TMI Blog2024 (1) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... dered by the Hon ble Supreme Court in the case of India Cement Ltd vs. State of Tamil Nadu [ 1989 (10) TMI 53 - SUPREME COURT] and held that royalty is a tax. The said decision is rendered by seven judges bench of the Hon ble Supreme Court. Later, in the case of State of West Bengal vs Kesoram Industries Ltd Ors. (decided on 15.1.2004) [ 2004 (1) TMI 71 - SUPREME COURT ] the decision rendered in the case of India Cement Ltd was doubted. The Ld. Special Counsel appearing for department has relied on this judgment rendered by five judges bench decision to argue that royalty is not a tax - It is brought to our notice that the issue whether royalty by itself is a tax has now been referred to nine judges bench in the case of Mineral Area Development [ 2011 (3) TMI 1554 - SUPREME COURT] . In a recent decision, the Hon ble Apex Court in the case of RAJNISH KUMAR RAI VERSUS UNION OF INDIA ORS. [ 2023 (9) TMI 1421 - SUPREME COURT] , held that judicial proprietary does not allow to ignore the decision laid by the Court even though referred to larger bench. The royalty , in the present case, even if in the nature of regulatory fee or license fee contain a part which is compensa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.61 of the exemption notification. Para 15 of the SCN also would show that the demand has been raised on the basis that the royalty which is paid periodically is not exempted from service tax. The argument put forward by the Ld. Counsel that the liability is derived on the basis of an exemption notification and not charging provision is not without substance. The demand of service tax cannot sustain and requires to be set aside - Appeal allowed. - MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) AND MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) Shri. Sujit Ghosh, Advocate Shri. Shubh Dixit, Advocate : For the Appellant Shri Balasubramaniam, Special Counsel : For the Respondent ORDER Brief facts are that the appellant viz., M/s.Oil and Natural Gas Corporation, Karaikkal, is engaged in activities of exploration and production of crude oil and natural gas from various oil fields located in different areas of Nagapattinam, Cuddalur, Tiruvarur, Tanjore and Ramnad Districts of Tamil Nadu. The appellant holds service tax registration for discharging service tax on various taxable services. 1.1 On gathering intelligence that the appellant has not paid the appropriate se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x. However, with an amendment to Section 66D (a) (iv) of the Finance Act, 1994 with effect from 1.4.2016, 'any service' provided by Government or a local authority to business entities would attract Service Tax. 1.2.2. Thus, it appeared that assignment of right to use of oil fields (natural resources) provided by the Government of Tamil Nadu to M/s. ONGC Karaikal for exploration and production of crude oil and natural gas in lieu consideration is not covered under the Negative List of services under Section 66D of the Finance Act, 1994 and that assignment of right to use for exploration and production of crude oil and gas for consideration by the Government of Tamil Nadu is an act of 'service' as per Section 65B (44) of the Finance Act, 1994 and squarely covered under the phrase 'any service' used in the definition. 1.2.3. As per the Notification No.25/2012 dated 20.6.2012, as amended by Notification No.22/2016 ST dated April 13, 2016 (Sl.No.61) services by way of assignment of right to use of natural resources, where such right to use was assigned by the government or local authority before 01.04.2016 is exempted from payment of Service Tax. The relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ights to use of natural resources for exploration and production of crude and oil provided by Government of Tamil Nadu under reverse charge mechanism. 1.3. The appellant had not discharged service tax on the royalty paid by them to the Government of Tamil Nadu during the period April 2016 to June 2017. Show Cause Notice dt.10.10.2017 was issued to the appellant proposing to demand the short paid service tax along with interest and for imposing penalties. After due process of law, the Original authority confirmed the demand of service tax along with interest and imposed penalties. Aggrieved, the appellant is now before the Tribunal. The operative part of the impugned order is extracted below: ORDER (i) The assignment of right to use for exploration and production of crude oil and natural gas by the Government of Tamil Nadu to M/s. Oil Natural Gas Corporation Limited, Cauvery Asset, Neravy, Karaikal-609604 is classifiable as service under Section 65B (44) taxable service under Section 65B (51) of the Finance Act, 1994; (ii) I confirm the Service tax inclusive of Cess amounting to Rs.34,66,63,868/- (Rupees thirty-four crores sixty-six lakhs sixty-three thousand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon a careful reading of the provisions of Oilfields (Regulation and Development) Act, 1948 [hereinafter referred to as the ORD Act ], as well as the Constitution of India, it is evident that Royalty charged under the ORD Act falls squarely within the ambit of the term tax , thereby rendering the demand of Service Tax on an amount which is not a consideration, and is in the nature of tax, as illegal, and liable to be set aside. Something that qualifies as a tax can never be a consideration since both the terms have a distinct meaning in law. While tax is a statutory payment without any