TMI Blog2021 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ment is given in Section 65 (40) and the taxable service of event management is defined in Section 65 (zzzzr). An activity whether constitutes service was understood on the basis of the definition of classification and whether such service is taxable was to be understood on the basis of the definition of taxable service provided in Section 65 (105). From the definition, it can be seen that prior to 01.07.2012, definition of taxable service of renting of immovable property services did not include renting of vacant land solely used for mining purposes - A new service tax regime was introduced vide Finance Act, 2012 which gave up the system of identifying taxable services with reference to the definitions or classification of services. Section 65B thus practically replaced erstwhile elaborate definitions and classifications provided in Section 65. Section 66B was inserted as the new charging section. A negative list was introduced as Section 66D which comprises of the list of services which are not taxable under law. The Revenue alleges that royalty and dead rent is the consideration paid for providing renting of immovable property services. The act of entering into a lease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - The period involved is from 01.07.2012 to 31.03.2016. The show cause notices have been issued on dates thereafter invoking extended period. In para-16 of the SCN dt. 05.10.2017 it is stated that assessee has not paid service tax and has not obtained services tax registration. It is also alleged that if the Revenue had not requested to provide information, non-payment of service would have gone unnoticed. That therefore, assessee has wilfully and deliberately suppressed facts with intent to evade payment of service tax - No particular positive act of wilful and deliberate suppression has been unearthed by Revenue with cogent evidence. Further, in the present case, there is clarification issued by the Board that grant of mining rights is not support service. For these reasons, the demand raised invoking the extended period cannot sustain. The assessee succeeds on the issue of limitation also. The demand of service tax cannot sustain - appeal allowed - decided in favor of appellant. - ST/52575-52587/2018, ST/51389,51478,51495,51715/2019 (with ST/EH No.50080,50099/2021) ST/50917,51396-51399/2019 (with ST/EH/50077-50078/2021, ST/Cross/50723-50725, 50737/2019) - FINAL ORDER No. 52 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S-000-COM-0027-17-18 dt. 27.03.2018. 4. ST/52578/2018 -do- CGST CE Jodhpur OIO JOD-EXCUS-000-COM-0024-17-18 dt. 21.03.2018. 5. ST/52579/2018 -do- CGST CE, Jodhpur OIO JOD-EXCUS-000-COM-0022-17-18 dt. 20.03.2018. 6. ST/52580/2018 -do- CGST CE Jodhpur OIO JOD-EXCUS-000-COM-0023-17-18 dt. 21.03.2018. 7. ST/52581/2018 [with ST/EH/50099/2021] -do- CGST CE Jodhpur OIO JOD-EXCUS-000-COM-0025-17-18 dt. 21.03.2018. 8. ST/52582/2018 -do- CGST CE Alwar OIO ALW-EXCUS-000-COM-033-039-17-18 dt. 23.01.2018 9. ST/52583/2018 -do- CGST CE Alwar -do- 10. ST/52584/2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -do- Case put forward by Revenue : 3. Learned Authorized Representative Shri A. Thapliyal, appeared and argued for the Revenue and also filed written submissions. The Department of Mines and Geology, Government of Rajasthan, the assessee herein collected dead rent as well as royalty on lease agreements entered for granting mining rights. The dead rent is a fixed amount which is collected by the assessee for giving the land on lease and royalty is being collected for right to use the land for mining purposes. The royalty depends on the quantity of ore mined by the lessee. The lessee thus requires to pay dead rent or royalty whichever is higher. The lessee has to pay minimum annual royalty as dead rent to the assessee in four equal quarterly instalments. 4. He submitted that the assessee by entering into lease agreements for grant of mining rights is providing Renting of Immovable Property Services and is liable to pay service tax for the period 01.07.2012 to 31.03.2016. 5. The definition of Renting of Immovable Property prior to 01.07.2012 did not include renting of vacant land solely used for mining purposes. However, with the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the precincts of a port or an airport; (iii) transport of goods or passengers; or (iv) support service, other than services covered under clauses (i) to (iii) above, provided to business entities . [emphasis supplied] 8. From the above, it can be seen that as per sub-clause (iv) of Section 66D (a), support services provided by Government to business entities are chargeable to service tax. Support Services are defined under Section 65B(49) of Finance Act, 1994 which reads as under : Support Service means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion construction or works contract, renting of immovable property , security, testing and analysis. [emphasis supplied] 9. According to the Revenue, though the negative list comprises of various services provided by Government and are not exigible to service tax, however, when these services fall within the definition of support services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable to government for ore or mineral excavated or utilized from leased land. 12. The Ld. A.R relied upon the decision of the Hon ble High Court of Rajasthan filed by Udaipur Chamber of Commerce and industry Ors. in D.B. Civil Writ Petition No.14578 of 2016. He submitted that in the said judgement, the Hon ble High Court has categorically held that in the case of mining lease, there is no transfer of title of immovable property and in absence of this, the activities would fall within the definition of service as given under Section 65B (44). He submitted that the royalty being consideration certainly places assignment of right to use natural resources deposited in the leased area as a service as defined under Section 65B (44) of the Finance Act, 1994. The said section defines service to mean any activity carried out by a person for any consideration and includes a declared service. Further, as already stated, the mining lease granted by the assessee to lease holders / licensee for excavation, removal or utilization of mineral from the leased land would come under the purview of renting as defined under Section 65B (41) of the Finance Act, 1994. 