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TMI Blog2019 (1) TMI 1958X X X X Extracts X X X X X X X X Extracts X X X X ..... any service to the particular person who is paying the penalty. Penalties are inbuilt in provisions of law to ensure its strict compliance and it acts as a deterrent for violators. No quid pro quo, which is an essential ingredient for 'service' as held by a catena of decisions of the Apex Court and also lower judicial forum, is present when a person pays penalty to a government or semi government agency. The penalty is imposed by such an agency in the course of imparting its sovereign responsibilities and it is not done for any commercial consideration or for furtherance of business. Penalty is different from `fees' collected by such agencies in as much as the agency is supposed to render certain specific service to a specific class of person in lieu of the fees. It is basically a punishment for violation of law and the monetary element of the penal provision is introduced into it to dissuade and to act as a deterrent and not for any commercial consideration or- for furtherance of business. The penalty so collected, is used by the agency for the good of the general people. Hence, in such cases, the penalty does not satisfy the definition of 'consideration' a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be included in the taxable value, as defined in Section 15 of the GST Act 2017, of the service and are taxable to GST at appropriate rates. - UK/AAAR/03/2018-19 - - - Dated:- 21-1-2019 - SHRI S.H HASAN AND SMT. SOWJANYA, MEMBER Party Represented by : Shri Ashwarya Sharma, Advocate. ORDER (Proceedings under Section 101 of the Central Goods and Service Tax Act, 2017 and Uttarakhand Goods and Service Tax Act, 2017) The present appeal has been filed under Section 100 of the Central Goods and Service Tax Act and Uttarakhand Goods and Service Tax Act, 2017 (hereinafter referred to as the CGST Act and UKGST Act ) by M/s Purewal Stone Crusher, Ramnagar, Nainital, Uttarakhand (hereinafter referred to as the Applicant ) against the Advance Ruling Order No.08/2018-19 dated 05.10.2018 by the Authority for Advance Ruling, Uttarakhand in an application made by them. At the outset, we would like to make it clear that the provisions of both the CGST Act and the UKGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Shulk is different from toll tax and is covered under service code 9997 and is to be treated as 'other services and is liable to a GST @18% (9% each of CGST and SGST) to be paid on reverse charge. (b) The fee collected by UPEPPCB is exempted in terms of sl. No. 4 of the notf. No. 12/2017-CT(R) dated 28.06.2017. (c) Khanij Sampada Shulk is a supply of service and hence is liable to a GST @18% (9% each of CGST and SGST) to be paid on reverse charge. (d) The service of registration provided by the state is exempted and hence no GST is payable on such charges. (e) Penalty imposed by the authority is liable for GST @18% (9% each of CGST and SGST) to be paid on reverse charge. (f) Input credit is allowed on purchase of Pokland, JCB, Dumper and Tipper. IV. Being aggrieved with the said ruling, M/s Purewal Stone Crusher, have filed the present appeal for setting aside the Ruling passed by the AAR to the extent of declaring the following- (A) Penalty paid on stock of RBM on the orders of DM is outside the scope of supply or in the alternative it is an exempt service under GST and hence not taxable under RCM; (B) Abhivahan Shulk paid to TPVP is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he place of business of the appellant. Thereafter, the DM levied a 'penalty' (as claimed by PSC) of ₹ 19858100/- on the said unaccounted stock in terms of powers exercised under the Mines and Minerals (Development and Regulation) Act 1957, the Uttarakhand Secondary Minerals Rules 2001 read with Minerals Policy 2015. The appellant claims that since he has deposited the said 'penalty' amount with the District Geology Mining Department, the unaccounted stock becomes legal and the same can be supplied on payment of GST. He further states that since no GST was paid on purchase of such stock as the same was unaccounted, so the advance ruling was sought for clearing this ambiguity. The appellants have tried to make out a case that penalty imposed by the DM cannot be defined as 'service' in absence of quid pro quo and hence such penalty cannot be leviable to GST. They have cited numerous decisions of various higher judicial forum in support of their contention that penalty imposed by government agency cannot be considered as 'service' as defined in the GST act and rules. At the very outset, we agree with the contention of the appellant that penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of that particular law, there is no contract or agreement between persons for violation of any law or rendering of any type of service otherwise and there is no quid pro quo. It is basically a punishment for violation of law and the monetary element of the penal provision is introduced into it to dissuade and to act as a deterrent and not for any commercial consideration or- for furtherance of business. The penalty so collected, is used by the agency for the good of the general people. Hence, in such cases, the penalty does not satisfy the definition of 'consideration' as contained in GST Act and is therefore not liable to be taxed. Now, coming to the present context, the exact nature of the amount, claimed by the appellant as 'penalty' has to be understood before the above inference is applied. We have gone through the notice of the District Magistrate dated 31.03:2018, issued to the appellant, through which ₹ 19858100/- was demanded on the unaccounted stock of 25530 cu. Mtrs. of RBM. The notice categorically states that this amount consists of royalty @ of ₹ 770/- per cu.mt. totalling to ₹ 19658100/- (Rupees One crore ninety six lakhs fifty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and is therefore undoubtedly subject to levy of GST at the appropriate applicable rates. In fact, the appellants appear to have been paying or at least seem to be aware of, such GST on their legally procured and accounted stock of RBM, as is obvious from para 9 of Annexure-I of the appeal memorandum, wherein they have claimed that since no GST was paid on the purchase of unaccounted stock, so the advance ruling was sought. Therefore, we hold that the payment of ₹ 19658100/- was made by the appellants as royalty which is covered by Heading No. 9973 at entry serial no. 17 of Notification no. 11/2017-CT(R) dated 28.06.2017 and the GST is applicable at the rate prescribed therein. B. Taxability of Abhivahan Shulk and Khanij Sampada Shulk - We find that the AAR has given a well reasoned ruling. Abhivahan Shulk is paid to TVPV only by the license holders and in lieu of this fee, the govt, agency is ensuring the right of passage as well as continued maintenance of supplies. Similarly, Khanij Sampada Shulk is paid only by the lease holders who have been given the right to extract, transport and sell RBM by the District Geology Mining Department who are providing service ..... X X X X Extracts X X X X X X X X Extracts X X X X
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