TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 868
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd sheets, MS slabs, Cobbles, Galvanized Corrugated sheets, Pig Iron, Iron scrap, Steel scrap ends etc., falling under Chapter 72; Iron ore pellets, Pig iron etc., falling under Chapter 26. The Applicant has set up a large production facility for manufacture of Iron and steel products in the region of Toranagallu, Sandur taluk, Bellary Dist. 4. The applicant states that with the intent to fulfill the requirement of Iron ore for manufacture of Steel and Iron they had participated in auction for seven mines and based on the bidding, M/s JSW Steel Limited was given the lease area to the extent of 33.21 hectares for a period of 50 years for carrying out mining activities. 5. With regard to the levies made for the purpose of mining for extraction of the iron ore, the applicant pays Royalty to the government. The royalty amount, in light of Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957, is equivalent to fifteen percent of average selling price of iron ore. 6. Further, the applicant states that, in addition to the royalty, he is paying an amount equivalent to ten percentage of the royalty to the District Mineral Foundation of the district in which the minin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. iii. Scope of supply is defined under Section 7 of the said GST Act to inter alia include:- * all forms of supply of goods or services such as sale, transfer, etc. for a consideration made in the course or furtherance of business * import of services for a consideration whether or not in the course or furtherance of business * the activities specified in Schedule I, made or agreed to be made without a consideration; and * the activities to be treated as supply of goods or supply of services as referred to in Schedule II. iv. And the following shall neither be treated as a supply of goods nor supply of services,- * activities or transactions specified in Schedule III; or * such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council. 10. As discussed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urther whether such service is liable for payment of GST under reverse charge. 17. The GST Act defines "reverse charge" under Section 2(98), as to mean, the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under subsection (3) or sub-section (4) of section 9 of the Central Goods and Services Tax Act or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act. 18. As per Section 9(3), the Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. 19. In the present case, the payments made in form of contributions to NMET and DMF, and for cases wherein tax is payable under reverse charge, attention is drawn to Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017. Relevant SI. No. 5 is extracted below ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... large, required under the law, have been exempted vide Notification No. 25/2012 - ST dated 20.6.2012 as amended by Notification No. 22/2016 - ST dated 13A.2016 [Entry 58 refers}. 3. Further, services provided by Government or a local authority where the gross amount charged for such service does not exceed Rs. 5000/- have been exempted vide Notification No. 25/2012 - ST dated 20.6.2012 as amended by Notification No. 22/2016 - ST dated 13.4.2016 [Entry 56 refers}. However, the said exemption does riot cover services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994. Further, in case of continuous service, the exemption shall be applicable where the gross amount charged for such service does not exceed Rs. 5000/-in a financial year. 4. It is also clarified that Circular No. 89/ 7/2006-Service Tax dated 18-12-2006 & and Reference Code 999.01/23.8.07 in Circular No. 96/7/2007-ST dated 23.8.2007 issued in the pre-negative list regime are no longer applicable. 21. From the aforesaid table, the applicant states that, it can be inferred that the government has extended similar clauses of taxing as well providing exemption under service t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....25. Sri. Harish Bindumadhavan, Advocate and authorised representative of M/s JSW Steel Ltd., appeared for personal hearing proceedings before this authority and made the submissions as mentioned above. Further he requested the authority to grant time for additional submission. Accordingly he made additional submissions and appeared again on 28.02.2019. 26. Accordingly, the applicant has submitted the following additional arguments.- i. As per Section 7 of the CGST Act 2017 it is clear that each supply must have a consideration and the in present case, there is no consideration, even if it assumed that there is a supply. In this regard, the Applicant contends that the definition of 'consideration' is adopted from the Indian Contract Act, 1872 as provided under Section 2(d), as:- "When at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing something, such act or abstinence or promise is called consideration for the promise'' ii. In light of the above provision, the Applicant submits that the payments like Royalty, NMET and DMF are statutory payment towards holding....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the supply and states that the thing (made available for use) does not necessarily forms the consideration." vi. The above Larger Bench decision was recently upheld by the Hon'ble Supreme Court in the above case of Bhayana Builders, which was reported in 2018-TIOL-66-SC-CT = 2018 (2) TMI 1325 - SUPREME COURT which interprets Section 67 of the Finance Act and lays downs a very important test i.e. 