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2024 (5) TMI 326 - CESTAT NEW DELHILevy of service tax - water charges paid by the appellant to the department in lieu of supply of water under the Agreement dated 05.01.2013 - transfer of right to use the water by the Government to the appellant - deemed sale - HELD THAT:- A perusal of the Agreement executed between the government of Madhya Pradesh and the appellant would indicate that the appellant had applied to the government for permission to draw water from the Rihand Reservoir for use in the power project and the government had agreed to grant the said permission on certain terms and conditions in consideration of the appellant making payment to the government. The said permission was granted for a term of 30 years subject to the provisions of the Madhya Pradesh Irrigation Act 1931 and the Madhya Pradesh Irrigation Rules 1974 as is clear from clause 1 of the Agreement. The Title of the Agreement shows that it was for supply of water to the industrial power plant. The appellant was required to pay water charges to the government for the water drawn by it from the government water source at the rates fixed by the Water Department which would be Rs. 5.50/- per cubic meter. In addition, the appellant was also required to pay local fund cess or any other tax as may be fixed by the government. The appellant was required to make its own arrangement at its own cost for drawl of water from the water resource of the government to the plant - The appellant has to pay water rates/water charges depending on the quantity of water drawn by the appellant. The Agreement also deals with a situation where there can be reduction or shortage in the water supply. This clearly means that the Agreement is for supply of water and not mere access to water source. It is, therefore, more than apparent that the Agreement is for supply of water by the government to the appellant and is not for assignment of any right to the appellant to use the natural resources of the government. The appellant is justified in asserting that the Agreement executed between the appellant and the government is for supply of water for which charges are paid by the appellant on the basis of volume of water drawn and it is not a case of assignment of right to use natural resources of the government - no service was provided by the government to the appellant. The impugned order, therefore, deserves to be set aside on this ground alone. Appeal allowed.
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