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TMI Blog2020 (12) TMI 1314X X X X Extracts X X X X X X X X Extracts X X X X ..... sp;Brief facts of the case : (1) Mr. Andru Srinivas (Andru), an individual proprietor and a mining lease holder was granted mining lease rights for "LATERITE" mineral by Government of Andhra Pradesh vide G.O. Ms. No. 63, dated 24-7-2013 over an extent of 10 hectares of land of Reserve Forest in East Godavari District. (2) On reclassification of Laterite from Major to Minor Mineral, the Government has announced fixed Royalty (seigniorage fee) for Laterite vide G.O. M.S No. 105, dated 13-11-2015. The rate of Royalty is Rs. 75/- M.T for non-metal Grade and Rs. 150/- M.T for Metal Grade. (3) The Central Government as per Section 9(c) of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR) read with National Mineral Exploration Trust Rules, 2015 ('NMETR') has notified the establishment of a trust as a non-profit body to be called the National Mineral Exploration Trust (NMET), for which the mining lease holder shall pay a sum equivalent to two per cent of the royalty paid in terms of the Second Schedule in such manner as prescribed by the Central Government. (4) The Government of Andhra Pradesh (G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in NMET and DMF in addition to the royalty amount. * The said contribution is not by way of royalty, and said fund is to be utilised for the objectives set under the MMRD Act read with NMETR and MMCDMFR rules framed under the said Act. * It is clear from the G.Os issued in respect of DMF and MERIT that these are in connection with grant of mineral rights and the statement of objectives of the MERIT states that the trust fund shall be utilized towards study, identification, acquisition of technology and equipment and also development of mineral database for exploration, exploitation and use by mineral based industries. Further, the funds of DMF are meant for the welfare and benefit of persons and areas affected by mining related operations. Therefore the principal purpose in the case of MERIT seems to be public good. * The contributions of the funds as prescribed by the Central Government are to be deposited at the rate of 2% of the royalty and 30% of the royalty in the case of NMET and DMF respectively. * From the plain reading of the above provisions, we understand that under MMRD Act, it is statutory obligation on the mining company to contribute to the trust and fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contribution to the NMET and DMF are based on a per ton basis or with reference to Royalty payment to be made separately to the State Government (on which appropriate GST is being paid) will not take away the force of the submission because in law it is a well settled principle that the measure or yardstick for collection of tax will not determine the character or the nature of levy which in this case is a statutory collection by way of tax. [see : Union of India & Ors. v. Bombay Tyre International Ltd. & Ors., (1984) 1 SCC 467 = 1983 (14) E.L.T. 1896 (S.C.)] Hence, it has long been recognized that the measure employed for assessing a tax must not be confused with the nature of the tax. 6. Virtual hearing : The proceedings of hearing were conducted through video conference on 22nd October, 2020, for which the authorized representative, Sri S. Thirumalai, Advocate attended and made certain additional submissions which are as under : (1) Contribution to National Mineral Exploration Trust (NMET) forms part of the Consolidated Fund of India. The collections on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Federation of Indian Mineral was dealing with the question of date of operation of notification levying DMF contribution. Paras 27 to 33 of the said judgment deliberated extensively on the validity of the DMF contribution in the realms of taxation scheme. The three components of taxing statute viz. subject of the tax, person liable to pay the tax and the rate at which the tax is levied were applied in deciding the validity of the contribution towards DMF. The relevant Paras of the judgment are as under : "31. We may also note a similar view expressed in Principles of Statutory Interpretation by Justice G.P. Singh that : There are three components of a taxing statute, viz. subject of the tax, person liable to pay the tax and the rate at which the tax is levied. If there be any real ambiguity in respect of any of these components which is not removable by reasonable construction, there would be no tax in law till the defect is removed by the legislature. 32. In view of the decision of the Constitution Bench of this Court that the specification of the rate of tax (or any compulsory levy for that matter) is an essential component of the tax regime, it is difficult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (d) of Article 243 of the Constitution; (b) a "Municipality" as defined in clause (e) of Article 243P of the Constitution; (c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund; (d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006; (e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution; (f) a Development Board constituted under Article 371 of the Constitution; or (g) a Regional Council constituted under Article 371A of the Constitution." The definition of the term 'local authority' as defined in Section 2(69) is exhaustive and not inclusive. Therefore, the local authority includes only those that have been listed in Section 2(69). Sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : We have examined the issues raised in the application. The taxability of the goods and services supplied or to be supplied, as governed under the provisions of respective GST Acts are examined. The applicant seeks clarification on two issues (a) Whether the contribution to National Mineral Exploration Trust (NMET) and District Mineral Foundation (DMF) would qualify as consideration towards supply of mining service? (b) If so, whether it is consequently included for purpose of value of supply chargeable to GST under the Reverse Charge Mechanism in the hands of the applicant, i.e., service recipient? The applicant has emphasized the following points at the time of hearing about the amount contributed to DMF and NMET. (1) Contribution to National Mineral Exploration Trust (NMET) forms part of the Consolidated Fund of India. The applicant contends that the NMET collections by the Mining Department are not proceeds from business since there is no supply by the Government, but reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of separate legislations for specific purposes. There is no correlation between the Royalty payments and the NMET and DMF except for measurement of NMET and DMF which is based on Royalty. If the intention had been to collect additional amounts akin to Royalty, the Government would have either increased the Royalty rate or collected the same as surcharge linked to Royalty. Merely because, the NMET and DMF payments were based on Royalty amounts, the same cannot be conjoined and termed as one to levy the GST. Without prejudice to the submissions made in Para 1-3 supra, if it is assumed that NMET and DMF are supply of services, the same cannot be termed as single service and therefore clubbed to arrive at value under Section 15 of the GST law. As per Sec. 9B of the Mines and Minerals (Development & Regulation) Act, 1957, DMF (District Mineral Foundation) is a trust which is formed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of valuation does not hold good. The service provided is only the license to extract mineral ore and also the right to use such minerals extracted is a single service where the consideration is payable under three heads and in case any one of the payments is not made, the service provider, that is the Government would not issue the permit to use the mineral ore so extracted. Hence it forms the value of the supply under Section 15 and the charges for DMF and NMET being compulsory payments, would only amount to application of the amounts paid and still would form the value of the taxable services. It is also inferred that the service is a single service as discussed above, there are no separate service providers for royalty, DMF and NMET and in all cases the Government which has provided the license to mine mineral ore and permitted the use of such mineral ore mined would be the person who has provided the service. As per Entry No. 5 of Notification No. 13/2017-Central Tax (Rate), GST on services supplied by Central Government, State Government or Local Authority, to a business entity needs to be paid by such business entity under RCM. 8. In view of the foregoing, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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