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TMI Blog2020 (12) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 does not hold good. The service provided is only the license to extract mineral ore and also the right to use such minerals extracted is a single service where the consideration is payable under three heads and in case any one of the payments is not made, the service provider, that is the Government would not issue the permit to use the mineral ore so extracted. Hence it forms the value of the supply under Section 15 and the charges for DMF and NMET being compulsory payments, would only amount to application of the amounts paid and still would form the value of the taxable services - there are no separate service providers for royalty, DMF and NMET and in all cases the Government which has provided the license to mine mineral ore and permitted the use of such mineral ore mined would be the person who has provided the service. As per Entry No. 5 of Notification No. 13/2017-Central Tax (rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such manner as prescribed by the Central Government. 4. The Government of Andhra Pradesh (GoAP) has notified establishment of District Mineral Foundations (DMF), vide G.O M.S. No 36 dated 14.03.2016, which shall collect 30% of royalty in this case, 10% in some other cases and also voluntary contributions, to fund the activities specified in the said G.O and these are in the nature of social welfare activities. The payments towards DMF are paid to GoAP (Mining & Geology Department) through online payment on their website. 4. Questions raised before the authority: Whether in the facts and circumstances the contributions to National Mineral Exploration Trust (NMET) and District Mineral Foundation (DMF) under the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR) read with National Mineral Exploration Trust Rules, 2015 ('NMETR') and Mines and Minerals (Contribution to District Mineral Foundation) Rules, 2015 ('MMCDMFR') would qualify as consideration towards supply of mining service by Andhra Pradesh Government and consequently included for purpose of value of supply chargeable to GST under the Reverse Charge Mechanism in the hands of the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rstand that under MMRD Act, it is statutory obligation on the mining company to contribute to the trust and fund as prescribed and such contribution are not in the form of any fee or charges collected by the Central/State Government. In other words there is no quid pro quo. "As per Section 2(31) "consideration" in relation to the supply of goods or services or both includes - (a) any payment made or to be made, whether in money or otherwise, 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 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 but 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration against such supply. This is evident from the fact that the NMET funds are credited to the Consolidated Fund of India. The applicant relies on Page 4 & 5 of the Annual report 2017-18 published by Ministry of Mines, Government of India and is publicly available on www.nmet.gov.in which states as under: The accounting procedure for utilization of NMET funds to be finalized during the current financial year. It is proposed that the States will collect the NMET contribution in their Public Account and transfer these funds to the Consolidated Fund of India (CFI). Reliance was placed on the observations in paragraph 9 of Hingir Rampur Coal Co.'s case. AIR 1961 SC 459 to the following effect: "Tax recovered by public authority invariably goes into the Consolidated Fund which ultimately is utilised for all public purposes, whereas, a cess levied by way of fee is not intended to be, and does not become, a part of the Consolidated Fund. It is ear-marked and set apart for the purpose of service for which it is levied. There is, however, an element of compulsion in the imposition of both tax and fee. When the Legislature decides to render a specific service to any area or to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law is certainty and not vagueness not exceeding one-third could mean one-fourth or one-fifth or some other fraction it is this uncertainty that is objectionable. 33. Therefore, our answer to the second question is that the petitioners are not liable to make any contribution to the DMF from 12th January, 2015." As referred to in Para 33, since the DMF contribution failed the three tests applicable for levy of tax, Supreme Court struck down the levy of DMF contribution from retrospective date. 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. Without prejudice the submissions made under Para 2, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince inception under an agreement between the mining department and the applicant, whereas NMET and DMF were introduced by way of separate legislations for specific purposes. There is no correlation between the Royalty payments and the NMET and DMF except for measurement of NMET and DMF which is based on Royalty. If the intention had been to collect additional amounts akin to Royalty, the Government would have either increased the Royalty rate or collected the same as surcharge linked to Royalty. Merely because, the NMET and DMF payments were based on Royalty amounts, the same cannot be conjoined and termed as one to levy the GST. Without prejudice to the submissions made in Para 1-3 supra, if it is assumed that NMET and DMF are supply of services, the same cannot be termed as single service and therefore clubbed to arrive at value under Section 15 of the GST Law. 5. Discussion and Findings: We have examined the issues raised in the application. The taxability of the goods and services supplied or to be supplied, as governed under the provisions of respective GST Acts are examined. The applicant seeks clarification on two issues a) Whether the contribution to National Min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll amounts i.e. Royalty, NMET and DMF under Section 15 of the GST law for the purpose of valuation. The applicant submits that Royalty has been in existence and payable since inception under an agreement between the mining department and the applicant, whereas NMET and DMF were introduced by way of separate legislations for specific purposes. There is no correlation between the Royalty payments and the NMET and DMF except for measurement of NMET and DMF which is based on Royalty. If the intention had been to collect additional amounts akin to Royalty, the Government would have either increased the Royalty rate or collected the same as surcharge linked to Royalty. Merely because, the NMET and DMF payments were based on Royalty amounts, the same cannot be conjoined and termed as one to levy the GST. Without prejudice to the submissions made in Para 1-3 supra, if it is assumed that NMET and DMF are supply of services, the same cannot be termed as single service and therefore clubbed to arrive at value under Section 15 of the GST Law. As per Sec. 9B of the Mines and Minerals (Development & Regulation) Act, 1957, DMF (District Mineral Foundation) is a trust which is formed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law for the purpose of valuation does not hold good. The service provided is only the license to extract mineral ore and also the right to use such minerals extracted is a single service where the consideration is payable under three heads and in case any one of the payments is not made, the service provider, that is the Government would not issue the permit to use the mineral ore so extracted. Hence it forms the value of the supply under Section 15 and the charges for DMF and NMET being compulsory payments, would only amount to application of the amounts paid and still would form the value of the taxable services. It is also inferred that the service is a single service as discussed above, there are no separate service providers for royalty, DMF and NMET and in all cases the Government which has provided the license to mine mineral ore and permitted the use of such mineral ore mined would be the person who has provided the service. As per Entry No. 5 of Notification No. 13/2017-Central Tax (rate), GST on services supplied by Central Government State Government or Local Authority, to a business entity needs to be paid by such business entity under RCM. In view of the foregoing, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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