TaxTMI 
TaxTMI 
2021 (12) TMI 3
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....inst the order passed by adjudicating authority who has granted benefit of reduced penalty vide OIOs dated 19.02.2019 and also against order of Commissioner (Appeals) who has set aside the demand vide OIA No.498(SM)/ST/JPR/2018 dated 30.11.2018. The parties are hereinafter referred to as Assessee and Revenue for the sake of convenience. 2. Revenue had filed applications for early hearing of the appeals and Miscellaneous Applications were filed by assessee to link up the appeals for being heard together. These applications were allowed on 13.01.2021 and 21.01.2021. The EH applications in other appeals were taken up on 09.09.2021. The request for early hearing were allowed pursuant to the EH granted in earlier applications. These appeals were heard together and are disposed of by this common order. The details of appeals and cross objections disposed as per this order are as under : S.No. Appeal No. Appellant Respondent Arising out of Order-in-Original No. and date 1. ST/52575/2018 The Mining Engineer, Dept. of Geology, Rajasthan CGST & CE, Alwar OIO ALW-EXCUS-000-COM-033-039-17-18 dt. 23.01.2018 2. ST/52576/2018 -do- CGST & CE Alwar -d....
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....erein collected 'dead rent' as well as 'royalty' on lease agreements entered for granting mining rights. The dead rent is a fixed amount which is collected by the assessee for giving the land on lease and royalty is being collected for right to use the land for mining purposes. The royalty depends on the quantity of ore mined by the lessee. The lessee thus requires to pay dead rent or royalty whichever is higher. The lessee has to pay minimum annual royalty as dead rent to the assessee in four equal quarterly instalments. 4. He submitted that the assessee by entering into lease agreements for grant of mining rights is providing "Renting of Immovable Property Services" and is liable to pay service tax for the period 01.07.2012 to 31.03.2016. 5. The definition of "Renting of Immovable Property" prior to 01.07.2012 did not include renting of vacant land solely used for mining purposes. However, with the introduction of negative list of services, the definition of "renting" as provided under Section 65B (41) of the Finance Act, 1994 includes renting of land for mining purposes. The definition "renting" as per Section 65B (41) in Chapter V of Finance Act, 1994 reads as under : ....
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...., provided to business entities". [emphasis supplied] 8. From the above, it can be seen that as per sub-clause (iv) of Section 66D (a), "support services" provided by Government to business entities are chargeable to service tax. "Support Services" are defined under Section 65B(49) of Finance Act, 1994 which reads as under : "Support Service" means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion construction or works contract, renting of immovable property, security, testing and analysis. [emphasis supplied] 9. According to the Revenue, though the negative list comprises of various services provided by Government and are not exigible to service tax, however, when these services fall within the definition of 'support services', even if provided by Government they are subject to levy of service tax. As per the definition of 'support services', 'Renting of immovable property' is a kind of support servic....
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....Chamber of Commerce and industry &Ors. in D.B. Civil Writ Petition No.14578 of 2016. He submitted that in the said judgement, the Hon'ble High Court has categorically held that in the case of mining lease, there is no transfer of title of immovable property and in absence of this, the activities would fall within the definition of 'service' as given under Section 65B (44). He submitted that the royalty being "consideration" certainly places assignment of right to use natural resources deposited in the leased area as a 'service' as defined under Section 65B (44) of the Finance Act, 1994. The said section defines 'service' to mean any activity carried out by a person for any consideration and includes a declared service. Further, as already stated, the mining lease granted by the assessee to lease holders / licensee for excavation, removal or utilization of mineral from the leased land would come under the purview of "renting" as defined under Section 65B (41) of the Finance Act, 1994. 13. With regard to appeals filed by the department, Ld. A.R submitted that SCNs were issued to the assessee for non-payment of service tax on the consideration collected by them from the lease holde....
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...., the assessee herein, by treating the activity as support service in the nature of 'Renting of Immovable Property Service' on a Forward charge basis. 16. He submitted that the allegation is that lease agreements entered for grant of mining rights falls within the definition of 'renting' in terms of Section 65B (41) and that renting of immovable property service is a 'Declared Service' under Section 66E of the Finance Act, 1994. Further, that by virtue of Section 66D (a) [Negative list] read with Section 65B (49) [definition of 'support services'] of the Finance Act, 1994 renting of immovable property provided by Government to a business entity has to be treated as 'support service' which is not covered under negative list of services; that therefore leasing of land for grant of mining rights is subject to levy of service tax. 17. Ld. Consultant submitted that by reading Rule 2(1)(d) (E)together with Notification No.30/2012 dt.20.06.2012, it has been concluded by Revenue that renting of immovable property is under forward charge of service tax and thus demand has been raisedon the service provider, assessee herein, on the royalty and dead rent collected in terms of the lease ....
