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2019 (11) TMI 479

..... chanism - as per the understanding of the Applicant, the mining lease service availed by them should be classified under the head 99733 - AAR is of the view that the present case of the Applicant does not come within the ambit of provisions of Section 97 of the CGST Act, 2017. Jurisdiction of AAR - HELD THAT:- The broad objective for setting up of the AAR/AAAR is to provide certainty in tax liability in advance in relation to an activity being undertaken or proposed to be undertaken by the Applicant as well as to reduce litigation. The activity on which the Applicant sought an advance ruling is a continuous activity and pronouncing an order on such activity shall be within the jurisdiction of the “Authority”. Merits of the case - rate of GST - HELD THAT:- On a conjoint reading of the notification no 27/2018-Central Tax (Rate) dated 31 12.2018, Minutes / Agenda / Proposal / Discussion of the GST council, we are of the view that amendments have been carried out vide the aforesaid notification to clarify the legislative intent as well as to resolve the unintended interpretations It is well settled that the legislative intent cannot be defeated by adopting interpretations w .....

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..... 2.1 In terms of Notfn No.13/2017- Central Tax (Rate) dated 28 06 2017 the Business Entity located in the taxable territory shall be liable to pay GST under Reverse Charge Mechanism on the service supplied by the Central Government, State Government, Union Territory or Local Authority to a Business Entity. The Applicant is, thus, liable to pay GST on the royalty amount paid to the State Government under reverse charge mechanism. The Applicant has admitted the reverse charge liability and there is no dispute on this account. The Applicant has sought a ruling only on the rate at which GST is to be paid on reverse charge on the royalty paid to State Government during the period from 01.07.2017 to 31.12.2018. 2.2. The Advance Ruling Authority had examined the application and heard the Applicant. After hearing, the members did not agree on the issue of advance ruling on the rate of GST applicable to past supplies transacted during the period from 01 07.2017 to 31.12.2018 3.0. Views of the members of AAR 3.1. Member of AAR, the Joint Commissioner of Central Tax was of the view that the Appellant had filed application for advance ruling on 24.05.2019 on the issue of determination of Rate o .....

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..... assified under the Heading 9973 It was also observed by him that the rate of GST prescribed in column 4 against the residual services in clause (viii) of Entry Serial 17 of Notification No 11/2017 -CT (Rate) cannot simply be implemented for determining the rate of GST applicable to the mining lease provided by Government to all the mining lessees including the Applicant for the simple reason that the supply does not involve lease of any goods but rather conferment of the right to exploit and appropriate the minerals from the lease hold area during the currency of the lease agreement The supply being of the nature of conferring the right on the lessee to mine and appropriate the minerals, the rate prescribed for leasing of goods cannot be applied in this case Hence, the most appropriate rate shall be the default rate of 9% CGST & 9% OGST. 4.0 On reference by the Authority for Advance Ruling with differing observation by members the Applicant was granted an opportunity of personal hearing on 23 10 2019 Shri Vikram Khaitan. Chartered Accountant appeared on behalf of the Applicant In the course of personal hearing Mr Khaitan reiterated the submissions made in the application and al .....

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..... jasthan has also been upheld by the Appellate Authority on Advance Ruling Rajasthan vide their order No RAJ/AAAR/03/2019-20 dated 30 05.2019 = 2019 (8) TMI 1010 - APPELLATE AUTHORITY FOR ADVANCE RULING, RAJASTHAN AAR of Chhattisgarh, Haryana and Karnataka have also held that the rate of GST applicable for the period from 01 07.2017 to 31 12 2018 was the rate of GST applicable to the minerals AAR of Karnataka have also ruled that the rate of GST on the said service is 18% (9% CGST and 9% SGST) after 01 01 2019 Discussion & Finding: 5.0. We have considered the submission of the Applicant filed along with the application and also in the course of personal hearing. The Applicant has requested to pass an order holding that the Rate of GST, payable by them under Reverse Charge Mechanism, on royalty paid to Government for mining of iron ore for the period July, 2017 to December, 2018 would be 5 % i.e. rate of GST applicable on supply of iron ore. We find that, as per the understanding of the Applicant, the mining lease service availed by them should be classified under the head 99733. They have also accepted their liability to pay GST on Royalty paid to the State Government under Reve .....

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..... Description (1) (2) (3) (4) 232 Heading 9973 Leasing or rental services without operator 233 Group 99731 Leasing or rental services concerning machinery and equipment without operator 234 997311 Leasing or rental services concerning transport equipments including containers, without operator 235 997312 Leasing or rental services concerning agricultural machinery and equipment without operator 236 997313 Leasing or rental services concerning construction machinery and equipment without operator 237 997314 Leasing or rental services concerning office machinery and equipment (except computers) without operator 238 997315 Leasing or rental services concerning computers without operators 239 997316 Leasing or rental services concerning telecommunications equipment without operator 240 997319 Leasing or rental services concerning other machinery and equipments without operator 241 Group 99732 Leasing or rental services concerning other goods 242 997321 Leasing or rental services concerning televisions, radios, video cassette recorders, projectors, audio systems and related equipment and accessories (home entertainment equipment ) 243 997322 Leasing or rental services concerning video ta .....