quid pro quo authorised under Article 265, consideration is a contractual payment signifying quid pro quo. 2.5. Taxation is defined under Article 366(28) of the Constitution of India which includes the imposition of any tax or impost, whether general, local, or special and tax shall be construed accordingly. Further, the Hon ble Supreme Court in the case of Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt AIR 1954 SC 282, has held that tax is a compulsory extraction of money by public authority for public purposes enforceable by law and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that royalty is not in the nature of tax. 2.9 It is submitted that the Ld. Adjudicating Authority in Para 26 of the Impugned Order has observed that royalty is not in the nature of tax in as much as an element of quid pro quo is ingrained in the transaction where the lessee promises to pay royalty for getting or enjoying the benefits from the properties leased out to the lessor. Further, the Ld. Adjudicating Authority observed that Section 6(2)(i) of the ORD Act provides that the Government has power to make rules for the collection of royalties, and the levy and collection of fees or taxes, in respect of mineral oils mined, quarried, excavated or collected . On this basis, the Ld. Adjudicating Authority concludes that if royalty was in the nature of tax, then the term royalty would have been subsumed in the word taxes in Section 6(2)(i) of the ORD Act and the legislature would not have referred to royalty over and above the term tax in Section 6(2)(i) of the ORD Act. 2.10 It is submitted that the Ld. Adjudicating Authority has erred in its findings with regards to the nature of royalty paid under the ORD Act in as much as the nomenclature of the levy has no bea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a). At para 56 of the decision in Kesoram Industries (supra), the Hon ble Supreme Court attributed the finding of the Hon ble Court in India Cements (supra) qua royalty being in the nature of tax to a typographical error and stenographers devil and thereby proceeds to depart from the law laid down by 7 judges in India Cements (supra). Subsequently, the Hon ble Supreme Court in the case of Mineral Area Development Authority and Ors. v. Steel Authority of India and Ors. (2011) 4 SCC 450 referred the question of whether royalty is a tax to a bench of 9 judges. The said reference is pending adjudication before the Hon ble Supreme Court of India. It is pertinent to note that there is no stay on the decision of India Cements (supra) during the pendency of the reference. 2.17 It is submitted that the reliance placed by the Ld. Adjudicating Authority on the decision of the Hon ble Supreme Court in the case of Kesoram Industries (supra) rendered by 5 judges and ignoring the decision of the Hon ble Supreme Court in India Cements (7 judges) is a complete breach of judicial discipline. This is so because all quasi-judicial authorities are bound by the decision of the bench which has the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.21 In that regard, it is submitted that royalty is a statutory payment which ought to be made by the licensee. Further, as per Section 6A of the ORD Act, royalty ought to be paid on the quantum of the mineral oil extracted. Accordingly, royalty has no nexus with the grant of license to the Appellant. Furthermore, the rate of royalty is determined by the Schedule to the ORD Act [Section 6A (1)] (and revised from time to time by means of Notifications) and not on the basis of any contract between the State Government and the licensee (Appellant). 2.22 It is further submitted that grant of mining lease by the State Government is a regulatory function performed by the Government and cannot be considered as a service being provided to the Appellant. In that regard, attention is drawn to the preamble of the ORD Act, which prescribes that the ORD Act is an act to provide for the regulation of oilfields and for the development of mineral oil resources. Furthermore, the mining lease is granted by the State Government pursuant to the powers enshrined in Article 246 read with Entry 23 of List II of Schedule VII of the Constitution of India. Entry 23 of List II provides for regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of the Appellant that the Respondent has not been able to discharge its burden to establish that these payments are compensatory in nature. At best royalty can be considered as a regulatory fee, to regulate the business of mining of natural resources. Accordingly, the contention of the Ld. Adjudicating Authority that royalty is a consideration for a service being provided by the State Government cannot be sustained. 2.26 Further, assuming without admitting that there is a service element in addition to the regulatory function being performed by the Government, it is submitted that there is no machinery provision prescribed in the Finance Act which provides a mechanism for bifurcating the components towards regulatory fee, and fee which is compensatory in nature, so as to arrive at the assessable value on which service tax ought to be levied. It is trite law that in absence of a machinery for valuation of tax, no service tax can be imposed. [Suresh Kumar Bansal v. Union of India 2016 (43) STR 3 (Del.) para 48, 53 and 55]. As such therefore, no service tax can be levied on the royalty payments made by the Appellant to the State Government. C. The Ld. Adjudicating Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the sale quantity of crude oil and gas produced from