2022 (3) TMI 1369 - HC - Service Tax

Validity of Show Cause Notice (SCN) - service tax is leviable on royalty paid on mining operations or not - petitioner contended that this issue is pending before the larger bench of the Supreme Court in a reference to 9 judge bench in the meantime, service tax should not be allowed to be recovered - HELD THAT - Firstly this petition is directed against the show cause notice and in this adjudication process is still not over. It is true that even against the show cause notice this Court would entertain the writ petition if jurisdiction question is raised. In other words, if the authority issuing show cause notice has no jurisdiction to levy a tax, this Court would not insist on the assessee submitting to such notice. However in the present case the issues as of now stand concluded against the petitioner. Petitioner has candidly placed for consideration a Division Bench judgment of this Court in the case of UDAIPUR CHAMBERS OF COMMERCE AND INDUSTRY VERSUS THE UNION OF INDIA, THE SUPERINTENDENT, CENTRAL EXCISE AND OTHERS 2017 (10) TMI 975 - RAJASTHAN HIGH COURT in which the question of service tax on royalty on mining lease was examined and decided against the assessee. The decision of 5 judge bench of the Supreme Court in case of STATE OF WEST BENGAL AND ANOTHER VERSUS KESORAM INDUSTRIES LTD. AND ANOTHER 2004 (1) TMI 71 - SUPREME COURT would also be applicable. Merely because the Supreme Court in subsequent decisions has doubted the correctness of the view of the 5 judge bench and referred the issue to 9 judge bench, would not persuade us to stay the department from issuing notice and adjudicating the demands. It is noted that the reference was made to the larger bench by an order passed in MINERAL AREA DEVELOPMENT AUTHORITY ETC. VERSUS M/S STEEL AUTHORITY OF INDIA ORS 2011 (3) TMI 1554 - SUPREME COURT . If all the proceedings are stayed awaiting the reference judgment even before the adjudication has been completed, there is serious apprehension of the evidence and materials getting lost. We would therefore not like to stop the department from even carrying out the adjudicating process on the petitioner s expectation that the larger bench of 9 judge may reverse the decision in the case of Kesoram Industries. Petition dismissed.

Summary

Issues: Challenge to show cause notice for recovery of service tax on royalty paid on mining operations.

The judgment by the Rajasthan High Court involved the challenge to a show cause notice issued by the Assistant Commissioner of Central Goods and Service Tax Division-F, Bharatpur, calling for the recovery of service tax on royalty paid on mining operations. The petitioner contended that no service tax is leviable on such royalty payments, citing pending issues before a larger bench of the Supreme Court. The Court noted that the adjudication process was not yet complete, and the jurisdiction question was not raised against the authority issuing the notice. The Court referred to a Division Bench judgment of the Court and a decision of a 5-judge bench of the Supreme Court, which had ruled against the assessee on the issue of service tax on royalty on mining lease. Despite doubts raised by subsequent Supreme Court decisions and a reference to a 9-judge bench, the Court declined to stay the department from issuing notice and adjudicating the demands.

Furthermore, the Court highlighted the importance of allowing the adjudication process to continue to prevent the loss of evidence and materials, especially considering the pending reference to a larger bench. Staying all proceedings until the reference judgment could lead to potential loss of crucial information. Therefore, the Court dismissed the petition, emphasizing the need to allow the department to carry out the adjudication process without hindrance based on the petitioner's expectation of a reversal by the larger bench of the Supreme Court.