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.... (x) "Dead Rent" means the minimum guaranteed amount payable for mining lease which is calculated as per the area of the lease and revisable as provided in these rules. c) Dead Rent is in the Nature of Minimum Royalty Fifth Proviso to Sub Rule (3) of Rule 18 Provided further also that the lessee shall be liable to pay either dead rent or royalty in respect of eachmineral whichever is higher but not both; d) Surface Rent is Separate from Royalty & Dead Rent Sub Rule (2) (a) of Rule 18 The lessee shall pay for surface area used by him for the purpose of mining, surface rent to Revenue Department as per the rates prevalent in the area; e) Mining Lease does not give Surface Area Rights Sub Rule 29 of Rule 18 The Lessee / lessees shall abstain from entering upon the surface of any occupied Government land or of any private land comprised within the leased area without previously obtaining the consent of the occupant in writing: f) Royalty & Dead Rent are paid against Movable Assets viz. minerals lying beneath the land and not Land Clause 1 (a) of Form No.5 In consideration of the rents and royalties covenants and agreements hereinafter ....
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....duction of GST). For the period from 01.07.2012 to 31.03.2016,which is the disputed period in these appeals, 'support services' provided by Government to a business entities are taxable in terms of Section 66D (a) of the Finance Act, 1994.With effect from 01.04.2016, the word "support service" was omitted. Thus 'any service' provided by the Government to a business entity became exigible to service tax. The liability to pay service tax on services provided by Government to business entities except renting of immovable property is on the recipient of service. The demand against the assessee is only till 01.04.2016. The liability to pay service tax on 'renting of immovable property service' is on the provider of service. However, there is no change as to who has to discharge service tax on renting of immovable property before and after 01.04.2016. The demand being made only till 01.04.2016 would show that renting of immovable property in the nature of mining lease is not taxable prior to 01.04.2016 also. 21. As per Rule 2 (1) (d) E and Notification No.30/2012, the person liable to pay service tax on renting of immovable property always remained under forward charge mechanism befor....
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....lso. The SCN has been issued invoking the extended period alleging that assessee has not taken service tax registration and that has wilfully and deliberately supressed the facts with intent to evade payment of service tax. The said allegation is without any basis as the CBEC itself has issued clarification that grant of mining lease is not a support service. Further, being a Government Department the assessee cannot be saddled with intent to indulge in any wilful or deliberate violation of law. The collection of royalty and dead rent are properly accounted and subject to legal audit. He prayed that assessee appeals may be allowed and department appeals be dismissed. ISSUE : 27. The issue to be decided is whether the assessee is liable to pay service tax under the category of "Renting of Immovable Property Services' falling within the definition of 'support services' for the period from 01.07.2012 to 31.03.2016 on the royalty and dead rent collected in terms of mining lease agreements for grant of mining rights. FINDINGS : 28. It is not in dispute that the appellant is a Department of the State Government of Rajasthan. The grant of mining rights in the State of Rajastha....
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.... in relation to such renting, for use in the course of or, for furtherance of, business or commerce. Explanation 1. - For the purposes of this sub-clause, "immovable property" includes - (i) building and part of a building, and the land appurtenant thereto; (ii) land incidental to the use of such building or part of a building; (iii) the common or shared areas and facilities relating thereto; and (iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, (v) vacant land, given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce; but does not include - (a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes; (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; (c) land used for educational, sports, circus, entertainment and parking purposes; and (d) building used solely for residential purposes and buildi....
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.... Government or State Governments or local authority and who is not deemed as an employee before the commencement of this section. ..... .... ......" 35. The above Section 65B thus practically replaced erstwhile elaborate definitions and classifications provided in Section 65. Section 66B was inserted as the new charging section. A negative list was introduced as Section 66D which comprises of the list of services which are not taxable under law. This list mainly covers the services rendered by Government and local authority. Section 66D as it stood during the disputed period reads as under (prior to its' amendment w.e.f. 01.04.2016) : SECTION 66D. Negative list of services. -The negative list shall comprise of the following services, namely :- (a) services by Government or a local authority excluding the following services to the extent they are not covered elsewhere- (i) services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an a....
