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 that forest clearance granted by Ministry of Environment, Forest and Climate Change for non-forest purposes does not constitute a "Declared Service" under Section 66E(e) of Finance Act, 1944, and NPV charges paid cannot be considered as consideration for such service. The tribunal found no suppression of facts by the appellant, as entire NPV was paid to CAMPA Fund as per law, making extended period of limitation and penalty under Section 78 not applicable. The impugned order was set aside and appeal allowed.

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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 Service
The 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 Mechanism
The 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 Facts
The 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. 25/2012
The 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.

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