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TMI Blog2021 (8) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... ory levy of taxes - Contribution to District Mineral Foundation (DMF) is paid to the non -profit trust (DMF Trust) established by the State Government and not to the State Government even if it is assumed that DMF contribution is a consideration towards supply, the applicant submits that the DMF Trust and the State Government are two different persons. The payment of tax under Para 5 of Notification 13/2017 dated 28th June 2017 on RCM basis is not applicable to the DMF Trust. Hence, the applicant being recipient of service from DMF Trust is not liable to pay the GST on RCM basis. The levy if at all applicable is on forward charge and shall be liable to be paid by the supplier of service i.e. DMF Trust. DMF Trust is not local authority within the scope of Section 2 (69) of the GST Law. Royalty is only a measure of NMET and DMF contributions and cannot be equated with NMET and DMF and that NMET and DMF are not in respect of single supply of service i.e. licensing that warrants clubbing of all amounts i.e. Royalty, NMET and DMF under Section 15 of the GST law for the purpose of valuation - There is no correlation between the Royalty payments and the NMET and DMF except for measurem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act respectively) by M/s. Manyam Venkata Rajini, Rajahmundry, East Godavari District, Andhra Pradesh (hereinafter referred to as applicant), registered under the AP Goods Services Tax Act, 2017. 3. Brief Facts of the case: 1. Ms. Manyam Venkata Rajini (Manyam), an individual proprietor and a mining lease holder was granted mining lease rights for LATERITE mineral by Government of Andhra Pradesh vide G.O. Ms. No. 63 dated 24.07.2013 over an extent of 10 hectares of land of Reserve Forest in East Godavari District. 2. On reclassification of Laterite from Major to Minor Mineral, the government has announced fixed Royalty (seigniorage fee) for Laterite vide G.O. M.S No. 105 dated 13.11.2015. The rate of Royalty is ₹ 75/- M.T for non -metal Grade and ₹ 150/- M. r for Metal Grade. 3. The Central Government as per section 9 (c) of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR) read with National Mineral Exploration Trust Rules, 2015 ( NMETR ) has notified the establishment of a trust as a non-profit body to be called the National Mineral Exploration Trust (NMET), for which the mining lease holder shall pay a sum equivalent to two percent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 2 of `MMCDMFR , mining company must deposit a sum or fund/ contribution to NMET and DMF respectively. Such contribution is additional sum to be deposited in NMET and DMF in addition to the royalty amount. The said contribution is not by way of royalty, and said fund is to be utilised for the objectives set under the MMRD Act read with NMETR and MMCDMFR rules framed under the said Act. It is clear from the G.Os issued in respect of DMF and MERIT that these are in connection with grant of mineral rights and the statement of objectives of the MERIT states that the trust fund shall be utilized towards study, identification, acquisition of technology and equipment and also development of mineral database for exploration, exploitation and use by mineral based industries. Further, the funds of DMF are meant for the welfare and benefit of persons and areas affected by mining related operations. Therefore the principal purpose in the case of MERIT seems to be public good. The contributions of the funds as prescribed by the Central Government are to be deposited at the rate of 2% of the royalty and 30% of the royalty in the case of NMET and DMF respectively. From th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipient. The fact that the yardstick for the measurement of the contribution to the NMET and DMF are based on a per ton basis or with reference to Royalty payment to be made separately to the State Government (on which appropriate GST is being paid) will not take away the force of the submission because in law it is a well settled principle that the measure or yardstick for collection of tax will not determine the character or the nature of levy which in this case is a statutory collection by way of tax. (see: Union of India Ors. Vs. Bombay Tyre International Ltd. Ors., (1984) 1 SCC 467) Hence, It has long been recognized that the measure employed for assessing a tax must not be confused with the nature of the tax. 6. Virtual Hearing: The proceedings of Hearing were conducted through video conference on 22 nd October, 2020, for which the authorized representative, Sri S. Thirumalai, Advocate attended and made certain additional submissions which are as ender: 1. Contribution to National Mineral Exploration Trust (NMET) forms part of the Consolidated Fund of India. The collections on