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....ules 2 (1) (d) E is noticed as under : "RULE 2. Definitions.- (1) In these rules, unless the context otherwise requires, - ... ... .... (d) "person liable for paying service tax", - .... ... .... .... (E) in relation to [support]* services provided or agreed to be provided by Government or local authority except,- (a) renting of immovable property, and (b) services specified sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994, to any business entity located in the taxable territory, the recipient of such service." *The word 'support' has been omitted w.e.f. 01.04.2016. [emphasis supplied] The above Rules lay down that when 'support services' are provided by Government to business entities other than renting of immovable property, the person liable to pay service tax is the recipient of service. In other words, for support services provided by Government in the nature of renting of immovable property, the liability to pay service tax is on the person providing services. In the present case, provider of service is the Government of Rajasthan. It would benefit to add that....
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....from the assessee (Government) on forward charge basis for the period 01.07.2012 to 31.03.2016 and under reverse charge basis from the lessee on the very same service after 01.04.2016. That this act of Revenue by changing the liability to pay service tax after 01.04.2016 itself would show that the lease of land for mining purpose is not a support service. 43. Learned Consultant has relied upon the clarification issued by CBEC in their Education Guide dated 20.06.2012 wherein the meaning of support services has been clarified. It is categorically stated in this clarification that service of granting of mining rights provided by Government will not fall under the category of "support services". The relevant part of said Education Guide reads as under : "4.1.7. What is the meaning of "support services" which appears to be a phrase of wide ambit? Support Services have been defined in section 65B of the Act as "infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason wh....
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....oyalty and dead rent is the consideration paid for providing renting of immovable property services. The act of entering into a lease agreement for grant of mining rights arises out of statue, namely, Mines and Minerals (Regulation and Development) Act, 1957 as well as the Rajasthan Minor Minerals Concession Rules, 1986. No amount other than the charges specified in the Acts/Rules can be collected. The conditions that can be incorporated in the agreement are also prescribed by giving a Modal Agreement. The assessee who is the service provider thus has no say in the terms and the conditions of the agreement or on the charges that may be collected from the lessee. For that matter, the lessee who is the service recipient also has no say as to the terms or the consideration that has to be paid. Everything flows from the statute. The clarification issued by the Board under the new Tax regime w.e.f. 01.07.2012 explaining the application of definition of "support services" lays down that services provided by Government in the nature of grant of mining rights or licensing rights does not fall within the meaning of 'support services' and is not taxable service. The circular / clarification ....
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....missionerates of Jodhpur & Alwar have raised the demand and other Commissionerates all over the country have accepted the clarification issued by the Board. In various judgments it has been held that the circular/ instructions / clarifications issued by Board are binding on the Revenue. 48. In Ramadey Micronutrients Vs CCE- 1996 (87) ELT 19 (SC), the Hon'ble Apex Court held that Board circulars are meant for adoption of uniform practice and that they are binding on officers of Revenue Department. 49. The Hon'ble Apex Court in the case of UOI Vs Arviva Industries (I) Ltd. - 2007 (209) ELT 5 (SC) observed as under : "2. We agree with the view taken by the High Court that the Circulars issued by the Central Board of Excise & Customs are binding on the department and the department cannot be permitted to urge that the Circulars issued by the Board are not binding on it. 3. This Court in a series of decisions has held that Circulars issued under Section 119 of the Income Tax Act, 1961 and Section 37B of the Central Excise Act, 1944 are binding on the revenue. [See Navnit Lal C. Jhaveri v. K.K. Sen, (1965) 56 ITR 198 (SC); Ellerman Lines Ltd. v. CIT, (1972) 4 SCC ....
