PAYMENT OF RCM ON SENIORAGE CHARGES, Goods and Services Tax - GST

[gunda ashok kumar]

Sir,

It is submitted that one of my client has paid the tax on senior age charges through forward charges for the period from July 2017 to March 2023 as there was no clarity for payment of RCM on senior age charges till issue of Circular No.164/20/2021-GST dated 6-10-2021 now department is asking to pay the RCM on senior age charges. Recently Apex court given the judgement that the senior age charges is not tax and levy of GST on senior age charges is pending. Therefore we request to clarify for payment of GST on senior age charges by way of RCM

Posts / Replies

[Sadanand Bulbule]

Refer issued ID No.119484 which is on similar query.

[KASTURI SETHI]

(i) Tax cannot  be  charged twice. Same transaction cannot be charged more than once. Case laws can be traced out. One case law  is appended below. Case laws pertaining to GST regime on the issue is also available. Make efforts. 

2013 (32) S.T.R. 628 (Tri. - Ahmd.)

IN THE CESTAT, WEST ZONAL BENCH, AHMEDABAD

[COURT NO. II]

Shri M.V. Ravindran, Member (J)

ANGIPLAST PVT. LTD.

Versus

COMMISSIONER OF SERVICE TAX, AHMEDABAD

Final Order No. A/10433/2013-WZB/AHD, dated 18-3-2013 in Appeal No. ST/16/2012

Demand - Goods Transport Agency service - Recipient of service - Failure to discharge Service Tax liability on freight charges for outward transportation - Certificates issued by transport companies categorically specifying that Service Tax raised in invoices discharged - Certificates clearly indicating transport company’s Service Tax registration no. and PAN number - Bench’s decision in Navyug Alloys Pvt. Ltd. [2009 (13) S.T.R. 421 (Tribunal); Mandev Tubes [2009 (16) S.T.R. 724 (Tribunal)] and Geeta Industries Pvt. Ltd. [2011 (22) S.T.R. 293 (Tribunal)] and C.B.E. & C.’s Letter F. No. 341/18/2004-TRU (Pt.), dated 17-12-2004 squarely covers issue in assessee’s favour - Demand set aside - Section 73 of Finance Act, 1994. [paras 8, 9]

Strictures against First Appellate Authority - Transport Companies Certificate indicating Service Tax registration number - Lower authority ought to have called for details from concerned jurisdictional Service Tax Authorities - Entire blame of non-production of documentary evidence ought not to have been shifted on assessee - Section 86 of Finance Act, 1994. [para 8]

Appeal allowed

CASES CITED

Commissioner v. Geeta Industries Pvt. Ltd. — 2011 (22) S.T.R. 293 (Tribunal) — Followed [Paras 4, 9, 10]

Mandev Tubes v. Commissioner — 2009 (16) S.T.R. 724 (Tribunal) — Followed.... [Paras 4, 9, 10]

Navyug Alloys Pvt. Ltd. v. Commissioner — 2009 (13) S.T.R. 421 (Tribunal) — Followed [Paras 4, 9, 10]

DEPARTMENTAL CLARIFICATION CITED

C.B.E. & C. Letter F. No. 341/18/2004-TRU (PT.), dated 17-12-2004.................... [Paras 5, 9, 10]

REPRESENTED BY :        Ms. Shilpa P. Dave, Advocate, for the Appellant.

Shri K.J. Joshi, AR, for the Respondent.

[Order]. - This appeal is directed against order-in-appeal No. 282/2011 (STC)/k.anpazhakan/Commr.(A)/Ahd, dated 2-11-2011.

2. The relevant facts that arise for consideration are that during the course of audit it was noticed that the appellant were paying freight charges for outward transportation of the goods and had not discharged the Service Tax liability. It was concluded that the appellant being recipient of goods transport agency services and as per the provisions of Rule 2(1)(d)(v) of the Service Tax Rules, 1994 is required to discharge such Service Tax liability on the reverse charge mechanism as provided under provisions of the Finance Act, 1994. Appellant were issued show cause notice by the department demanding the Service Tax liability. The appellant replied to the said show cause notice claiming that out of the total Service Tax liability demanded, the transporters have paid an amount of Rs. 40,850/- and balance of Rs. 22,349/- is discharged by the appellant as a recipient of the services for inward transportation. The adjudicating authority after following the due process of law confirmed the demands appropriated the amount paid by the appellant against demand of Rs. 22,349/- and imposed penalties besides seeking recovery of interest from the appellant.

3. Aggrieved by such an order, appellant preferred an appeal before the first appellate authority. The first appellate authority also did not agree with the contentions raised by the appellant and upheld the order-in-original.

