TaxTMI 
TaxTMI 
2026 (8) TMI 330
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....yment of Royalty under a mining lease. 2.1. Pursuant to an open tender floated by the Mining Department, Government of Bihar on 15.01.2015, the Appellant participated in the Tender and deposited security/consideration of Rs. 1,48,55,000/-. The Government of Bihar allotted the stone mine to the Appellant vide Allotment Letter (Letter of Intent) No. 92/Khannan dated 03.02.2015, over an area of 12.50 acres, for extraction of stone (approximately 10,00,000 cubic metre / 25,00,000 MT). The formal lease deed pursuant to the said allotment was thereafter executed on 29.08.2016. By reason of the said grant of the right to extract minerals, the Appellant was required to pay Royalty to the State Government, computed with reference to the minerals extracted / removed from the mine. 2.2. Prior to 01.04.2016, the services provided by the Government or a local authority, were covered under the negative list of services under Section 66D(a) of the Finance Act, 1994, and were accordingly not exigible to Service tax. The grant by the Government of the right to use natural resources, including by way of a mining lease, was thus outside the purview of Service tax, and the consideration paid in ....
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.... the proviso to Section 73(1)], along with interest under Section 75, penalty of Rs. 89,13,000/- under Section 78 and penalty of Rs. 10,000/- under Section 77(2) of the Finance Act, 1994, by invoking the extended period of limitation. 2.8. The Appellant preferred an appeal before the Commissioner (Appeals), CGST & Central Excise, Patna-I, who, vide the impugned Order-in-Appeal No. 33/Pat/S.Tax/Appeal/2025 dated 11.06.2025, upheld the Order-in-Original, holding, inter alia, that the formal lease agreement having been executed on 29.08.2016, i.e. after 01.04.2016, and hence the Appellant was liable to Service tax on the Royalty under reverse charge. 2.9. Aggrieved against the confirmation of demand of service tax along with interest and penalty, the Appellant filed this appeal. 3. The submissions made by the Appellant are summarized as under: A. The demand is barred by limitation - the issue being purely interpretational, the extended period is not invocable A.1 The entire demand for the period April 2016 to June 2017 has been raised by a Demand-cum-Show Cause Notice dated 20.10.2021, i.e. wholly beyond the normal period of limitation, by invoking the exten....
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.... A.7 Without prejudice, it is submitted that since the entire demand is revenue neutral as the credit of the service tax if paid would have been available to the Appellant, extended period of limitation is not invocable. B. In any case, the mining right having been allotted prior to 01.04.2016, no Service tax is leviable. B.1 The taxable event in the case of a service is the time when the service is provided or agreed to be provided. In terms of the charging provision, Section 66B of the Finance Act, 1994, Service tax is leviable on all services, other than those in the negative list, "provided or agreed to be provided" in the taxable territory. The right to use natural resources was allotted / agreed to be provided to the Appellant vide Allotment Letter (Letter of Intent) No. 92/Khannan dated 03.02.2015, i.e. long prior to 01.04.2016, at which time such services provided by the Government were covered by the negative list under Section 66D(a) and were not exigible to Service tax. B.2 The relevant date for determining taxability is the date on which the assignment of the right to use natural resources was made / agreed to be made, namely 03.02.2015, an....
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....No. 75767/2026 dated 23.06.2026 - CESTAT Kolkata. B.5 It is therefore submitted that where the mining lease / assignment of the right to use natural resources was prior to 01.04.2016, Service tax cannot be fastened even if the consideration is paid thereafter, and set aside the demand of Service tax along with interest, holding further that no penalties were imposable. B.6 Relying on the aforesaid principles, the entire demand in the present case is liable to be set aside on this ground alone. C. No interest is payable and no penalty is imposable C.1. It is submitted that Interest under Section 75 of the Finance Act, 1994 is merely accessory to the principal demand of Service tax. The demand of Service tax being itself unsustainable, both on limitation and on merits, no interest is payable by the Appellant. C.2. The demand being unsustainable, no penalty under Section 78 or Section 77(2) of the Finance Act, 1994 is imposable. Further, penalty under Section 78 is predicated upon fraud, collusion, wilful misstatement or suppression of facts with intent to evade tax, none of which is present in the facts of the case. The dispute turning ent....
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....entral Goods and Service Tax, Guwahati, 2026 (7) TMI 455 - CESTAT Kolkata, wherein, on identical facts, the demand of Service tax on Royalty under reverse charge was set aside on the ground of limitation, this Tribunal holding that the issue was interpretational and that there was no proof of suppression or intent to evade. The relevant portion of the said decision is reproduced below: "... The issue involved relates to the taxability of Royalty under the category of 'assignment of right to use natural resources service', a matter which had been the subject matter of considerable judicial debate and conflicting views before various judicial fora... Such circumstances clearly demonstrate that the issue was interpretational and highly contentious. ... no material has been brought on record to establish any wilful suppression of facts, fraud, collusion, misstatement or deliberate intent on the part of the appellant to evade payment of Service Tax... Accordingly, we hold that the demand confirmed under this category is barred by limitation and is therefore unsustainable." 6.3. In support of our view that extended period is not invocable on such interpretational issues, we r....
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....r 01.04.2016. The Point of Taxation Rules, 2011 merely provide the machinery for collection of the tax and the point at which it becomes payable; they can neither enlarge the charge nor render taxable a service that was not taxable on the date it was provided or agreed to be provided. 7.3. We find that the issue is no longer res integra and stands concluded in favour of the Appellant, it having been consistently held that where the assignment of the right to use natural resources / grant of the mining lease was prior to 01.04.2016, Service tax cannot be fastened even if the consideration is paid thereafter. In support of this view, we place our reliance on the following decisions: (i) Principal Commissioner v. S.R. Traders, (2023) 9 Centax 407 (Tri-.Del), affirmed by the Hon'ble Supreme Court in (2023) 9 Centax 408 (SC); (j) M/s. Madhya Pradesh State Mining Corporation Ltd. v. Pr. Commissioner, CGST & CE, (2023) 10 Centax 253 (Tri.-Del); (k) National Aluminium Company Ltd. v. Commissioner, CGST & CX, Bhubaneswar, 2024 (5) TMI 621 (Tri.-Kol); (l) Cement Corporation of India Ltd. v. Commissioner, CGST & CE, Guwahati, 2024 (6) TMI 192 (Tri.-Kol);....
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....tered; failing which the lease shall be cancelled. 5. An amount equal to 10 percent of the settlement amount of the stone plots must be deposited as security (after adjusting the advance amount and the amount deposited during the auction). This security shall be adjusted against the final installment, provided that there are no arrears outstanding against the lessee and that the lessee's work is satisfactory. 6. Within 120 days of this in-principle approval order, the mining lease deed in Form 'D' must be submitted along with the following documents :- (a) The Mining Plan of the concerned mining lease area must be prepared and approved in accordance with the provisions laid down in the rules, and submitted. [b] An environmental clearance certificate must be obtained from the State Level Committee (SEIAA) of the Ministry of Environment and Forests, Government of India, and submitted. (c) 20 percent of the settlement amount (first installment) must be paid by bank draft. (d) Two percent of the first installment, together with the surcharge payable thereon, must be paid to the Income Tax Department under the income tax head by bank draft made payable t....