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2024 (1) TMI 1018
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....evelopment Tax paid to the Monitoring Committee for auction purchases of iron ore was a consideration paid for the services of assignment of right to use natural resources by the Government of Karnataka and that the assessee was liable to pay service tax under reverse charge mechanism. 2. Having noticed that the assessee had not discharged any such taxes on Royalty and Forest Development Tax, the same Commissionerate appears to have issued a Show Cause Notice Sl. No. 10/2019 (Commr.) dated 16.04.2019 by extending the larger period of limitation under Section 73(1) of the Finance Act, 1994, thereby also proposing to impose penalties. 3.1 It appears from the record that the assessee had contested the proposals in the Show Cause Notice by filing a detailed reply, but however, the original authority per impugned Order-in-Original No. 19/2021-ST (Commr.) dated 20.09.2021 has confirmed the proposals made in the Show Cause Notice. The original authority has held that the Monitoring Committee issued a tax invoice to the successful bidder, which contained details of auction number, rate, which included material value, Royalty, Forest Development Tax, CST and EMD with location of mines....
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....ore by participating in the auction sale of iron ore in the State of Karnataka conducted by the Monitoring Committee appointed by the Hon'ble Supreme Court. (iii) The price paid for the purchase of iron ore comprised of bid price i.e., material value, Royalty at 15% of the said price, Forest Development Tax at 12%, CST of 2%, as per the acceptance letters issued by the Monitoring Committee and subsequent tax invoices. (iv) A perusal of the Acceptance Letter No. EA- 59/45160/581 issued by the Monitoring Committee shows auction sale of 16,000 metric tonnes of iron ore lumps to the appellant; the iron ore lumps under Lot No. N/FP/037L/16 belonged to M/s. Sesa Sterlite Ltd. with Mining Lease (ML) No. 2677 (erstwhile ML No. 2236) in the State of Karnataka. (v) The instructions to M/s. JSW Steel Ltd, Salem in the said acceptance letter was to deposit 89.655% after deducting MSTC Commission @ 0.3% plus taxes at applicable rates, which aggregated to 0.345%, of the material value in respect of Lot No. N/FP/037L/16, Rs.2,85,17,462/- to M/s. Sesa Sterlite Ltd., Sesa Iron Ore, in their account No. 001551000003 with ICICI Bank Ltd., Sindur Business Centre, S.V. Road, ....
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.... Act, 1994, (xii) Royalty and Forest Development Tax are taxes by themselves and hence, there is no question of further liability in the case of Service Tax. 5.3 The Ld. Advocate took us through the directions of the Hon'ble Supreme Court in its Order in W.P. (Civil) No. 562 of 2009 dated 23.09.2011 in the case of Samaj Parivartana Samudaya & Ors. v. State of Karnataka & ors. wherein it is stated it is for the Monitoring Committee to conduct sale of iron ore through auction, collection of the sale price, Royalty and other taxes and applicable charges from the buyer and remittance of the taxes with the Governments, which is as per paragraphs 2(viii) and 2(xii)(c) of the said Order. 5.4 Further reference was made to the Order of the Hon'ble Supreme Court in W.P. (Civil) No. 562 of 2009 dated 18.04.2013 wherein specific directions were given with respect to payment of 90% of the sale price (excluding the Royalty and the applicable taxes) by the buyers to the respective mining lease holders and the balance 10% to be deposited with the Monitoring Committee along with Royalty, FDT and other applicable taxes/charges. 5.5 He would also submit that in terms of the Hon'ble ....
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.... the same being a levy on the mining lease holders, cannot be levied on the buyer of iron ore; further, that the Monitoring Committee has collected 50% of the FDT, by referring to the Interim Order of the Hon'ble Apex Court dated 13.02.2017 in SLPs filed against the judgement of the Hon'ble High Court of Karnataka striking down the impugned provisions as ultra vires the Constitution of India, which are pending before the Hon'ble Apex Court. 6.1 On the other hand, Smt. Anandalakshmi Ganeshram, Ld. Assistant Commissioner, defended the order of the lower authority. 6.2 She would place reliance on orders of the Authority for Advance Ruling, wherein it was held that G.S.T. was payable on Royalty. She would also rely on a decision of the Hon'ble High Court of Rajasthan in the case of Sudershan Lal Gupta, Contractor v. Union of India [2022 (6) G.S.T.L. 4 (Raj.)] wherein the Hon'ble High Court has confirmed the levy of G.S.T. on the Royalty amount payable on lease of mines for extraction of ores, in terms of the Central Goods and Services Tax (CGST) Act, 2017. 7. We have considered the rival contentions, we have carefully gone through the documents placed on record. We have also g....
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....pecified in the notification: Provided that the Central Government shall not enhance the rate of royalty in respect of any mineral more than once during any period of three years." 8.2 In terms of the above, therefore, the holder of the mining lease is fastened with the liability to pay Royalty on the price of mineral extracted or consumed by the said lease holder at the rates specified, or, the dead rent as per Section 9A of the said Act, whichever is higher. It is not the case of the Department that the appellant is the holder of a mining lease nor has the appellant claimed to be a mining lease holder. We also do not find anywhere as to the any commitment by the appellant-company to having undertaken mining of the iron ore for which they were held to be liable for payment of Royalty and FDT. 9.1 Further, the whole transaction of the sale of iron ore mined by the holders of mining leases in the State of Karnataka was clearly regulated by the Monitoring Committee under the orders of the Hon'ble Apex Court, as evident from the various interim orders passed in W.P. (Civil) No. 562 of 2009 (supra). The Hon'ble Apex Court vide Order dated 23.09.2011 had in fact approved ....
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....ced by Items A to I of the Report dated 13.3.2012 which are reproduced below along with Items V to XIV of the initial Report dated 3.2.2012). E) the sale of the iron ore should continue to be through e-auction and the same should be conducted by the Monitoring Committee constituted by this Hon'ble Court. However, the quantity to be put up for e-auction, its grade, lot size, its base/floor price and the period of delivery will be decided/provided by the respective lease holders. The Monitoring Committee may permit the lease holders to put up for e-auction the quantities of the iron ore planned to be produced in subsequent months. The system of sale through the Monitoring Committee may be reviewed after say two year; F) 90% of the sale price (excluding the royalty and the applicable taxes) received during the e-auction may be paid by the buyer directly to the respective lease holders and the balance 10% may be deposited with the Monitoring Committee alongwith the royalty, FDT and other applicable taxes/charges;" 10. It is thus clear from the above that the Monitoring Committee is conducting e-auction and sale of iron ores mined by the holders of mining leases in ....
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.... this appeal, references were also made to the decisions of the Hon'ble Supreme Court in the cases of Mineral Area Development Authority v. M/s. Steel Authority of India & ors. [Civil Appeal Nos. 4056 to 4064 of 1999 & ors. dated 30.03.2011] and India Cement Ltd. and ors. v. State of Tamil Nadu & ors. [(1990) 1 SCC 12 / 1990 AIR 85 (S.C.)]. We have reached our conclusions above without touching upon these aspects as they are not germane to the questions before us. Any view we reach on the effect of these judgements will not alter our conclusions above. It is thus not for us to consider it necessary to adjudicate upon these arguments, particularly considering that the questions are still pending before the Hon'ble Supreme Court. 13. It is clear from this that it was as per the directions of Hon'ble Apex Court that the Monitoring Committee was required to collect the Royalty, taxes and other applicable charges from the auction buyers of iron ores and deposit the same with the Government. This is clearly evidenced by the samples of invoices/e-mails that were filed along with the appeal papers. The said tax has been deposited by the Monitoring Committee under the name and service ta....