4. Ld. counsel appearing on behalf of the appellant would submit that the appellant has discharged the Service Tax liability of Rs. 22,349/- while as regards the Service Tax liability on Rs. 40,850/- she submits that the details were given to the lower authorities and she would draw my attention to the certificates issued by the transport agencies which are annexed at page Nos. 35 to 39. It is her submission that the Service Tax demand of Rs. 40,850/- has been discharged by the transporters which is very clear from the certificate issued. It is her submission that in an identical issue, this Tribunal in the following cases has held that Service Tax liability cannot be fastened upon the recipient of the services.

1.      Navyug Alloys Pvt. Ltd. - 2009 (13) S.T.R. 421 (Tri.-Ahmd.)

2.      Mandev Tubes - 2009 (16) S.T.R. 724 (Tri.-Ahmd.)

3.      Geeta Industries Pvt. Ltd. - 2011 (22) S.T.R. 293 (Tri.-Del.).

5. She would also rely upon the C.B.E. & C. Circular No. 341/18/2004-TRU (Pt.), dated 17-12-2004 which specifically states as to that Service Tax is discharged by the transporters, Service Tax should not be discharged from any other person to avoid double taxation.

6. Ld. Assistant Commissioner (AR) on the other hand would submit that these services which has been brought to the notice of the Bench are only indicating year-wise discharge of Service Tax liability by the transporters and does not give any specific details. It is his submission that in the absence of any specific details, first appellate authority was correct in dismissing the evidences produced not being authentic documentary evidence for discharge of Service Tax liability by the transporters.

7. I have considered the submissions made at length by both sides and perused the records. I find that the issue which has to be decided by the Tribunal is only in respect of the amount of Service Tax liability of Rs. 40,850/-, interest thereof and the various penalties imposed on such Service Tax liability on the ground that this amount of Service Tax liability is on the outward transportation facility availed by the appellant from various transporters.

8. On perusal of the records, I find that there is no dispute that the amount of Service Tax liability which is contested before the Bench is in respect of the services rendered by M/s. Naranji Peraj Transport Co., M/s. Pathik Roadlines and Transport Corporation of India Ltd. On perusal of the certificates issued by these transport companies, as annexed page Nos. 36, 37 & 38, I find that these transporters have categorically stated that the Service Tax liability for the invoices raised on the appellant has been discharged by them and they had also mentioned their Service Tax registration number and PAN number in their certificates. As against such documentary evidences, the first appellate authority’s findings as to no authentic documentary evidence has been produced, seems to be incorrect. Since the certificates clearly indicate the Service Tax registration number, the least that could have been expected from the Revenue, was to call for the details from the concerned jurisdictional Service Tax authorities. Having not done, the lower authorities cannot shift the entire blame on the appellants for having not produced any authentic documentary evidence.

9. I find that the decision of this Bench in the cases Navyug Alloys Pvt. Ltd. (supra), Mandev Tubes (supra) and Geeta Industries Pvt. Ltd. (supra) will squarely cover the issue in favour of the assessee. I also find that C.B.E. & C. vide Circular dated 17-12-2004, specifically in para 5.7 stated that - “If Service Tax due on transportation of a consignment has been paid or is payable by a person liable to pay Service Tax, Service Tax should not be charged for the same amount from any other person, to avoid double taxation.”

10. In my view, the Board’s circular as well as the decisions relied upon by the ld. counsel would cover the issue in the favour of the assessee.

11. Accordingly, appeal to the extent it is challenged before the Tribunal for setting aside of the demand of the Service Tax liability of Rs. 40,850/- with interest and consequent penalties is set aside and the appeal is allowed to that extent.

(Dictated and pronounced in the Court)

_______

(ii) However, a  Ccarificatory circular has always retrospective effect, unless specifically mentioned otherwise.

[DEVARA SIVAPRASAD]

It is a Composite Supply of Services in terms of the MMDR Act, 1957 and APMMC Rules, 1966 made there under, by way of issuance of Permit/License under Lease deed for

    i. Assignment/Transfer of Right to carry out Mining Operations for the purpose of

        winning/Extract any Mineral from the Mine

   ii.  Assignment/Transfer of Right to evaluate the Extracted Mineral

   iii. Assignment/Transfer of Right to dispatch the Extracted Mineral

  iv. Any other incidental or ancillary Services to carry out the  Assignment/Transfer of right to  use Minerals including its Exploration and Evaluation as the ambit & scope of the Impugned Services covers under “Inclusive definition”

      It is supply of Composite Services by the State Government, which are naturally bundled and supplied together in the ordinary course of business of the Mining Industry and the principal supply being the “Supply of Licensing Services for Assignment/Transfer of right to undertake Mining Operations for the Purpose of Winning or Extracting Granite Mineral from the Mine."

