DMF and NMET payments linked to mining royalty were treated as taxable consideration, attracting service tax under reverse charge.

Amounts paid to the District Mineral Foundation and the National Mineral Exploration Trust, calculated as a percentage of royalty under mining law, were treated as consideration for a taxable rehabilitative service connected with mining rights. Royalty itself was already liable to service tax under reverse charge for the grant of mining rights, and the additional DMF and NMET payments arose from the statutory scheme and the polluter pays principle. The Tribunal also treated these trusts as falling within the relevant governmental authority framework, so service tax under reverse charge applied to the additional payments.

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Issues: Whether the amounts paid towards District Mineral Foundation and National Mineral Exploration Trust, calculated as a percentage of royalty, constituted consideration for a taxable service and attracted service tax under reverse charge mechanism.

Analysis: Royalty on mining leases was treated as consideration for the grant of mining rights by the government and was already subjected to service tax under reverse charge mechanism. The dispute concerned the additional amounts payable to DMF and NMET under the mining law. Those funds were created by the State for rehabilitation and welfare connected with mining activity. The obligation to pay them arose from the polluter pays principle and the statutory scheme under the mining law, and the Tribunal held that the funds were rendering a rehabilitative service to the lease-holder. On that basis, the amounts paid to DMF and NMET were held to be consideration for service. The Tribunal also held that these trusts fell within the description of governmental authority for the relevant exemption framework, and therefore service tax under reverse charge applied.

Conclusion: The additional payments to DMF and NMET were taxable and liable to service tax under reverse charge mechanism, against the assessee.

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