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TMI Blog2017 (10) TMI 975X X X X Extracts X X X X X X X X Extracts X X X X ..... Ali, Mohammad Ayyub Khan Son of Shri Gulbaz Khan, Syed Sajid S/o Shri Mushtaq Ali, Mohammad Sabir Khan S/o Shri Gulbaz Khan, Mohammad Saeed Khan S/o Habibullah Khan, Mohammad Saeed Khan of Late Mohammad Sher Khan, M/s Perwa Minerals, Sherwa Minerals Private Limited, M/s M W Mines Private Limited Versus The Union of India, The Superintendent, Central Excise, The Assistant Commissioner, Central Excise Department Govind Mathur And Vinit Kumar Mathur, JJ. For the Petitioner : Mr. M.S.Singhvi, Senior Advocate, assisted by Mr. Varun Singhvi Mr. Vivek Aggarwal Mr. D.D.Thanvi Mr. B.M.Bohra Mr. Amit Vyas Mr. Arvind Shrimali For the Respondent : Mr. Vipul Singhvi, Senior Standing Counsel ORDER Per Hon'ble Govind Mathur, J. In this batch of petitions for writ the issue under consideration before us is relating to applicability of service tax on yearly installments due after April 1, 2016 in respect of assignment of right to use any natural resource, more specifically a mining lease granted by Government in the context to notification No.25/2012-ST dated 20.6.2012 read with notification NO.22/2016 dated 13.4.2016, issued by the Government of India. The facto legal background neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation 4.-- A person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an establishment in that territory; Sub clause (i) of sub clause (a) of the aforesaid subsection clearly exempts the transfer of goods or immovable property from charge of service tax." The Act of 1994 also interprets the term "declared services" under Section 66-E and that is as follows:- "Declared services.-- The following shall constitute declared services, namely:- renting of immovable property construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion- certificate by the competent authority. Explanation.-- For the purpose of this clause.-- (I) the expression "competent authority" means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:- architect registered with the Council ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le property, irrespective of the transfer of possession or control of the said immovable property;]" With the enactment of the Act of 1994 the Central Government derived its authority from the residuary Entry 97 of List-1 (Union List) for levying tax on services. To have legal backup to introduce such tax, the parliament by way of constitutional amendment (constitution) (eighty eighth amendment) Act, 2003 introduced Article 268-A, according to that, taxes on services shall be levied by the Government of India and such tax shall be collected and appropriated by the Government in the manner provided in clause (2) of Article 268-A. By the same amendment Act Entry 92-C was also introduced in List-1 - Union List (seventh schedule) appended with the Constitution of India. Important to note here that "service tax" as applied under the Act of 1994 is a value added tax which applies to all commercial activities involving production of goods and provision of services. Invoking powers under sub-section(1) of Section 93 of the Act of 1994 and in super-session of notification No.12/2012- ST dated 17.3.2012, the Government of India issued and published a notification No.25/2012-ST dated 20.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mining lease is neither a service nor a declared service being an authorisation by the State Government to excavate the mineral or consume or sale the same. Such activity is an assignment of a right but such assignment is not prescribed under Section 66-E of the Act of 1994, which pertains to right to use the radio frequency spectrum and subsequent transfers thereof. According to learned counsel appearing on behalf of the petitioners the grant of mining lease could have not been brought within the definition of service or declared service by executive fiat without making necessary amendments in the definition of "service" or "declared service" under the Act of 1994. On behalf of the petitioners, it is also submitted that while executing mining lease no service is rendered either by the State Government or the mining lease holder, as such, no question arises to levy service tax. The term, as per learned counsel for the petitioners, "service" expressly excludes an activity that may result in transfer or title for goods or immovable property by way of gift or any other manner. Grant of mining lease is transfer of the right by the State Government to lease holder to excavate the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment subject to payment of royalty grants mining lease assigning lessee a right to explore and exploit minerals in an area and such assignment of immovable property is a service. A rejoinder to the reply is given by the petitioners, mainly reiterating whatever already stated in the petition for writ. Heard learned counsels. The effect of the amendment introduced under the notification dated 13.4.2016 and its clarification is far reaching as that provides that any service which is not specifically excluded, provided by the Government/local authority, shall liable to service tax irrespective of the fact whether payments have been made to the Government on performing its statutory functions/duties or otherwise. In mining sector, the effect of amendment is apparent as that involves grant of rights to use natural resource by the Government subject to payment of royalty. Under the notification impugned, while the one time charge for grant/assignment of right to use natural resource issued prior to April 1, 2016 has been kept out of the levy of service tax, but i.e. payable on periodic payments made to the Government/local authority, as such, the payment of royalty by the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted only after adhering the procedure prescribed under Chapter-IV of the Rules of 1960. At the threshold, applications for granting mining lease are required to be entertained by the State Government in the prescribed format and further after adhering a definite procedure, mining lease is required to be granted and executed between the parties. The mining lease executed is nothing but a contract to undertake mining operations in the leased mining area. As already stated, the mining operations, as per the conditions of mining lease deed, are subject to payment of royalty. According to Section 2(d) of the Indian Contract Act, 1872, when at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing something, such act or abstinence or promise is called a consideration for the promise. In general, "consideration" is the price for a promise and is an essential ingredient for a contract. It is a value received as incentive for the promise and a contract without that is not binding on the parties. It is a vital element and benefit i.e. to be settled between the parties and also a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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