TaxTMI 
TaxTMI 
2026 (8) TMI 1299
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.... under Reverse Charge Mechanism on Royalty paid to Government of West Bengal and Production Level Payment (PLP) to the Government of India for natural resources extraction. 2. Brief facts of the case are as under :- The appellant M/s. Essar Oil & Gas Exploration & Production Limited, is engaged in the exploration and production of Coal Bed Methane (CBM) pursuant to a contract dated 26.07.2002 executed with the Ministry of Petroleum and Natural Gas, Government of India. Under the said contract, the appellant is required to pay Royalty to the Government of West Bengal and Production Level Payment (PLP) to the Government of India. The department issued a show cause notice alleging that the Royalty and PLP paid by the appellant duri....
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....atter is that whether the appellant is liable to pay Service Tax under Reverse Charge Mechanism on royalty paid to Government of West Bengal and PLP paid to Government of India for natural extraction by way of agreement dated 26.07.2002 or not during the period April 2016 to June 2017. The said issue has been examined by this Tribunal in the case of The Principal Commissioner, CGST & Central Excise, Bhopal v. M/s. S R Traders (supra), wherein this Tribunal has observed as under:- "2. The issue involved in this appeal is regarding non-payment of service tax on the amount paid to the Government or a local authority towards periodical charges for assignment of right to use of natural resource or quarry sand from the allotted mines. Th....
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....epartment is that since the payment under the agreements were to be made after April 01, 2016, the appellant would be liable to pay service tax. 5. This precise issue came up before a Bench of the Tribunal in M/s. Madhya Pradesh State Mining, Corporation Limited vs. Principal Commissioner, CGST & Central Excise, Bhopal (M.P.)3. In regard to short payment of service tax on dead rent paid by the appellant to the State Government, which was taxable on a reverse charge basis against the receipt of services concerning grant of mining rights, the Bench held that for the purposes of levying service tax, the taxable event is construed at the time the service is provided or agreed to be provided. Therefore, in order to determine whether lev....
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.... 16. Thus, for the purpose of levying service tax, the taxable event is construed as the time when the service is provided or agreed to be provided. Thus, in order to determine whether levy of tax is applicable on a particular activity, it is necessary to determine the point of time when such activity is provided or agreed to be provided. In the present case, the agreement between the appellant and State Government for grant of mining rights was executed on 02.01.2016 and on this date, the transactions involving) assignment of right to use natural resource was not taxable. 17. In this connection section 66D of the Finance Act, as it existed prior to 01.04.2016, can be referred to and it is as follows: "66D The negative lis....
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....of natural resources was not excluded from the scope of negative list prior to 01.04.2016 and so no tax implication can be fastened on the appellant for such period." (emphasis supplied) 6. Shri Harshvardhan, learned authorized representative appearing for the Department, however, placed reliance upon the grounds taken in the memo of appeal, particularly to ground no. 9.6 to contend that since the payments were received after April 01, 2016, the appellant would be liable to pay service tax. The said ground is reproduced below: "9.6 On going through the agreements it has been observed that all the contracts/agreements (for each sand quarry) have been executed allotted prior to the relevant date i.e. 01.04.2016 (the date ....
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....me charge, payable in full upfront or in installments, for assignment of right to use any natural resource and not to any periodic payment required to be made by the assignee, such as Spectrum User Charges, license fee in respect of spectrum, or monthly payments with respect to the coal extracted from the coal mine or royalty payable on extracted coal which shall be taxable 8. The Point of Taxation Rules deal with the date on which payment of service tax has to be made and do not determine whether the service is taxable or not. These Rules, therefore, would not be applicable in the present case. In any view of the matter, the issue is covered by the decision of the Division Bench of the Tribunal in Madhya Pradesh State Mining Corpo....