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..... rnment, as grantor of the right does not continue to enjoy title over the minerals extracted by the lessee Rather the lessee enjoy the title over the minerals extracted from the lease hold area and accordingly appropriates the property in the minerals by way of sale or otherwise. Thus, in the case of mining lease service granted by Government in favour of any licensee including the Applicant, on payment of royalty as applicable, there is transfer of right to exploit the minerals lying under the lease hold area and to appropriate the exploit. On examining the aforesaid nature of the service being received by the Applicant vis-a-vis classification of service, we are of the same view as have been taken by the Advance Ruling Authorities of the other States relied upon by the Applicant and have no hesitation to rule that the impugned service received by the Applicant from the State Government merits classification under the head 997337 in the category of service description Licensing services for the right to use minerals including its exploration and evaluation . On the other hand, we do not agree with the ruling issued by the AAR Haryana and AAR Chhattisgarh that the rate of GST on su .....

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..... ing the rate of GST on mining services. The AAR of Madhya Pradesh did not issue ruling on the rate of tax applicable to mining lease. The ruling issued by them is on the classification of the service and that GST is also payable on the contributions made to DMF and NMET which is not before us for decision. 5.3.2. For determining the applicable rate of GST on the supply of aforesaid service, we examined Entry SI No 17 the Notification No 11/2017-Central Tax (Rate) dated 28-06-2017 and find that the said entry SI. No 17 notifies rate of CGST for the service Heading 9973 (Leasing or rental services with or without operator). The relevant entry of the notification is reproduced below for easy reference. SI.No. Chapter, Section or Heading Description of Service Rate (per cent) Condition 17 Heading 9973 (Leasing or rental services, with or without operator) (i) ................................ 6 - (ii) - 9 - (iii) - Same rate of Central tax as on supply of like goods involving transfer of title in goods - (iv) -. Same rate of Central tax as on supply of like goods involving transfer of title in goods - (v) - 2.5 - (vi) Leasing or rental services, with or without operator, other than (i), .....

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..... stood prior to its amendment, for the entire period 01.07.2017 to 31.12.2018. Since, the service received by the Applicant is not at all leasing of goods but rather leasing services for the right to use minerals including its exploration and evaluation , the transaction is appropriately covered under the residual entry of SI.No. 17 of the aforesaid notification. The aforesaid description of service received by the Applicant has subsequently been classified against item no. vii [From 13.10.2017 to 24.01.2018] and item no viii from 25.01.2018 onwards. The rate prescribed in the relevant notification against aforesaid item is same rate of central tax as applicable on supply of like goods involving transfer of title in goods till 31.12.2018 and 9 % thereafter. We also find that the GST rate so prescribed at Si.No. 17(vi) or at clause (vii) or (viii) after amendment is not implementable due to the absence of any underlying goods. 5.3.3.4. On examining the Notification no. 27/2018-Central Tax (Rate) dated 31.12.2018 which has been issued on the recommendations of the GST Council to further amend the Notification no. 11/2017-Central Tax (Rate) dated 28.06.2017, we find that the same has .....

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..... apply to transfer of intellectual property and similar products other than IPR. We have also gone through the minutes of the 31s1 GST Council Meeting held on 22nd December, 2018, where in, against the aforesaid proposal, it has been minuted as follows Annexure - II 14 41. The Council agreed to the proposals contained in S.Nos. 1 to 19 of Annexure II, recommended by Fitment Committee in its meeting of 14th and 15th December, 2018. 5.3.3.5. From the aforementioned proposal, it may be appreciated that amendment of Entry SI No. 17 (viii) was approved merely to clarify the GST rate applicable to the right to use Intellectual Property and similar products other than IPR which are covered under Group 99733. There was no such proposal either to enhance or reduce the rate of tax As is discussed in earlier Para 5 3 1, the impugned service received by the Applicant is appropriately covered under description Licensing services for the right to use minerals including its exploration and evaluation which is classifiable under SAC 997337 under Group 99733 But, as per discussion in point no 1 no rate has been prescribed for transfer of intellectual property and similar products other than IPR and .....

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..... hroughout. These amendments were obviously made to end the dispute raised by the manufactures by an express statement. Un-quote We are of the view that the ratio of the aforesaid case is squarely applicable to the instant case as well. 7.0. We are also inclined to rely on the decision of the Hon ble Supreme Court of India in the case of W.P.I.L Ltd. Versus Commissioner of Central Excise, Meerut, U P [2005 (181) E.L.T. 359 (S.C)] = 2005 (2) TMI 137 - SUPREME COURT which is also applicable to the present case, where in a 3 Judges Bench of the Hon ble Supreme Court while interpreting applicability of exemption notifications have observed in Para 15 and 16 as follows. To Quote:- 15. The learned counsel for the appellant is also right in relying upon a decision of this Court in Collector of Central Excise. Shillong V. Wood Craft Products ltd., ((1995) 3 SCC 454] = 1995) 3 SCC 454. In that case, this Court held that a clarificatory notification would take effect retrospectively Such a notification merely clarified the position and makes explicit what was implicit. Clarificatory notifications have been issued to end the dispute between the parties. 16. In view of the consistent policy of .....

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