Tribunal Rules Appellant Not Liable for Service Tax on Odisha Water Charges; Agreement Not "Allocation of Resources.

The Tribunal set aside the impugned order, ruling that the appellant was not liable to pay service tax on water charges paid to the Government of Odisha. The Tribunal determined that the water supply agreement did not constitute "allocation/auction of natural resources" under Section 65B (44) of the Finance Act, 1994. The appeal was allowed, granting consequential relief to the appellant.

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Issues:
Challenge of service tax on water charges paid to the Government of Odisha for supply of water against charges in terms of an Agreement dated 25.11.2014.
Dispute regarding levy of service tax on water charges paid by the Appellant to the Government of Odisha for supply of water against charges/consideration at a specified rate stipulated in the Agreement.
Interpretation of Section 65B (44) of the Finance Act, 1994 to determine if the appellant is liable to pay service tax under the category of "allocation/auction of natural resources."

Analysis:
The appellant, engaged in fertilizer manufacturing in Odisha, challenged the service tax imposed on water charges paid to the Government for water supply under an Agreement. The issue arose due to the categorization of water supply as "allocation/auction of natural resources" subject to service tax from 01.04.2016. The appellant received a Show Cause Notice for service tax demand from 1st April, 2016 to 30th June, 2017, invoking an extended period of limitation. The adjudicating authority upheld the demand, leading to the appellant's appeal.

The appellant argued that a similar issue was settled in a previous Tribunal case, citing Sasan Power Limited vs. Commissioner of CGST & Excise, Jabalpur. The appellant contended that the impugned order should be set aside based on the precedent. Conversely, the Revenue's representative supported the adjudicating authority's findings. The Tribunal considered both arguments and examined whether the appellant fell under the category of "allocation/auction of natural resources" for service tax liability under Section 65B (44) of the Finance Act, 1994.

Referring to the Sasan Power Limited case, the Tribunal analyzed the nature of the Agreement between the appellant and the Government for water supply. The Agreement specified water charges based on the volume drawn by the appellant, indicating a supply arrangement rather than an assignment of rights to natural resources. Consequently, the Tribunal concluded that no service was provided by the Government to the appellant, leading to the setting aside of the impugned order. The Tribunal ruled that the appellant was not liable to pay service tax on water charges, as it did not fall under the category of "allocation/auction of natural resources."

In light of the above analysis, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellant if applicable. The decision was pronounced in open court, affirming that the appellant was not obligated to pay service tax on the water charges paid to the Government for water supply.

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