TaxTMI 
TaxTMI 
2019 (8) TMI 1010
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....(P) Ltd., A-251, B-i, Mewar Industrial Area, Road N0.-1, Madri, Udaipur-313001, Rajasthan, against the Advance Ruling No. RAJ/AAR/2018-19/34 dated 15.02.2019 = 2019 (3) TMI 929 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN. Brief Facts of the Case 3. M/s. Aravali Polyaft (P) Ltd., A-251, B-i, Mewar Industrial Area, Road N0.-1, Madri, Udaipur-313001 (Rajasthan) (hereinafter also referred to as 'the Appellant') is a Private Limited Company and holding GSTIN 08AAECA7970L2Z5. 4. The Appellant is engaged in the business of mining of soapstone and dolomite in the State of Rajasthan on the land taken on lease from one Shri Ramesh Chand Singhvi. The Appellant is classifying these products under Tariff Heading 2518 and paying GST on their supply at the rate of 5%. 5. The mining lease is governed by the Rajasthan Minor Mineral Concession Rules, 2017. In accordance with Rule 28 of the Rajasthan Minor Mineral Concession Rules, 2017, for the lease right awarded to the Appellant, they are required to pay royalty or dead rent as specified therein. 6. The State Government, for the purpose of collection of Royalty on given minerals, has awarded Excess Royalty Collection Contracts (ERCC) ....
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....(Rate) dated 28.06.2017 and corresponding SGST notification with aggregate GST rate of 18%. They have contended that the activity' should deserve classification either under SI. No. 17(iii) or (iv) or (viia) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 attracting 5% GST. Following contentions have been advanced by the Appellant in their favour:- (i) Royalty' which is being paid by the Appellant to the State Government is in respect of minerals extracted for consumption or for onward supply. Thus it is specifically linked with the right to use of goods being provided to the Appellant by the State Government. (ii) Royalty is a variable return and it varies with the quantity of minerals extracted or removed. In Hingir Rampur Coal Co. Ltd. v. State of Orissa [1961 (2) SCR 537] = 1960 (11) TMI 115 - SUPREME COURT, Justice Wanchoo stated that right to receive royalty is a mineral right. (iii) In the case of the India Cement Ltd., etc. v. State of Tamil Nadu, etc. (AIR 1990 SC 85) = 1989 (10) TMI 53 - SUPREME COURT, the Hon'ble Supreme Court has held that Royalty is payable on a proportion of the minerals extracted and it has relationship ....
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....at the minerals in question are also goods. (x) Since lease rights have been given in respect of given minerals only, hence for the purpose of GST Rate, the given service can fall under entry number i7(iii) or (iv) or (viia) but not under i7(viii) ibid. Personal Hearing 11. A personal hearing in the matter was held on 08.05.2019. Shri Yash Dhadda, CA & Authorised Representative of the Appellant, alongwith Ms. Shuchi Sethi, CA, appeared for personal hearing on 08.05.2019 on behalf of the Appellant. Shri Yash Dhadda submitted additional written submissions (which is being narrated below) and explained the points mentioned therein. He had nothing further to add. Additional Submissions 12. Sh. Dhadda has submitted synopsis of the Case and tendered that the classification of the Services received by them should be under entry No. 17 (viia) ibid which is 'Leasing or renting of Goods' and leviable to tax at the rate which is applicable on supply of minerals extracted i.e. 5%. He also cited Ruling dated 22.02.2019 given by the Authority for Advance Ruling, Chhattisgarh in the case of M/s. NMDC Limited, Chhattisgarh in their favour. Discussion and Findings 13. We ....
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....ts classification either under SI. No. 17(iii) or 17(iv) or 17(viia) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 with GST applicable @ 5%. 16. Before coming to decide the tax rate on the impugned Service we first look into the aspect whether the Service is rightly classifiable under the Service code 997337 under the Scheme of Classification appended to the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. After going through the Scheme, We find that the Service has been rightly classified by the AAR, Rajasthan under the Service Code 997337 [Licensing services for the right to use minerals including its exploration and evaluation (entry No. 257)] falling under the Group 99733 [Licensing Services for the right to use intellectual property and similar products (entry No. 250)] falling under the Heading 9973 [Leasing or rental services with or without operator (entry No. 232)]. Relevant portion of Scheme is being reproduced for ready reference :- Annexure: Scheme of Classification of Services S.No. Chapter, Section, Heading or Group Service Code (Tariff) Service Description (1) (2) (3) (4) 1. Chapter 99 ....
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.... for the right to use computer software and databases 252 997332 Licensing services for the right to broadcast and show original films, sound recordings, radio and television programme and the like 253 997333 Licensing services for the right to reproduce original art works 254 997334 Licensing services for the right to reprint and copy manuscripts, books, journals and periodicals 255 997335 Licensing services for the right to use research and development products 256 997336 Licensing services for the right to use trademarks and franchises 257 997337 Licensing services for the right to use minerals including its exploration and evaluation 258 997338 Licensing services for right to use other natural resources including telecommunication spectrum 259 997339 Licensing services for the right to use other intellectual property products and other resources nowhere else classified 17. Having satisfied with the classification of the Service under the Service code 997337, we come to the next Question of determination of the rate of tax on ....
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....at to bring clarity, the residuary rate entry for Heading 9973 in notification No. 11/2017-CT (R) dated 28.06.2017 may be split in two parts as follows. Existing Proposed Description of Services Rate (%) Description of Services Rate (%) SI. 17 Heading 9973 (Leasing or rental services, with or without operator) (viii) Leasing or rental services, with or without operator, other than (i), (ii). (iii), (iv), (v), (vi) and (vii) above Same rate of Central Tax as on supply of like goods involving transfer of title in goods (viia) Leasing or renting of goods Same rate of Central Tax as on supply of like goods involving transfer of title in goods (viii) Leasing or rental services, with or without operator, other than (i), (ii), (iii), (iv), (v), (vi), (vii) and (viia) above 18 Discussion: 1. Heading 9973 of scheme of classification of services under GST includes "Group 99733: the licensing services for the right to use intellectual property and similar products". However, the rate notification No. 11/2017-CT (R) dated 28.06.2017, prescribes rate only for transfer or permitting the use or enjoyment of Intellectual Property Rights (IPR). No rate h....
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...., (iv), (v), (vi), (vii) and (viia) above" with rate of tax as 18%. 20. The Appellant has cited Rulings of the AAR, Haryana and AAR, Chhattisgarh in the cases of M/s Pioneers Partners, Bhiwani and M/s NMDC Limited, Chhattisgarh = 2019 (4) TMI 1449 - AUTHORITY FOR ADVANCE RULINGS, CHHATTISGARH respectively in their favour. We find that in the case of M/s Pioneers Partners, Bhiwani = 2018 (9) TMI 1477 - AUTHORITY FOR ADVANCE RULING, HARYANA, the Application was filed on 12.04.2018 and Ruling was given on 29.06.2018. The entry No. 17 ibid did not figure in the Notification at that time. There was neither sub-entry No. (viia) nor the revised sub entry No. (viii). Upon perusal of the case of M/s NMDC Limited, Chhattisgarh, we find that the changes made in the entry No. 17 of the Notification i.e. substitution of old sub-entry No. (viii) by sub-entry' Nos. (viia) and new entry No. (viii), vide Notification No. 27/2018-Central Tax (Rate), dated 31.12.2018, have not been taken into account by the AAR, Chhattisgarh while passing the Ruling. Needless to mention here that sub-entry No. (viia) is the entry to which the Appellant has staked its claim while the entry No. (viii) is the entry' ....