2026 (2) TMI 1340 - AT - Service Tax

Limitation period and condonation: appeals filed beyond the statutory condonable period are barred; royalty for resource use attracts reverse charge service tax.

The note addresses two issues: first, statutory limitation restricts the appellate authority's power to condone delay to a prescribed maximum, and where ... Limitation and condonation of delay in appeals - service tax on right to use natural resources / royalty - reverse charge mechanism for services provided by Government or local authority - extended period of limitation and allegation of suppression - principles of natural justice and opportunity of personal hearing - HELD THAT:- Counsel of the appellant trying to emphasize that he has not being heard by the Commissioner (Appeals) which is contrary to the facts as recorded in the impugned order. First Appellate Authority has categorically recorded that Counsel for the appellant had appeared before him through virtual mode on 05.08.2025 and reiterated the grounds of appeal, which has been taken into account while dismissing the appeal of the appellant. Hence, no merits in the argument advanced by the appellant for denial of principles of natural justice. No merits in the submissions that the appeal was dismissed without hearing him. Service tax on right to use natural resources / royalty - reverse charge mechanism for services provided by Government or local authority - extended period of limitation and allegation of suppression - It is observed that the appeal was to be filed before the Commissioner (Appeal) after the condonable period from the date of the receipt of the Order-in-Original by the appellant. As per the proviso Commissioner (Appeal) has been granted the power to condone delay of one month in filing the appeal on sufficient cause being shown. In the present case appeal was filed before the Commissioner (Appeal) after expiry of condonable period from the date of receipt of Order-in-Original. Hence Commissioner (Appeal) has rightly held that appeal was filed beyond the prescribed period of limitation and has dismissed the same on this ground alone. This issue is squarely covered by the decision of Hon’ble Supreme Court in the case of M/s Singh Enterprises [2007 (12) TMI 11 - SUPREME COURT], wherein it has been held that Commissioner (Appeals) could not condone the delay beyond the 30 days in filing the appeal before him, As per the Section 37C of the Central Excise Act, 1944 it is the date of service of the order, which is material for determining the period of limitation in filing the appeal and not the date of knowledge. It is evident that the Order-in-Original was send to the appellant on 16.03.2023 and would have been received by him within the reasonable time as per Section 27 of the General Clauses Act. Nothing has been stated by the appellant in the appeal before Commissioner (Appeals) to counter the presumption as per this section of General Clauses Act. Accordingly, no merits in the submissions made by the appellant in this regard. Accordingly, no merits in this appeal filed by the appellant. Issues: (i) Whether the appeal against the Order-in-Original is barred by limitation and whether delay could be condoned beyond the statutory condonable period; (ii) Whether royalty/periodical payments for right to use natural resources constitute a taxable service under Section 65B of the Finance Act, 1994 and are exigible to service tax under the reverse charge mechanism.Issue (i): Whether the appeal is time barred and whether condonation of delay beyond the statutorily permitted period is permissible.Analysis: The statutory provision limits the appellate authority's power to condone delay to a specified short period. The facts show the appeal was filed well beyond the condonable period and the explanations offered were unsupported and attributable to inaction or negligence in pursuing the remedy. Established precedents cited address the restrictive scope of condonation where the statute prescribes a maximum condonable period and where forum-shopping or inordinate delay is apparent.Conclusion: The appeal is barred by limitation and condonation beyond the prescribed period is not permissible; the appeal is dismissed on the ground of limitation.Issue (ii): Whether royalty paid for rights to use natural resources is taxable as a service under Section 65B and payable under reverse charge.Analysis: The notifications and circulars cited classify activities by government/local authority for consideration, including assignment of rights to use natural resources, as taxable services. The reverse charge notifications make such service recipients liable to discharge service tax. The record shows periodical payments characterized as royalty for use of natural resources and requisitioned documents to determine tax; no adequate documentary evidence was produced to substantiate exemption claims or threshold entitlements.Conclusion: The payments characterized as royalty fall within the taxable service definition and are exigible to service tax under the reverse charge mechanism; the demand is sustainable on merits.Final Conclusion: The appeal is dismissed; the appellate authority correctly concluded that the appeal was barred by limitation and, on merits, the tax demand under reverse charge for right to use natural resources was sustainable.Ratio Decidendi: Where statute prescribes a maximum condonable period for filing an appeal, the appellate authority cannot extend condonation beyond that period; payments made as consideration for assignment or license to use natural resources by a government/local authority constitute a taxable service under Section 65B of the Finance Act, 1994 and are payable by the service recipient under the notified reverse charge mechanism.