account of NMET are not proceeds from business since there is no supply by the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject of the tax, person liable to pay the tax and the rate at which the tax is levied were applied in deciding the validity of the contribution towards DMF. The relevant paras of the judgement are as under: 31. We may also note a similar view expressed in Principles of Statutory Interpretation by Justice G.P. Singh that: There are three components of a taxing statute, viz. subject of the tax, person liable to pay the tax and the rate at which the tax is levied. If there be any real ambiguity in respect of any of these components which is not removable by reasonable construction, there would be no tax in law till the defect is removed by the legislature. 32. In view of the decision of the Constitution Bench of this Court that the specification of the rate of tax (or any compulsory levy for that matter) is an essential component of the tax regime, it is difficult to agree with the learned Additional Solicitor General that specifying the 12th, 14th edition revised by Justice A.K. Patnaik, former Judge, Supreme Court of India, page 876 maximum amount of compensation to be paid to the DMF in terms of Section 98 of the MMDR Act, being an amount not exceeding one -third of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il constituted under article 371A of the Constitution. The definition of the term local authority as defined in Section 2 (69) is exhaustive and not inclusive. Therefore, the local authority includes only those that have been listed in Section 2 (69). Sub clause (a) to (g) except (c) refers to institutions constituted under specific Articles of the Constitution. However, DMF Trusts constituted under the Mines and Minerals (Development and Regulation) Act, 1957 with a specific purpose of interest and benefit of persons and areas affected by mining related operations is not covered under any of the Articles of Constitution as referred in Section 2 (69) ibid. In view of the above, the applicant submits that the levy of GST on DMF, even if applicable, is liable to be discharged by the supplier of service i.e. DMF trust and not the recipient of service i.e. the applicant. 4. Royalty is only a measure of NMET and DMF contributions and cannot be equated with NMET and DMF and that NMET and DMF are not in respect of single supply of service i.e. licensing that warrants clubbing of all amounts i.e. Royalty, NMET and DMF under Section 15 of the GST law for the purpose of valua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in Federation of Indian Mineral ... vs. Union of India on 13th October, 2017 ((CIVIL) NO. 43 OF 2016). The applicant submits that decision of Supreme Court in Federation of Indian Mineral clearly points to the fact that DMF contribution is nothing but the tax payable to the Government. 3. Contribution to District Mineral Foundation (DMF) is paid to the non -profit trust (DMF Trust) established by the State Government and not to the State Government even if it is assumed that DMF contribution is a consideration towards supply, the applicant submits that the DMF Trust and the State Government are two different persons. The payment of tax under Para 5 of Notification 13/2017 dated 28th June 2017 on RCM basis is not applicable to the DMF Trust. Hence, the applicant being recipient of service from DMF Trust is not liable to pay the GST on RCM basis. The levy if at all applicable is on forward charge and shall be liable to be paid by the supplier of service i.e. DMF Trust. DMF Trust is not local authority within the scope of Section 2 (69) of the GST Law. 4. Royalty is only a measure of NMET and DMF contributions and cannot be equated with NMET and DMF and that NMET an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is paying the amount of consideration need not be same under GST. Hence, the activity undertaken by the trust satisfies the definition of supply. Further, section 15 (2) of CGST Act elaborates the components that can be considered under value of supply 2) The value of supply shall include- -- (a) 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, if charged separately by the supplier; From the above it is clear that the charges levied under MMDR Act are meant to be the charges levied under any law other than the GST Act. Thus, the payments made to DMF and NMET are very well includible under the value of supply in addition to the royalties paid and can be called a total consideration received for granting mining and leasing rights. Hence, the argument of the applicant that Royalty is only a measure of NMET and DMF contributions and cannot be equated with NMET and DMF and that NMET and DMF are not in respect of single supply of service i.e. licensing th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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