2021 (8) TMI 472 - HC - Service Tax

Court allows lessee of iron ore mines to appeal service tax on royalty & allied charges; waiver of deposit condition advised.

M/s. TARINI MINERALS (P) LTD. Versus UNION OF INDIA, COMMISSIONER, GST AND CENTRAL EXCISE, ROURKELA, ADDL. DIRECTOR GENERAL, DGGI, BBSR, DIRECTORATE GENERAL OF GOODS AND SERVICE TAX

The court directed the Petitioner, a lessee of iron ore mines, to approach the appropriate forum for appeal regarding the imposition of service tax on ... Maintainability of petition - availability of alternative remedy - appealable order or not - Levy of Service Tax - royalty and allied charges paid by the Petitioner on the minerals extracted by it by virtue of granting of mining lease by the Government in its favour - HELD THAT:- If the order impugned is appealable, the Petitioner is relegated to approach the appropriate forum in accordance with law. At this point of time, Mr. J. Sahoo, learned Senior Advocate for the Petitioner contended that the Petitioner has no objection to approach the appropriate forum under the provisions of law, but the pre-condition of entertaining the appeal is to deposit 75% of the demanded amount, which will cause prejudice to the Petitioner. Therefore, the Petitioner has approached this Court by filing the present writ petition. As the matter is pending before the Apex Court for adjudication, whether service tax is leviable on the royalty collected from the Petitioner for winning of minerals and, as such, an interim order has been passed by the Apex Court to that extent, it is open to the Petitioner to bring all these facts before the appellate forum by filing interlocutory application seeking waiver of predeposit of the amount for entertaining the appeal. If such application is filed, the appellate authority shall consider the same taking into consideration the orders passed by the Apex Court and pass appropriate order in accordance with law. Petition disposed off. Issues:1. Imposition of service tax on royalty and allied charges paid by the Petitioner.2. Contention regarding the legality of service tax and royalty payment.3. Appealability of the impugned order.4. Precondition of depositing 75% of the demanded amount for entertaining the appeal.Analysis:Issue 1: Imposition of service tax on royalty and allied charges paid by the PetitionerThe Petitioner, a lessee of iron ore mines, challenged the imposition of service tax on royalty and allied charges paid on minerals extracted under a mining lease. The government contended that the grant of mining rights constituted a service under Section 66D of the Finance Act, 1994. The Petitioner argued that royalty is not a payment for a taxable service but a price for winning minerals, citing pending cases and previous judgments. The court noted the pending adjudication on the nature of mining royalty and directed the Petitioner to approach the appropriate forum for appeal.Issue 2: Contention regarding the legality of service tax and royalty paymentThe Petitioner's counsel argued that service tax on royalty is ultra vires as royalty is not a taxable service but a state's share in minerals. Referring to previous judgments and pending cases, the counsel contended that mining royalty is a tax and therefore, service tax cannot be imposed on it. The Revenue Department's counsel emphasized the appealability of the order and suggested the Petitioner pursue the matter through the appellate process.Issue 3: Appealability of the impugned orderThe court acknowledged the appealability of the impugned order and directed the Petitioner to approach the appropriate forum for redressal. The Petitioner expressed concerns about the precondition of depositing 75% of the demanded amount for appealing, which could prejudice them. The court advised the Petitioner to file an interlocutory application before the appellate authority seeking waiver of the predeposit, considering the pending adjudication on the levy of service tax on mining royalty.Issue 4: Precondition of depositing 75% of the demanded amount for entertaining the appealThe court highlighted the option for the Petitioner to file an interlocutory application before the appellate authority to seek waiver of the predeposit condition. The appellate authority was instructed to consider the application in light of the pending adjudication and pass a reasoned order within 15 days if the Petitioner files an appeal along with the interlocutory application. The court disposed of the writ petition, allowing the Petitioner to pursue the matter through the appellate process while addressing concerns about the predeposit requirement.