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of <h1>Appeal allowed against service tax demand on royalty, DMF, NMET charges under reverse charge mechanism as per Section 66B</h1> <h3>M/s. Shrawan Kumar Pathak Versus Commissioner of Central Excise & Central GST, Jabalpur.</h3> M/s. Shrawan Kumar Pathak Versus Commissioner of Central Excise & Central GST, Jabalpur. - TMI ISSUES: Whether the amount paid as royalty, District Mineral Foundation (DMF), and National Mineral Exploration Trust (NMET) charges to the state government constitutes 'consideration' for a taxable service under the Finance Act, 1944.Whether the appellant is liable to pay service tax under the reverse charge mechanism on royalty and related payments made to the state government for mining rights.Whether the circular No. 192/02/2016 dated 13.04.2016 is binding on the adjudicating authorities and the Tribunal.Whether the extended period of limitation can be invoked for recovery of service tax on such payments. RULINGS / HOLDINGS: The amount paid by the appellant as royalty, DMF, and NMET to the state government does not qualify as 'consideration' for receiving any service from the government within the meaning of the Finance Act, 1944, and hence is not liable to service tax under reverse charge mechanism.The demand for service tax on payments made for mining rights was confirmed 'in total ignorance of the afore discussed judicial precedences thereby violating the judicial protocol,' and is therefore unsustainable.The circular No. 192/02/2016 dated 13.04.2016 has been 'held contrary to the position of law laid down by the superior Courts' and is not binding on the Courts or quasi-judicial authorities including the Tribunal.The extended period of limitation invoked for recovery of service tax in this context is not justified as the taxable event did not arise on the payments made for mining rights during the relevant period. RATIONALE: The Tribunal relied on the legal framework under the Finance Act, 1944, particularly the definition of 'consideration' and the negative list of services under section 66D as it existed prior to 01.04.2016, which excluded most government services from service tax liability.The Tribunal followed its recent decision in M/s. Madhya Pradesh State Mining Corporation Limited, which was affirmed by the Hon'ble Supreme Court on 22.08.2023, holding that payments for mining rights do not constitute consideration for taxable services.Precedents from the Hon'ble Supreme Court, including All India Federation of Tax Practitioners Association vs. Union of India and CCE v. Ratan Melting and Wire Industries, were applied to emphasize that service tax is a 'contract based levy' requiring an apparent service provider-service receiver relationship, absent in the case of royalty payments to the government.Earlier High Court decisions holding otherwise were stayed by the Supreme Court, and subsequent High Court decisions followed the stay, reinforcing the non-taxability of such payments.The Tribunal rejected reliance on circular No. 192/02/2016 as it conflicts with binding judicial precedents and is not binding on adjudicating authorities.
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