13. With regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demands service tax for the period 01.07.2012 to 31.03.2016 on the royalty and dead rent collected for grant of mining rights by the Department of Geology, Govt. of Rajasthan, the assessee herein, by treating the activity as support service in the nature of Renting of Immovable Property Service on a Forward charge basis. 16. He submitted that the allegation is that lease agreements entered for grant of mining rights falls within the definition of renting in terms of Section 65B (41) and that renting of immovable property service is a Declared Service under Section 66E of the Finance Act, 1994. Further, that by virtue of Section 66D (a) [Negative list] read with Section 65B (49) [definition of support services ] of the Finance Act, 1994 renting of immovable property provided by Government to a business entity has to be treated as support service which is not covered under negative list of services; that therefore leasing of land for grant of mining rights is subject to levy of service tax. 17. Ld. Consultant submitted that by reading Rule 2(1)(d) (E)together with Notification No.30/2012 dt.20.06.2012, it has been concluded by Revenue that renting of immovable propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) What is Royalty Rule 3 (1) (xx) Royalty means the charge payable to the Government in respect of the ore or mineral excavated, removed or utilized from any land as prescribed in schedule-I. b) What is Dead Rent Rule 3 (10 (x) Dead Rent means the minimum guaranteed amount payable for mining lease which is calculated as per the area of the lease and revisable as provided in these rules. c) Dead Rent is in the Nature of Minimum Royalty Fifth Proviso to Sub Rule (3) of Rule 18 Provided further also that the lessee shall be liable to pay either dead rent or royalty in respect of eachmineral whichever is higher but not both; d) Surface Rent is Separate from Royalty Dead Rent Sub Rule (2) (a) of Rule 18 The lessee shall pay for surface area used by him for the purpose of mining, surface rent to Revenue Department as per the rates prevalent in the area; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or removal or consumption or sale of mineral which is a movable property, and not against rent for use of barren land or surface area which is immovable property. The definition of royalty spells out that it is paid against excavation, removal and utilisation of Ore or Mineral from the land. Mining rights are also granted on self-owned land of the lessee and in such situations, there cannot be any tax as it would be self service of renting. He referred to copy of land patta and lease agreement in which land owner itself is the lessee in the mining lease. That surface rent receipts would show that such rent is paid to revenue department, and not to assessee herein. 20. Ld. Consultant submitted that there is change in law with respect to taxability of services provided by the Government for the period 01.07.2012 to 31.03.2016 and thereafter from 01.04.2016 to 30.06.2017 (till the introduction of GST). For the period from 01.07.2012 to 31.03.2016,which is the disputed period in these appeals, support services provided by Government to a business entities are taxable in terms of Section 66D (a) of the Finance Act, 1994.With effect from 01.04.2016, the word support service was om ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mining rights will not come within the meaning of support services . He relied on Taxation of Services An Education Guide dated 20.06.2012 issued by Tax Research Unit of CBEC. Ld. Consultant submitted that clarification issued by Department is binding upon the Revenue and the demand raised against the clarification cannot sustain. 25. Countering the arguments put forward by the Ld. A.R relying upon the decision of the Hon ble High Court of Rajasthan in D.B. Civil Writ Petition filed by Udaipur Chambers of Commerce and Industry and Ors. (supra), he submitted that said writ petition is filed by lessee against whom show cause notices were issued demanding service tax for the period after 01.04.2016 under reverse charge mechanism. He submitted that this itself would substantiate the arguments of assessee in this case. 26. The Ld. Consultant argued on the ground of limitation also. The SCN has been issued invoking the extended period alleging that assessee has not taken service tax registration and that has wilfully and deliberately supressed the facts with intent to evade payment of service tax. The said allegation is without any basis as the CBEC itself has issued clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The taxable service of renting of immovable property was provided in Section 65 (105) (zzzz). Similarly, what is event management is given in Section 65 (40) and the taxable service of event management is defined in Section 65 (zzzzr). An activity whether constitutes service was understood on the basis of the definition of classification and whether such service is taxable was to be understood on the basis of the definition of taxable service provided in Section 65 (105). 