'nexus test'. Relevant paragraph is extracted below:- "...For valuation of taxable service, provision is made in Section 67 of the Act which enumerates that it would be 'the gross amount charged by the service provider for such service provided or to be provided by him'. Whether the value of materials/goods supplied free of cost by the service recipient to the service provider/assessee is to be included to arrive at the 'gross amount\ or not is the poser. On this aspect, there is no difference in amended Section 67 from unamended Section 67 of the Act and the parties were at ad idem to this extent. On a reading of the above definition, it is clear that both prior and after amendment, the value on which service tax is payable has to satisfy the following ingredients:- a. Service ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....absence of specific judicial precedents in India, it must be noted that the definition of supply under the Australian GST Act reads similar to the definition of service under the Finance Act, 1994. Section 9-10 of the Australian GST Act provides for the 'Meaning of supply' as below:- "(1) A supply is any form of supply whatsoever. (2) Without limiting subsection (1), supply includes any of these:- (a) a supply of goods; (b) a supply of services; (c) a provision of advice or information; (d) a grant, assignment or surrender of real property; (e) a creation, grant, transfer, assignment or surrender of any right; (f) a financial supply; (g) an entry into, or release from, an obligation: (i) to do anything: or (j) to refrain from an act; or (k) to tolerate an act or situation; (l) any combination of any 2 or more of the matters referred to in paragraphs (a) to (g). (3) It does not matter whether it is lawful to do, to refrain from doing or to tolerate the act or situation constituting the supply." viii. In this context, the applicant places reliance on the Goods & Service Tax Ruling numbered as GSTR 2001/4 of the Australian Taxation Office which deals with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rties give to the arrangement, but by looking at all of the transactions entered into and the circumstances in which the transactions are made.[F60]" ix. In light of the above ruling, the Applicant submits it is clear that there must be a direct nexus between supply and payment and from the above discussions, it is amply clear that no supply has been made by the Government, and the Applicant, as a mine license holder is obligated to make statutory payments to Government controlled funds. FINDINGS AND DISCUSSION 27. We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made by Sri. Harish Bindumadhavan, authorised Signatory of M/s JSW Steel Ltd., during the personal hearing proceedings before this authority and we have also considered the additional submissions made. We have also considered the issue involved, on which advance ruling is sought by the applicant, relevant facts and the applicant's interpretation of law. 28. The applicant is a manufacturer of Iron & Steel Products and to fulfill the requirement of Iron ore M/s JSW Steel Limited was given an area to the extent of 33.21 hectares by the Government ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ivities or transactions, constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II. 31. Scheduled II to the CGST/KGST Act, 2017 lists activities to be treated as supply of goods or supply of services. Entry No. 2 of the schedule is with regard to the Land and Building and the entry is narrated as under:- a. any lease, tenancy, easement, licence to occupy land is supply of service This provision implies that leasing of Government land to the applicant to carry out the activity of the mining is a supply of service to the applicant. 32. From the above provisions it is observed that Government has provided the land on lease to the applicant to carry out the mining activity and in turn the applicant pays royalty along with the amounts paid to the District Mineral Foundation of the district and to the National Mineral Exploration Trust as specified by the Government. Applicant made these payments under the statutory requirements of the Mines and Minerals (Development and Regulation) Act, 1957. Here whether amount paid to the District Mineral Foundation of the district....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the purposes of regional and detailed exploration in such manner as may be prescribed by the Central Government. (3) The composition and functions of the Trust shall be such as may be prescribed by the Central Government. (4) The holder of a mining lease or a prospecting licence-cum-mining lease shall pay to the Trust, a sum equivalent to two percent of the royalty paid in terms of the Second Schedule, in such manner as may be prescribed by the Central Government. 33.3. On perusal of the above sections related to DMF and NMET, it is seen that both these payments are payable by a lessee in addition to the royalty and both the calculations are made on the basis of royalty. 34. In this context we see clause (a) of subsection (2) of the section 15 of the CGST/ KGST Act, 2017 which is narrated as under.- 15(2) The value of supply shall include a. any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than Central Goods and Services Tax Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; Therefore....