'), and Section 15 ('value of taxable supply'), to argue that royalty does not fit within the definition of consideration for taxable supply. They referenced the case "Govind Saran Ganga Saran Vs. Commissioner of Sales Tax and others" to emphasize the essential components of a valid tax levy. 4. Interim Protection from Recovery: The petitioners sought interim relief to restrain the respondents from demanding service tax and GST. They pointed to interim orders from various High Courts, including the Gujarat High Court, Karnataka High Court, and Bombay High Court at Goa, which stayed the imposition of service tax on royalty. The Advocate General for the State of Jharkhand argued that the petitions were premature as no tax recovery had been initiated, and the notices were merely for data collection to determine tax liability. The respondents from CGST and DGGI also argued that the petitions were premature and that the GST provisions differed significantly from the Finance Act, 1994. Court's Interim Order: The court, acknowledging the legal issues raised, granted an interim order similar to that of the Supreme Court in "Udaipur Chambers of Commerce and Industry and Others Vs. Union of India and Others," staying the recovery of service tax on royalty until further orders. However, the court did not grant interim protection regarding the levy of CGST and JGST, allowing the revenue to conduct and complete assessment proceedings. The court directed the respondents to file counter-affidavits within three weeks, with petitioners allowed to reply within two weeks thereafter. The matter was scheduled for further hearing in the week of 26th April, 2021. This comprehensive analysis covers all relevant issues and preserves the legal terminology and significant phrases from the original text, ensuring thorough and detailed coverage of the judgment.
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