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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 ..... d is only to excavate mineral from the leased area and that activity at the most can be physical `transfer of property by its “renting” as prescribed under Section 65(90a) of the Act of 1994, but not the transfer of title in immovable property. Section 65(90a) pertains to transfer of immovable property by renting and that includes leasing of immovable property for use in furtherance of business and commerce. The absence of the word “title” in this provision is quite important and that indicates the entire activity as transfer of possession of the immovable property for its use or consumption by way of renting, letting, leasing, licencing or by other similar arrangements, as the case may be. The exclusion under Section 65-B(44) is for transfer of title in immovable property, which is conspicuously absent in the grant of lease for mining operations. The tile of the mining area admittedly retains with the State even on execution of mining lease to excavate mineral from the leased area. Petition dismissed - decided against petitioner. - D.B. Civil Writ Petition No. 14578 / 2016, D.B. Civil Writ Petition No. 2706, 2707, 2708, 2715, 2717, 2718, 2878, 2879, 2880, 3032, 3033, 3034, 416 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. The existing definition of service as given under Section 65-B(44) of the Act of 1994 is as follows:- 65B(44) service means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include-- (a) an activity which constitutes merely.-- (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. Explanation 1. For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to.-- (A) the functions performed by the Members of Parliament, Members of State Legislative, Members of Panchayats, Members of Municipalities and Members of other local authorities who received any consideration in performing the functions of that office as such member; or (B) the duties performed by any person who holds any post in pursuance of the provisions of the Constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes additions, alterations, replacements or remodeling of any existing civil structure; temporary transfer of permitting the use or enjoyment of any intellectual property right; development, design, programming, customization, adaption, upgradation, enhancement, implementation of information technology software; agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods; activities in relation to delivery of goods on hire purchase or any system of payment by installments; service portion in the execution of a works contract; service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity; assignment by the Government of the right to use the radio- frequency spectrum and subsequent transfers thereof. It is also relevant to mention that Section 65 of the Act of 1995 clarifies the transfer of immovable properties and i.e. as under:- [90a] renting of immovable property incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant from that, is as follows:- 61. Services provided by Government or a local authority by way of assignment of right to use any natural resource where such right to use was assigned by the Government or the local authority before the 1st April, 2016: Provided that the exemption shall apply only to service tax payable on one time charge payable, in full upfront or in installments, for assignment of right to use such natural resource; The Government of India, Ministry of Finance, on the same day, issued a clarification regarding levy of service tax on services provided by Government or a local authority to business entities. As per the Entry-9 of the circular aforesaid, service tax is payable on such installments in Rule 7 of the Taxation Rules, 2011 as amended vide notification No.24/2016-ST dated 13.4.2016. The exemption given vide notification No.25/2012 dated 20.6.2012 as amended on 13.4.2016 pertains to service tax payable on one time charge, payable in full upfront or in installments, for assignment of right to use any natural resource and not to periodic payment required to be made by the assignee, such as spectrum user charges, licence fee in respect of sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mineral subject to payment of royalty. It is also urged that levy of service tax on payment of royalty is bad as grant of mining lease and its execution by the Central Government or the State Government, as the case may be, is a statutory act and not a service. The payment of royalty by a lessee is also a statutory obligation and i.e. to be paid in proportion to the mineral excavated for sale, use or consumption. In either case the royalty does not come into ambit of service as defined under Section 65-B(44) or declared service as defined under Section 66-E of the Act of 1994. While meeting with the arguments advanced on behalf of the petitioners, it is submitted on behalf of the respondents that all services provided by the Government, Governmental authority or local authority to business entities subject to the specific exemptions, if provided, is leviable to service tax w.e.f. 1.4.2016. In the case in hand, the State Government, while granting mining lease, enables a lessee to excavate minerals subject to payment of royalty/licence fee and as such i.e. nothing but service provided by the Government to the lessee. It is asserted that the exemption is only for transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of a mine holder cannot be treated as service under Section 65-B(44) of the Act of 1994. The same is also not a declared service in view of the fact that the provision relates to assignment by the Government for the right to use the radiofrequency spectrum and subsequent transfers thereof. No clause of Section 66-E pertains to assignment of natural resources. It is asserted that the impugned notification dated 13.4.2016, in light of whatever stated above, is in conflict with the enabling Act, thus, deserves to be declared bad. We have scaled merits of the argument advanced by taking into consideration all relevant provisions. As per Section 9 of the Act of 1957, the holder of a mining lease notwithstanding anything contained in the instrument of lease or in any law in force is supposed to pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from the leased area at the rate the time being specified in the second schedule in respect of that material. In light of the provision aforesaid, the mining operations by a mining lease holder are absolutely dependent to payment of royalty and no mining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration to have mining operations in the leased area on execution of a mining lease. It is a part of agreement arrived between the parties to have lease of a mining area to undertaking mining operations. The royalty being consideration certainly places assignment of right to use natural resources deposited in the leased area as a service as defined under Section 65-B(44) of the Act of 1994, according to which, any activity carried out by a person for another for consideration is a service. The finding arrived by us as above is sufficient to say that the notification dated 13.4.2016 is not at all in conflict with its enabling Act i.e. the Finance Act, 1994 and the same does not suffer from any illegality. On arriving at the conclusion that the activity in question is a service, there is no need to examine the other argument advanced by counsel for the petitioners to challenge the notification aforesaid on the ground that the assignment of right to use natural resource i.e. the mineral deposited in the leased area is also not a declared service . An effort is also made to bring assignment under consideration in exclusion category with submission that by awarding lease ..... 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