Reverse-charge tax on mining royalty requires lease-date verification before determining the applicable Government-services tax regime.

Service tax on royalty paid under reverse charge for mining rights depends on the mining lease terms and the date the right was granted. Before 1 April 2016, Government services generally fell within the negative list; following amendment, Government services supplied to business entities became taxable. Without the mining lease agreements, the factual basis to determine the applicable regime was unavailable. The demand order was set aside and the matter remitted for fresh adjudication after examination of the leases under the applicable law.

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Issues: Whether service tax under reverse charge on royalty paid for mining rights could be determined without examining the mining lease agreements and the date on which the right was granted.

Analysis: Service tax is chargeable under Section 66B of the Finance Act, 1994 on services provided or agreed to be provided. Before 01.04.2016, services provided by the Government were generally within the negative list under Section 66D(a)(iv) of the Finance Act, 1994; after its amendment, Government services to business entities became taxable. The date of the mining lease is material to determine whether the grant of mining rights was governed by the pre-amendment regime. As the lease agreements were not produced before either lower authority, the factual basis necessary for this determination was absent.

Conclusion: The demand order was set aside and the matter was remitted for fresh adjudication after examination of the mining lease agreements in accordance with the applicable law.

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