32. The said Section 65 (105) (zzzz) which defined renting of immovable property prior to 01.07.2012 reads as under : SECTION 65. Definitions . - In this Chapter, unless the context otherwise requires, - (105) taxable service means any service provided or to be provided (zzzz) to any person, by any other person, by renting of immovable property or any other service in relation to such renting , for use in the course of or, for furtherance of, business or commerce. Explanation 1. - For the purposes of this sub-clause, immovable property includes - (i) building and part of a building, and the land appurtenant thereto; (ii) land incidental to the use of such building or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) fees taken in any Court or tribunal established under any law for the time being in force. Explanation 1 . - For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to,- (A) the functions performed by the Members of Parliament, Members of State Legislative, Members of Panchayats, Members of Municipalities and Members of other local authorities who receive any consideration in performing the functions of that office as such member; or (B) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or (C) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or State Governments or local authority and who is not deemed as an employee before the commencement of this section. .. . 35. The above Section 65B thus practically replaced erstwhile elaborate definitions and classifications provided in Section 65. Section 66B was inserted as the new charging section. A negative list was introduced as Section 66D which comprises of the list of services which are not taxable under law. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s within the definition of support services , the royalty and dead rent collected by the assessee is a consideration for service which is subject to levy of service tax. The allegation in the SCNs is that the activity of renting vacant land for mining purposes is a support service provided by assessee (Government of Rajasthan) to business entities and therefore taxable. 39. Further, Revenue has relied on the Service Tax Rules, 1994 to contend that the liability to pay the service tax is on the assessee. The Service Tax Rules 1994 lays down from whom the service tax has to be collected. In other words, these rules lay down the person who is liable to pay service tax. The relevant Rules 2 (1) (d) E is noticed as under : RULE 2. Definitions .- (1) In these rules, unless the context otherwise requires, - . (d) person liable for paying service tax , - . . . (E) in relation to [support]* services provided or agreed to be provided by Government or local authority except,- (a) renting of immovable property, and (b) services specified sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994, to any business entity loca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee though continued to be the service provider the demand is only upto 01.04.2016. 42. From Rule 2 (1) (d) (E) of Service Tax Rules, 1994 noticed above, it can be seen that except for renting of immovable property service (and services specified in sub clause (i) (ii) and (iii) of clause (a) of Section 66D which are not relevant for this case) when the services are provided by Government to business entities, the liability to pay service tax is on the recipient of service. It is thus argued by the assessee that when there is no change in law as to the person liable to pay service tax, the Revenue cannot collect service tax from the assessee (Government) on forward charge basis for the period 01.07.2012 to 31.03.2016 and under reverse charge basis from the lessee on the very same service after 01.04.2016. That this act of Revenue by changing the liability to pay service tax after 01.04.2016 itself would show that the lease of land for mining purpose is not a support service. 43. Learned Consultant has relied upon the clarification issued by CBEC in their Education Guide dated 20.06.2012 wherein the meaning of support services has been clarified. It is categorically stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XXXXXXX 44. The demand of service tax is on the royalty and dead rent collected by the assessee. Royalty and dead rent are defined in The Rajasthan Minor and Mineral Concession Rules, 1986. Relevant provisions are as under : Rule 3 (1) (xx) : Royalty means the charge payable to the Government in respect of the ore or mineral excavated, removed or utilized from any land as prescribed in schedule-I: Rule 3 (1) (x): Dead Rent means the minimum guaranteed amount payable for mining lease which is calculated as per the area of the lease and revisable as provided in these rules; 45. The Revenue alleges that royalty and dead rent is the consideration paid for providing renting of immovable property services. The act of entering into a lease agreement for grant of mining rights arises out of statue, namely, Mines and Minerals (Regulation and Development) Act, 1957 as well as the Rajasthan Minor Minerals Concession Rules, 1986. No amount other than the charges specified in the Acts/Rules can be collected. The conditions that can be incorporated in the agreement are also prescribed by giving a Modal Agreement. The assessee who is the service provider thus has no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply in relation to a duty of excise :- sub-section (2A) of section 5A, sub-section(2) of section 9A, 9AA, 9B, 9C, 9D, 9E, 11B, 11BB, 11C, 12, 12A, 12B, 12C, 12D, 12E, 14, 15, 15A, 15B 31, 32, 32A to 32P, 33A, 35EE, 34A, 35F, 35FF, to 35O (both inclusive), 35Q, 35R, 36, 36A, 36B, 37A, 37B , 37C, 37D 38A and 40. [emphasis supplied] Section 37B lays down that in order to achieve uniformity in the classification of excisable goods or with respect to levy of duties of excise, the Board can issue necessary instructions. In the case on hand, the Ld. Consultant has put forward a plea that only the Commissionerates of Jodhpur Alwar have raised the demand and other Commissionerates all over the country have accepted the clarification issued by the Board. In various judgments it has been held that the circular/ instructions / clarifications issued by Board are binding on the Revenue. 