2023 (7) TMI 1336 - AT - Service Tax

Service tax demand on compensatory levies paid to CAMPA Fund for forest land conversion ruled unsustainable

CESTAT Kolkata held that service tax demand on compensatory levies paid to CAMPA Fund for forest land conversion was not sustainable. The tribunal ruled ... Levy of service tax - declared service or not - mining of Iron Ore and Manganese at Katamati Iron Ore and grant of lease of mines by the Govt. of Odisha - whether the Appellant has rendered any Service as defined in clause (44) of Section 65B of the Finance Act, 1944? - Extended period of limitation - penalty - suppression of facts or not. HELD THAT:- As per clause (44) of Section 65B, ‘Service’ means any activity carried out by a person for another for consideration, and includes a ‘Declared Service’. Clause (22) of Section 65B of the Act defines ‘Declared Service’ as “an activity carried out by a person for another for consideration and specified in Section 66E of the Act”. In the present case the act of the Appellant tolerated by the Government is the act of conversion/diversion of forest land and use of the same for non-forestry purposes and consideration has been paid for the purpose of tolerating the mining activity by the Government. And for such act of toleration by the Govt., the appellant have paid compensatory levies/charges to CAMPA Fund which is being administered under the aegis of Central Government. Accordingly, the impugned order justified the demand and confirmed the same. The clearance granted by Ministry of Environment, Forest and Climate Change for usage of the forest land falling under the said project for non forest purposes, cannot be considered as a ‘Declared Service’ as defined under Section 66E(e) of the Finance Act, 1944 and the charges of NPV paid by the Appellant cannot be considered as ‘Consideration’ for the said service - the demand of service tax along with interest, in the impugned order is not sustainable. Extended period of limitation - penalty - suppression of facts or not - HELD THAT:- The Appellant has not suppressed any information from the department. In fact the entire NPV was paid to the CAMPA Fund as per law. Hence, extended period cannot be invoked to demand Service tax. As there is no suppression established, penalty under Section 78 of the Finance Act, 1994 not imposable in this case. The impugned order set aside - appeal allowed. Issues Involved:1. Whether the payment of Net Present Value (NPV) for forest clearance constitutes a 'Declared Service' under Section 66E(e) of the Finance Act, 1994.2. Whether the charges paid by the Appellant can be considered as 'Consideration' for the alleged service.3. Applicability of service tax under reverse charge mechanism.4. Whether the Appellant suppressed facts to evade payment of service tax.5. Applicability of exemption under Mega Exemption Notification No. 25/2012.Summary:Issue 1: Declared Service under Section 66E(e)The Tribunal examined whether the payment of NPV for forest clearance by the Ministry of Environment, Forest and Climate Change constitutes a 'Declared Service'. The Tribunal noted that 'Declared Service' includes activities specified in Section 66E(e) such as 'Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act'. The Revenue considered the clearance for forest land usage as a 'Declared Service' and the NPV as 'Consideration' for this service.Issue 2: Consideration for Alleged ServiceThe Tribunal observed that the payment of NPV to the CAMPA Fund is made by operation of law, and the Appellant had no choice in this matter. The payment cannot be considered as 'Consideration' for any service. The Tribunal referenced a similar case, MNH Shakti Ltd vs Commissioner of Central Excise and Service Tax, where it was held that compensation received by operation of law does not constitute 'Consideration' for a service.Issue 3: Applicability of Service Tax under Reverse Charge MechanismThe Tribunal held that since the payment of NPV is not 'Consideration' for any 'Declared Service', the demand for service tax under the reverse charge mechanism is not sustainable. The Tribunal emphasized that the Government's duty to collect charges for forest land diversion is mandated by the Constitution and relevant Acts, and does not constitute a service.Issue 4: Suppression of FactsThe Tribunal found that the Appellant did not suppress any information from the department. The payment to the CAMPA Fund was made as per law, and there was no intent to evade service tax. Therefore, the extended period for demanding service tax and the penalty under Section 78 of the Finance Act, 1994, were not applicable.Issue 5: Applicability of Exemption under Mega Exemption Notification No. 25/2012The Appellant argued that even if the Government provided a service under Section 66E(e), it would qualify for exemption under Serial No. 39 and Serial No. 57 of the Mega Exemption Notification No. 25/2012. The Tribunal did not need to delve into this argument as it had already concluded that no service was provided.Conclusion:The Tribunal set aside the impugned order, holding that the clearance for forest land usage is not a 'Declared Service' and the NPV payment is not 'Consideration' for any service. Consequently, the demand for service tax, interest, and penalty was not sustainable, and the appeal was allowed.