Interim stay on service tax recovery for mining lease royalty granted pending challenge, subject to undertakings.

Interim protection was granted against recovery of service tax on royalty payable for mining lease operations, as the challenge to the levy remained pending. The HC noted that similar interim relief had already been granted in connected proceedings before the SC and declined, at this stage, to examine merits of questions not previously considered there. To balance the interests of both sides, the stay on recovery was made subject to undertakings by members of the petitioner associations to pay the tax if the petitions ultimately failed.

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Issues: Whether interim protection should be granted against recovery of service tax on royalty payable for mining lease operations pending final adjudication of the petitions.

Analysis: The petitions raised a challenge to the levy of service tax on royalty in the context of mining leases. The Court noted that similar relief had been granted by the Supreme Court in connected proceedings arising from the Rajasthan High Court decision and considered it appropriate, at this stage, not to enter into the merits of questions that had not been examined in that earlier decision. The Court found that the interests of both sides could be protected by granting comparable interim relief, subject to undertakings by the members of the petitioner associations to discharge the tax liability if they ultimately failed in the petitions.

Conclusion: Interim relief was granted and recovery of service tax on royalty was stayed, subject to undertakings from the members of the petitioner associations.

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