2020 (11) TMI 353 - HC - Service Tax

Imposition of service tax on royalty and allied charges paid by the petitioner on the minerals extracted by it - Grant of mining lease by the Government - Legality of imposition of tax - HELD THAT - If the order impugned is appealable, we relegate the petitioner to approach the appropriate forum in accordance with law. At this point of time, Mr. A.K. Mohanty, learned counsel for the petitioner contended that the petitioner has no objection to approach the appropriate forum under the provisions of law, but the pre-condition of entertaining the appeal is to deposit 75% of the demanded amount, which will cause prejudice to the petitioner. Therefore, the petitioner has approached this Court by filing the present writ petition. As the matter is pending before the Apex Court for adjudication, whether service tax is leviable on the royalty collected from the petitioner for winning of minerals and, as such, an interim order has been passed by the Apex Court to that extent, it is open to the petitioner to bring all these facts before the appellate forum by filing interlocutory application seeking waiver of pre-deposit of the amount for entertaining the appeal. If such application is filed, the appellate authority shall consider the same taking into consideration the orders passed by the Apex Court and pass appropriate order in accordance with law.

Issues:
1. Legality of imposition of service tax on royalty and allied charges paid by the petitioner on minerals extracted by virtue of mining lease.
2. Contention regarding the imposition of service tax on royalty.
3. Appealability of the impugned order.
4. Pre-condition of depositing 75% of the demanded amount for entertaining an appeal.
5. Pending adjudication in the Apex Court on the levy of service tax on mining royalty.

Analysis:

1. The petitioner, a private limited company, challenged the imposition of service tax on royalty and allied charges paid on minerals extracted under a mining lease. The petitioner contended that royalty is not a payment for a taxable service but represents the state's share in minerals, and no service is provided by the state in this regard. The petitioner argued that the levy of service tax on royalty is ultra vires of the law. Reference was made to pending cases in higher courts regarding the nature of mining royalty as a tax.

2. The petitioner's counsel argued that mining royalty is a tax based on previous judgments, and therefore, service tax cannot be imposed on mining royalty. The counsel cited specific court orders to support the contention that mining royalty is considered a tax. The petitioner sought the court's intervention to decide the matter in accordance with the law.

3. The Revenue Department's counsel contended that the impugned order was appealable, and the petitioner should approach the appropriate forum for appeal. The court, after considering both parties' arguments, decided to relegate the petitioner to the appellate authority if the order was appealable. The petitioner expressed concerns about the pre-condition of depositing 75% of the demanded amount for filing an appeal.

4. The court acknowledged the pending adjudication in the Apex Court regarding the levy of service tax on mining royalty. It advised the petitioner to approach the appellate forum with an interlocutory application seeking waiver of the pre-deposit amount for appeal. The court directed the appellate authority to consider the application in light of the Apex Court's orders and pass an appropriate order after affording both parties an opportunity to be heard.

5. The court disposed of the writ petition, instructing the petitioner to file an appeal before the appellate authority within 15 days and submit an interlocutory application if needed. The court emphasized that the appellate authority should consider the application and dispose of the matter in accordance with the law. The court also allowed the use of soft copies of the order due to the ongoing COVID-19 pandemic situation.

This detailed analysis covers the legality of service tax imposition on royalty, the appealability of the order, and the court's directions regarding approaching the appropriate forum for appeal while considering the pre-deposit requirement and the pending adjudication on the levy of service tax on mining royalty.

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