         As seen Tariff Notification No.11/2017-Central Tax (rate) dt.28.06.2017 as amended from time to time, Impugned services of “assignment/Transfer of right to use Minerals including its exploration and evaluation” does not have most specific description up to 31-12-2018 like in service Tax regime.        

        Even though, various Tariff entries were there for   “Leasing  and  rental  Services” but  the same  are related to the Transactions involved in supply of Goods and the subject Impugned services are naturally bundled Services and there is a transfer of Right in the Immoveable property only to extract and use the Granite Moulds etc . In other words, there is no leasing or renting of goods in the subject Transaction.  As such, the Impugned services fit to be classified under residual services of “Services nowhere specified” under the Heading of 9997 and attracting CGST Rate @9%adv up to 31-12-2018.

        However, after the amendment of Notification No.11/2017-Central Tax (Rate) dt.28.06.2017 vide Notification No.27/2018-Central tax (rate) dt.31.12.2018,  the Impugned Services are having most Specific Description under “Licensing Services for the right to use Minerals including its exploration and Evaluation falling under the Clause (Viii) at S.No.17 of the Tariff Notification No.11/2017-central tax (Rate) dt.28.06.2017 and having specified Tariff Service Accounting Code of 997337, attracting CGST rate of 9%adv.  As such, the Impugned Services are taxable attracting CGST rate @ 9%adv under residual Services of “9997” up to 31-12-2018 and attracting CGST rate @9%adv under specific tariff Service Code of 997337 from 01-01-2019 onwards. Similarly, for the same reasons, the transactions are taxable under SGST at 9%adv right from 01-01-2017 onwards.  As such, the said Impugned Services are taxable Supply in terms of the Section 2(108) of the CGST Act right from 01-07-2017 onwards.     

        Therefore after the amendment of Notification No.11/2017-Central Tax (Rate) dt.28.06.2017 vide Notification No.27/2018-Central tax (rate) dt.31.12.2018,  the Impugned Services are having most Specific Description under “Licensing Services for the right to use Minerals including its exploration and Evaluation falling under the Clause (Viii) at S.No.17 of the Tariff Notification No.11/2017-central tax (Rate) dt.28.06.2017 and having specified  Tariff Service Accounting Code of 997337, attracting CGST rate of 9%adv. The said Tariff Service Accounting Code has been deciphered as follows:

99: ‘99’ denotes Chapter Number and covers “All services”

7: ‘7’ denotes Section Number under Chapter No.99 and covers “Financial and related Services; real estate Services; and rental and leasing Services”

9973: ‘9973’ denotes Heading Number under Section 7 of the Chapter 99 and covers “Leasing and rental Services with or without Operator”

99733: “99733” denotes “Group” Number under the heading of ‘9973’ of section 7 of the Chapter 99 and it covers “Licensing Services for the Right to use Intellectual Property Rights and similar Products”

997337: “997337” denotes the “Tariff Service Accounting Code” under the Group of “99733” of the Heading “9973” of the section “7” of the Chapter No.99 and it covers the “licensing Services” for the Right to use Minerals including its exploration and evaluation.

     From the above, it is very clear that the Impugned activity of State Government, i.e.; “Supply of Licensing Services” by the State Government for the right to use Minerals to the Petitioner clearly falls under the Tariff SAC of “997337”.

VALUATION:-

        As seen from the definition provided for Consideration under the Section 2(31) of the CGST Act, 2017 clearly indicates that “any income generated on account of Supply of Impugned Services attracts GST under GST regime and any income generated on account of Provision of Services attracts Service Tax read with definition provided for “Consideration” under Indian Contract Act 1872, before the introduction of GST.”

         Further, as seen from the ambit & Scope of the Section 15 of the CGST Act, 2017 read with section 2(31) ibid doesn’t bar to include all Charges including any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act.         

