Reverse charge on mining-lease royalty depended on pre-01.04.2016 Government-service rules; matter remanded for fresh examination.

Service tax under reverse charge on royalty paid to Government for a mining lease turned on whether the service was provided or agreed to be provided before 01.04.2016. Before that date, Government services were largely within the negative list, while the 01.04.2016 amendment moved services by Government to business entities outside it. Because the lease was stated to have been executed before 01.04.2016, the lease documents had to be examined to determine the correct tax position. The demand could not be finally sustained on the existing record, and the matter was remanded for fresh decision under the pre-01.04.2016 law.

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Issues: Whether service tax under reverse charge was payable on royalty paid to the Government under a mining lease executed before 01.04.2016.

Analysis: The levy of service tax under Section 66B of the Finance Act, 1994 depends on the time when the service is provided or agreed to be provided. Prior to 01.04.2016, services by Government were substantially covered by the negative list under Section 66D of the Finance Act, 1994, and the amendment effective from 01.04.2016 brought services by Government to business entities outside the negative list. As the mining lease agreement was stated to have been executed before 01.04.2016, the relevant factual issue required examination of the lease documents, which had not been considered by the lower authorities.

Conclusion: The demand could not be finally sustained on the existing record and the matter was remanded for fresh decision after considering the lease agreements and applying the law applicable to the pre-01.04.2016 period.

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