9911796707
TMI Blog2020 (9) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to such a similar provision under the CGST or MP GST Act would be mentioned as being under the GST Act. 4. Brief facts of the case :- 4.1 The applicant is allotted with various mining sites across the country on lease for excavating minerals. 4.2 As per Section 13 of the MMDR Act, the Central Government has enacted Mineral (Auction) Rules, 2015 (hereinafter referred to as Mineral Rules) to regularize the grant of prospecting licences and mining leases in respect of minerals. 4.3 The Directorate of Geology and Mining, Government of Madhya Pradesh had issued a Notice Inviting Tenders for grant of Mining Lease (ML) for Bunder Diamond Block in Chhatarpur District of Madhya Pradesh. The copy of the Tender Document submitted by the applicant with Application as Annexure -1. 4.4 Once the entire process is completed, the applicant would be granted mining lease in respect of the [hinder Diamond Block under the provisions of Mines and Minerals (Development & Regulation) Amendment Act, 2015 (hereinafter referred to as MMDRA Act) by the Madhya Pradesh State Government. 4.5 For granting the right to excavate diamond, the applicant is required to make various payments to the State Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement of production of mineral. The relevant extract of the same is reproduced hereunder: "12. Payments by the Successful Bidder 12.1. Upfront Payment The Upfront Payment paid by the Successful Bidder shall be adjusted in full at the earliest against the amount payable in accordance with the percentage of Value of Mineral Despatched quoted as the Final Price Offer on commencement of production wineral(s) as specified in MDPA." 4.11 After the upfront payment is made, the state government shall enter into an agreement with applicant for grant of mining lease. The relevant extract of tender document for issuing grant of lease is as under: 3. CONDITION FOR GRANT OF MINING LEASE 3.1. Grant of Mining Lease over the Lease Area shall be conditional upon prior payment of the third instalment of the Upfront Payment which is INR 220,19,87,520 (Rupees Two Hundred Twenty Crore Nineteen Lakh Eighty Seven Thousand Five Hundred Twenty) within a period of 30 days from the Agreement Date. 3.2. Upon such payment, the State Government shall grant a Mining Lease to the Successful Bidder within a period of 30 days from the date of receipt of the payment. 3.3. The date of the commencement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 19.12.2019 (Annexure-4 of application) has issued the "Letter of Intent" in favour of the applicant. 4.17 Even though, the applicant is of the view that the aforesaid monetary payments are in the nature of compulsory extract of money and not for any "supply". The applicant as an abundant caution has decided to discharge GST liability on the upfront payments, at the time when the same are adjusted against the revenue share, under reverse charge mechanism as applicable in terms of SI No. 5 of Notification No. 13/2017-CT(rate) dated 28.06.2017. 4.18 According to the applicant, the amount paid as upfront payment is only in the nature of "deposit" and will not be treated as "consideration" towards grant of mining lease license unless the same is adjusted against amount payable as revenue share. Therefore, the time of supply shall be the adjustment of deposit as a consideration and not the payment of deposit in terms of Section 2(31) of the MP GST Act, 2017. 5. QUESTION RAISED BEFORE THE AUTHORITY - "Whether the upfront payment made by the applicant to the State Government is in the nature of Deposit in terms of Section 2(31) of the MP GST Act, 2017 or is in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions the agreement for grant of lease would be entered. A.5 Further, the amount of so called "upfront payment" paid by applicant is shown as "current assets" in books of accounts of the applicant. The same is not booked as expenditure. The amount would have been proportionately transferred to expenditure for service as and when applicant would have been liable to pay Revenue Share to the State Government. A.6 The amount paid by applicant before entering into agreement is not an "advance" but only a "deposit". In support of this conclusion, the reliance is placed upon decision of the Supreme Court in the case of Shri Hanuman Cotton Mills and Ors. V. Tata Air Craft Limited AIR 1970 SC 1986 (case law at page 7-21 of the compilation). The aforesaid judgement down the following principles regarding earnest money: (1) It must be given at the moment at which the contract is concluded. (2) It represents a guarantee that the contract will be fulfilled or, in other words, 'earnest' is given to bind the contract. (3) It is part of the purchase price when the transaction is carried out. (4) It is forfeited when the transaction falls through by reason of the default or failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt repudiate the contract for the reasons not on account of applicant's default, the state government is liable to refund the "upfront payment" to the applicant. Hence, the state government does not have complete dominion over the amount received from the applicant and hence the same cannot be treated as consideration for provision of service. The state government will have dominion to the extent the "upfront payment" is adjusted to "Revenue share" as a consideration for rendition of supply. C.3 Reliance is placed on the judgement of Supreme Court of the United State in case of Commissioner of Internal Revenue v. Indianapolis Power & Light Company reported at 493 U.S. 203 (1990). The ratio of the above decision was also followed by the Indian Supreme Court in case of Siddheshwari Sahakari Sakhar Kharkhana Ltd. v. CIT, 2004-TIOL-76-SC. C.4 In support of the aforesaid submissions the reliance is also placed on the ratios laid down in the following judgements : a.) Thermax Instrumentation Ltd. v. CCE, Pune-I 2016 (42) STR 19 (Tri-Mum) b.) Thermax Engineering Const. Ltd.2019 (22) GSTL 80 (Tri. Mum) ALTERNATIVELY, THE AMOUNT PAID AS SURETY TOWARDS A CONTRACT WHICH IS CON ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise, in respect of, in response to, or for the inducement of, the supply of goods or service's or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person hut shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; "Section 13(3) of MP GST Act, Time of supply of services - 13(3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:- (a) the date of payment as entered in the hooks of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or (b) the date immediately followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the deposit is not applicable in the case of applicant. 8.6 We find that in this case the upfront payment is payable in three installments and after payment of third installment, the State Government shall grant the mining lease to the successful bidder. We have gone through the tender and other documents submitted by the applicant and found that there is no clause of refund of that amount after allotment of mines on lease, hence the payment made to the state government is no more deposit after allotment of mines but is advance which will be adjusted against the future payment of revenue share amount. In this case, the mining lease is granted after the payment of third installment. The upfront payment made to the state government is treated as advance against the revenue share from the date of allotment of mines and the GST is payable on this advance from the date of allotment of mines to the applicant. 8.7 On going through the said cases laws cited by the Applicant. We find that the case law cited by the applicant are not squarely applicable in the instant case as the facts and circumstances of the case are distinguishable. 8.8 As per the proviso to 2(31), a deposit would be ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