          From the provisions of Section 9 of the MMMDR Act and the APMMC Rules, 1966, it is also clearly understood that the Royalty/Seigniorage Fee is the consideration made by the Petitioner towards receipt of Impugned Services. Further, as seen from the Section 9(B) & 9(C) ibid that the DMF Charges/Cess/Tax and NMET/MERIT CHARGES as the case may be, Charges are directly linked to the Royalty amount paid and the same are being paid as a percentage of the Royalty amount as per directions of Central/State Government, as the case maybe. As such, it is clearly understood that these charges are being paid on account of supply of Impugned Services. The same is evident from the Provisions of MMDR Act,1957 and APMMC Rules,1966 that the “Mining Lease holder should pay DMF Charges, NMET/MERIT CHARGES as the case may be, or MERIT  Charges, as the case may be in addition to royalty for extracting and to use such Mineral. In other words, Payment of DMF charges, NMET/MERIT CHARGES as the case may be, Charges in addition to Royalty on account of receipt of Impugned Services is a sine-qua-non for getting the Mining Lease/license. Otherwise, the mining Permit would be put on hold and the petitioner is not able to utilize the extracted Mineral. Then, there would be no supply.    

           The “Principles of interpretation of Specified Description of Services or bundled Services” as exists under the Finance Act,1994 would be applicable even in GST era in terms of the section 174(3) of the CGST Act read with Section 6 of the General Clauses Act, 1897 as the GST Law is silent on the aspect of “Principles of interpretation of Specific Description of Services” or in other words, there is no specific provision under the GST Law to say that a different intention appeared in the GST Act other than which appears in the Erstwhile Finance Act,1994 with regard to Principles of interpretation of Specified Description of Services or bundled Services.

        

By applying the said principles of interpretation of Specified Description Services or bundled Services, following inferences can be drawn:

1. Where a service is capable of differential treatment for any purpose based on its description, the most Specific description will prevail over General Description in terms of clause (2) of the section 66F of the Finance Act,1994.

 

ii.if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character in terms of the Clause 3(b) of the Section 66F of the Finance Act,1994.

          

[DEVARA SIVAPRASAD]

      In continuation to the above,  as seen Tariff Notification No.11/2017-Central Tax (rate) dt.28.06.2017 as amended from time to time, Impugned services of “assignment/Transfer of right to use Minerals including its exploration and evaluation”  as  existing  in  Service  Tax  regime  does  not  have neither most specific description nor General Description up to 31-12-2018. Even though, various Tariff entries were there for “Leasing and rental Services” but the same are related to the Transactions involving supply of Goods whereas the subject Impugned services are naturally bundled Services involving transfer of Right in the Immoveable property to extract and use the Granite Mineral. In other words, in the subject Transaction, there is no leasing or renting of goods and thus there are no underlying Goods to be transferred in the subject Transaction.  As such, the Impugned services fit to be classified under residual services of ‘Services nowhere specified” under the Heading of 9997 attracting CGST Rate @9%adv up to 31-12-2018.’

         Hope I clarified this issue. You have misinterpreted the  Apex Court issue  or u have not gone through the judgment, I feel.  In the Apex Court issue, the subject issue was dealt in an incidental manner. However, it has clarified so many issues with regard to Levy of GST on Royalty Fee/Seigniorage Charges. Pl go through the Of late Himachal Pradesh recent  judgment which clarified the levy of GST upon Royalty/Seigniorage Charges.

[DEVARA SIVAPRASAD]

  While coming to your Query, it is not clear how did he pay Tax on Seigniorage Charges for the Composite Supply made by the State Government.

[KASTURI SETHI]

Dear Querist,

                     (i)   Your client is the service recipient and Govt. (Central or State) is the service provider (supplier). How can your supplier  deposit GST under FCM ? 

                      (ii)  The term, 'Seigniorage charges' does not find place in the Board's Circular dated 06.10.21. How the circular  is applicable to the subject issue ? 

                       (iii)  Mention the citation of the judgement of the Supreme Court.

                       (iv) It appears that the query has not been properly framed. It has been framed without going deeply into the circular and the judgement of the Apex Court.

[Sadanand Bulbule]

Dear Sir,

Pecisely you have pointed out the “pits” in the query. 

[KASTURI SETHI]

As per legal dictionary meaning of the word,  'seigniorage' charges are minting charges for converting bullion into coins.'  Seigniorage  is the profit made by the Government  on the coining of money.   

                                                              Source : The Law Lexicon Compiled and edited by P.                                                                               Ramanatha Aiyer  Publishers : Wadhwa and                                                                                Company, Nagpur 

The term, 'seigniorage'  is used in Section 4 (1)  of Kerala Grants and Leases Act, 1980 (16 of 1980) to highlight the prerogative of the State in relation to property belonging to the lessee or grantee but standing on State-owned land, 

                                                                 Source : Supreme Court Words & Phrases with                                                                    Legal Maxims Judicially considered : Compiled by                                                                 Surendra Malik and Sumeet Malik  Publishers Eastern                                                               Book Company Lucknow