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TMI Blog2020 (9) TMI 1253X X X X Extracts X X X X X X X X Extracts X X X X ..... UTGST Act, 2017. Please refer the Annexure, attached with this Order, to view the details of Order passed. This is a system generated Order and does not require any signature. RULING Salient features of the case are as follows, in brief: 1.1 In Re: M/s. Broadson Commodities Pvt. Ltd. having GSTIN: 10AABCB0310L3ZH, (hereinafter referred to as the "Respondent"), filed an application for advance ruling before Authority for Advance Ruling, Bihar (hereinafter referred to as the "AAR Bihar") under Section 97 of CGST Act, 2017 and Section 97 of the BGST Act, 2017. 1.2 The Respondent is engaged in the business of mining of "Sand" in the State of Bihar. The said product 'sand' is classified under Tariff Heading 2505 and are leviable to tax on the value of their supply @ 5% as per the Schedule appended to the tax rate notification. He submitted before the AAR Bihar that he has a lease agreement with the Department of Mines, Bihar, Patna vide letter no. 2961/M, dated 31/12/2018 for the period of five year (2015-19) and by letter no. 339/Mines, Patna. dated 28/12/2019, it is further extended up to 31/10/2020 for mining of sand. 1.3 He further submitted that the value of lease d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Aggrieved by the above ruling of AAR Bihar, Joint Commissioner of State Tax, Sahabad Circle, Arrah filed an appeal before Appellate Authority for Advance Ruling (hereinafter said as "AAAR, Bihar"). The following submissions were advanced on this behalf:- 4.1 The AAR Bihar has proceeded on the assumption that the aforesaid service is classifiable under the head 997337 which reads as: "Licensing services for the right to use minerals including its exploitation and evaluation" 4.2 The settlement of Sand Ghats does not give the settlee "any right to use mineral" but gives lease holder a right to exploit the natural resources. 4.3 It is clear from the explanatory notes issued regarding classification of services that service like - "Administrative services provided by government offices ............concerning discovery, exploitation ....................other aspects of minerals production" is classified under serial no. vii of SAC 999113 and Services of settlements of Sand Ghats (Bandobasti) Provided by the Government shall be covered by this code-SAC 999113 on which rate of tax is @18% from 01/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay any GST under reverse charge mechanism on the royalty paid to the government. 6. The departmental representative stated that the leasing service is rendered by state government to the respondent. This service falls under heading 997337. The principal contentions of the departmental representative are summarized hereinafter in this paragraph and in the subsequent paragraph. 6.1 In the wake of differing rulings across the Country, the matter was examined in detail by the GST Council in its 45th meeting. After detailed consideration of the issues involved in the matter, the Council recommended the issuance of a circular to clarify the issue. Accordingly, Circular no 164/2021 dated 06.10.2021, was issued on the recommendation of the Council wherein it has been clarified that the said service is taxable @ 18% (CGST 9 % + SGST 9 %) from 01.07.2017. 7. It is worth to mention relevant portion of the said Circular no 164/2021 7.1 The issue at hand has been clarified vide Para 9 of said circular which deals with "Services by way of grant of mineral exploration and mining rights" and it states that the Council is in receipt of various representations requesting clarification as to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carefully. The substantive part of the said entry reads as under: "Services provided by the Central Government, State Government, Union territory or local authority by way of assignment of right to use any natural resource where such right to use was assigned by the Central Government, State Government, Union territory or local authority before the 1st April, 2016:..." (Emphasis supplied) 8.2 This entry deals with assignment of right to use any natural resources. The instant case does not involve assignment of any right to use any natural resource. It is not in dispute that the Respondent engaged is in the business of exploiting sand from the river beds and that the right to explore for, exploit/extract sand is assigned by the Government for consideration, generally termed royalty. Upon extraction of the sand, the Respondent is free to sell it in the market. The Merriam Webster Dictionary defines the word "use" as "to do something with (an object, machine, person, method, etc.) in order to accomplish a task, do an activity, etc.". The activity of the Respondent is no way involved with "using" the sand extracted by it to accomplish any activity or any task. In fact, the Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing its exploration and evaluation" and that the rate of tax applicable to this activity is 18% (9% CGST + 9% SGST) with effect from 01.07.2017 itself. 9.1 Before, parting with the issue it is also being clarified that the expression "...where such right to use was assigned by the Central Government, State Government, Union territory or local authority before the 1st April, 2016:..." occurring in the said serial number 64 of the impugned notification number 12/2017 (supra) also does not come to the rescue of the Respondent on factual grounds alone. A perusal of the agreement and other document submitted by the Respondent before this Court as also before the Authority for Advance Ruling reveals that separate yearly agreement and work orders were issued by the Authorities of the Mining Department, Government of Bihar in respect of each calendar year. Even the Respondent himself has stated in Para 16 of this reply that- "separate yearly work orders were issued in favor of the Respondent for the district of Patna, Saran and Bhojpur. Consequent thereto, separate yearly agreements were executed by the District Magistrate of Patna and Bhojpur." 9.2 It is being reiterated that we have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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