48. In Ramadey Micronutrients Vs CCE- 1996 (87) ELT 19 (SC), the Hon ble Apex Court held that Board circulars are meant for adoption of uniform practice and that they are binding on officers of Revenue Department. 49. The Hon ble Apex Court in the case of UOI Vs Arviva Industries (I) Ltd. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. Vs UOI 2020 (41) GSTL - 165 (Del.). The Hon ble High Court held as under : 11 . Having heard Learned Counsel for the parties and having perused the paper book, this Court finds that the expression quantified in Section 121(r) has been extended/widened by way of para 2(v) of Circular dated 12th December, 2019 and paras 4(a) and 10(g) of Circular dated 27th August, 2019. 12 . In Navnit Lal C. Javeri v. K.K. Sen, Appellate Assistant Commissioner of Income Tax, Bombay, AIR 1965 SC 1375, K.P. Varghese v. Income Tax Officer, Ernakulam Anr., (1981) 4 SCC 173 and Paper Products Ltd. v. Commissioner of Central Excise, (2001) 247 ITR 128 (SC) = 1999 (112) E.L.T. 765 (S.C.), it has been held that circulars are binding on departments and department cannot challenge them even if they are inconsistent with the statute. 51. The Hon ble High Court of Bombay in CST Vs Citi Bank N.A. - 2018 (18) GSTL 580 (Bom.) held that the clarification issued by the Board is binding on the Revenue : 10 . In fact, the Central Board of Excise Customs on 24th February, 2009 has issued a clarificatory Circular No. 111/5/2009, clarifying that in respect of services following under cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the includes part. For better appreciation, the same is shown as under : support service means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion construction or works contract, renting of immovable property, security, testing and analysis. 54. The means part mentions five services. The third part which is the includes part gives a list of services. The middle part explains the category of services which can be accommodated along with other services in the includes part and means part. The middle part uses the word any other support of any kind . These words any other support of any kind are general words. However, this is expressly followed by the words comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing . Therefore, only those services which fit into the category of services which business ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of support service and to retain the sanctity of negative list which comprises of services rendered for the public by Government and local authority. 57. It appears that the clarification issued by Board that mining lease for grant of mining rights is not a support service is in accordance with the statute. 58. The Ld. Authorized Representative has not made any submission countering the clarification issued by the Board. He has relied upon the decision of the Hon ble High Court of Rajasthan in the case of Udaipur Chambers of Commerce Industry and Ors. in Civil Writ Petition No.14578/2016. The said writ petition is filed by lessee / service recipients against whom show cause notices have been issued demanding service tax after 01.04.2016 under reverse charge mechanism. Pertinently after the deletion of the words support services in Section 66D (a). The demand of service tax is made under reverse charge mechanism for the period after 01.04.2016 after the substitution of the word any service in clause (iv) of Section 66D (a) whereas the demand in these appeals is on the allegation that renting of immovable property is a support service The words support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also alleged that if the Revenue had not requested to provide information, non-payment of service would have gone unnoticed. That therefore, assessee has wilfully and deliberately suppressed facts with intent to evade payment of service tax. On appreciation of facts, we find that, the assessee being the Department of State of Rajasthan, the allegation that they have wilfully and deliberately suppressed facts is without any basis. The details of lease deed, royalty and dead rent collected etc. are reflected in the accounts. No particular positive act of wilful and deliberate suppression has been unearthed by Revenue with cogent evidence. Further, in the present case, there is clarification issued by the Board that grant of mining rights is not support service. For these reasons, we hold that demand raised invoking the extended period cannot sustain. The assessee succeeds on the issue of limitation also. 61. From the discussions made above, after appreciating the facts, law and evidence placed before us we are of the considered view that the demand of service tax cannot sustain. In the result, the Assessee s appeals are allowed. The Revenue s appeals are dismissed. The cross obje ..... X X X X Extracts X X X X X X X X Extracts X X X X
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