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....CC 173 and Paper Products Ltd. v. Commissioner of Central Excise, (2001) 247 ITR 128 (SC) = 1999 (112) E.L.T. 765 (S.C.), it has been held that circulars are binding on departments and department cannot challenge them even if they are inconsistent with the statute." 51. The Hon'ble High Court of Bombay in CST Vs Citi Bank N.A. - 2018 (18) GSTL 580 (Bom.) held that the clarification issued by the Board is binding on the Revenue : "10. In fact, the Central Board of Excise & Customs on 24th February, 2009 has issued a clarificatory Circular No. 111/5/2009, clarifying that in respect of services following under category/clause (c) above i.e. Rule 3(1)(iii) of the Export of Services Rules, 2005, the relevant factor is the location of the Services recipient and not the place of performance. It also clarified that the phrase used 'outside India', is to mean that the benefits of the service is to accrue outside India. This Circular which is binding on the Revenue, also concludes the issue in favour of the respondent. 11. In view of the above, as the answer to question as proposed is self evident and covered by the binding Circular, no substantial question of law ....
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....y, testing and analysis. 54. The means part mentions five services. The third part which is the includes part gives a list of services. The middle part explains the category of services which can be accommodated along with other services in the includes part and means part. The middle part uses the word 'any other support of any kind'. These words 'any other support of any kind' are general words. However, this is expressly followed by the words 'comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing'. Therefore, only those services which fit into the category of services which business entities can render by themselves can find place in the means part and includes part of the definition. In other words, the middle part fixes the category of services that would fall within the 'means part' and 'includes part' of the definition. The middle part applies to both the means part and the includes part. Though the word "include" is of wide import, the middle part curtails the category of services that can fall within the includes part. It can be said that middle part carves out a particular class / genus of ser....
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....case of Udaipur Chambers of Commerce & Industry and Ors. in Civil Writ Petition No.14578/2016. The said writ petition is filed by lessee / service recipients against whom show cause notices have been issued demanding service tax after 01.04.2016 under reverse charge mechanism. Pertinently after the deletion of the words "support services" in Section 66D (a). The demand of service tax is made under reverse charge mechanism for the period after 01.04.2016 after the substitution of the word "any service" in clause (iv) of Section 66D (a) whereas the demand in these appeals is on the allegation that 'renting of immovable property' is a 'support service' The words 'support services' having been omitted w.e.f. 01.04.2016, the circular is not applicable for the period after 01.04.2016. The Hon'ble High Court therefore had no occasion to consider the meaning of 'support service' and also the Circular issued by Board. For these reasons, keeping in view the changed scenario of law after 01.04.2016, the judgement of the Hon'ble High Court of Rajasthan in above D.B. Civil Writ petition (supra) is not applicable to the disputed period and facts of this case. From the foregoing, the issue on mer....
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....n the accounts. No particular positive act of wilful and deliberate suppression has been unearthed by Revenue with cogent evidence. Further, in the present case, there is clarification issued by the Board that grant of mining rights is not support service. For these reasons, we hold that demand raised invoking the extended period cannot sustain. The assessee succeeds on the issue of limitation also. 61. From the discussions made above, after appreciating the facts, law and evidence placed before us we are of the considered view that the demand of service tax cannot sustain. In the result, the Assessee's appeals are allowed. The Revenue's appeals are dismissed. The cross objections filed by assessee are also disposed off. (Pronounced in court on 25.11.2021) ============= Document 1 ML No. 13/2011 DEPATMENT OF MINES & GEOLOGY, RAJASTHAN GOVERNMENT OF RAJASTHAN FORM NO.5 MODAL FORM OF MINING LEASE (See Rule (19)) This indenture made this . 27 day of 2013 between the Governor of the State of Rajasthan (hereinafter referred to as the Government which expression shall, where the context so admits, include his successors in office and assi....
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....the condition that the enhancement in the rate of royalty shall not be made more than once during any period of four years. Surface rent:- The Lessee/Lessee shall pay for the surface area used by him/them (for the purpose of mining) surface rent equal to the land revenue payable under the Rajasthan Land Revenue Act, 1956 or any other law in force to the Land Revenue Department of State होने वाले संशोधनानà¥à¤¸à¤¾à¤° । Dead Rent:- The Lessee/Lessees shall also pay for every year, dead rent as determined from time to time. the yearly Provided that the lessee/Lessees shall be liable to pay the dead rent or royalty in respect of each mineral, which ever be higher but not both. Rate and mode of payment of dead rent etc. Subject to the provisions of sub-clause (3) above as from the day of registration the subsistence of the lease, the. Lessee/Lessees shall pay to the Government offer farfald तिमाही in four equal quarterly installments on जो पंजियन तिथà....