TaxTMI 
TaxTMI 
2019 (10) TMI 868
X X X X Extracts X X X X
X X X X Extracts X X X X
....RFH/CRCA coils, CRCA sheets, HR plates and 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'Services' are defined under Section 2(102) as:- "(102) "services" means anything other than goods, money 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 Gove....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 16. In light of the preceding paragraphs, that applicant states that it is pertinent to examine whether such fund paid is towards service provided to applicant for permission to excavate iron ore from mines. Further 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 f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ranted by the Government or a local authority. 2. However, services provided by the Government or a local authority by way of: (i) registration required under the law; (ii) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at 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 999.0....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... respectively. 24. Hence the applicant submits that the contribution made towards NMET and DMF, shall not be towards services, but towards goods and shall avail exemption from GST payment under reverse charge per SI.No.6 of the Notification 12- Central Tax (Rate). PERSONAL HEARING: / PROCEEDINGS HELD ON 28.11.2018 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 pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deration. Thus, there must be a supply; a payment; and the necessary nexus between the supply and the payment. Thus, where one party makes monetary payment to another, something of economic value is provided to the other. Para 90 GSTR sets out illustrations, of circumstances where the recipient of a supply may provide or make a thing available to the supplier for use in making 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 inclu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce provided. Therefore, merely because there is the use of the word 'gross', that does not indicate that the entire contract value is the consideration for the service provided. vii. In this regard, the applicant submits that in the present case there is no direct connection between the statutory payments made by the Applicant and a supply made by the Government. In this regard, the Appellant submits that due to 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: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of the definition of supply in the GST Act. In Berry's Case, Kitto J held that 'in connection with' was a broader test than 'for'. At page 659 he commented that consideration will be in connection with property where: 'the receipt of the payment has a substantial relation, in a practical business sense, to that property' 96. In determining whether a sufficient nexus exists between supply and consideration, regard needs to be had to the true character of the transaction. An arrangement between parties will be characterised not merely by the description which parties 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section (1) of section 7 of the CGST/ KGST Act 2017 which is narrated as under.- 7. (1) For the purposes of this Act, the expression "supply" includes: a. all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; b. import of services for a consideration whether or not in the course or furtherance of business; and c. the activities specified in Schedule I, made or agreed to be made without a consideration. (1A) where certain activities 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....istrict in which the mining operations are carried on, an amount not exceeding the royalty paid in terms of the Second Schedule in such manner and subject to the categorization of the mining leases and the amounts payable by the various categories of lease holders, as may be prescribed by the Central Government." 33.2. Section 9C of the Mines and Minerals (Development and Regulation) Act, 1957 as amended from time to time reads as under:- "9C. National Mineral Exploration Trust. - (1) The Central Government shall, by notification, establish a Trust, as a non-profit body, to be called the National Mineral Exploration Trust. (2) The object of the Trust shall be to use the finds accrued to the Trust for 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 Ce....