the oil fields allocated by the Government and therefore the royalty payable on monthly basis is not exempted from payment of Service Tax . Since the assignment of rights to use oil fields located within the state of Tamil Nadu by the Government of Tamil Nadu to M/s. ONGC Karaikal is neither covered under the Negative List of Services nor covered under the exemption Notifications, the same squarely falls within service under Section 65B (44) and Taxable Service as per Section 658 (51) of the Finance Act, 1994 with affect from 01.4.2016. Further, Central Board of Excise and Customs (CBEC) vide Circular No. 192/02/2016-ST dated 13.04.2016 has clarified that Service Tax is applicable on the amount of royalty paid or payable to the Government for assignment of rights to use of natural resources . [Para 23 of the Impugned Order at Page No. 129 of the Appeal Memo] (d) I notice, that the activity of assignment of right to use for exploration and production of crude oil and gas for consideration by the Government of Tamil Nadu do constitute a service as per Section 65B (44) of the Finance Act, 1994 and service tax is so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the other does not already own. None of this, of course, applies to a tenant in common, because he has a separate and distinct interest of his own which he can assign either to a third party or to his co-owner. 2.31 Furthermore, the Hon ble Andhra Pradesh High Court in Kondavati Naganna v. Matukumilli Satyanarayana and Anr AIR 1958 AP 711, Para 6) has clearly laid down that a lessee cannot be an assignee since lease is not an assignment of property. 2.32 In Hartman Ranch Co v. Associated Oil Co. L.A. 14980 decided on 26.11.1937 the Supreme Court of California had held that where the transferor reserves the right of re-entry for breach of condition, he has a contingent reversionary interest which prevents its transfer from operating as an assignment as a whole. Instead, a sublease arises. 2.33 From the conspectus of the above jurisprudence under Indian law and other jurisdictions, it is clear that in a transaction where reversionary interests are retained by the lessor, the transaction cannot be said to be that of assignment, for the reason that, an assignment assumes parting with the whole property without any reversionary interest. 2.34 From a perusal of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Act, 2012 wherein support services provided by the Government or a local authority to business entities was a taxable service. Subsequently, vide the Finance Act, 2015, any service provided by the Government or a local authority to business entities was made taxable with effect from 01.04.2016. As such therefore, the alleged service of assignment of rights to use oil fields is alleged to be made taxable under Section 66B only after 01.04.2016. 2.38 It is submitted that the rendering of the alleged services of assignment of right to use natural resources is a one-time event which actually takes place no sooner than the rights under the assignment arrangement is granted. Such point in time would be the date and time when the contractual arrangement is set into motion under which the rights are contractually made available. This would therefore be the date, i.e., the date of execution of lease agreement between the parties. For this purpose, reliance is placed on the decision of the Hon ble Supreme Court in the case of 20th Century Finance Corporation Ltd. v. State of Maharashtra (2000) 6 SCC 12. 2.39 It is submitted that the mining leases were granted by the State of Tami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of a delegated legislation (i.e., Notification No. 25/2012 Service Tax dated 20.07.2012), even when the substantive provision does not levy service tax on taxable events prior to the introduction of levy on 01.04.2016. 2.43 It is submitted that it is trite law that an exemption notification cannot be relied upon to determine taxability. That is to say that if a transaction is excluded from the exemption notification cannot by implication become a taxable service. The question of exemption only arises when there is a liability. Unless there is a liability, the question of exemption does not arise. [Commissioner of Customs, Kerala v. Larson Toubro Ltd. 2015 (39) S.T.R. 913 (S.C.) at para 44.] 2.44 Accordingly, the Ld. Adjudicating authority erred in levying service tax on the royalty payments made to the State Government in as much as the taxable event has occurred prior to the introduction of the levy, thereby rendering the Impugned Order liable to be set aside. In any case, the attempt to create a charge of tax on the basis of an exemption notification cannot be countenanced. F. Assuming without admitting that Royalty is not in the nature of tax, Central Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase where no production activities are carried out in any allotted oil fields. 3.3 As per Section 65(B) (44) of the Finance Act, 1994, Service means any activity carried out by a person for another for a consideration including the declared services and as per 65B (51) ibid, taxable service means any service on which service Tax is leviable under Section 66B of the Act. From these legal provisions, any activity which meets the characteristics of a service is taxable unless specified in the Negative List or is otherwise exempted by a notification issued under Section 93 ibid. Till 31.3.2016, the services other than support services provided by Government were in the Negative list and hence outside the scope of levy of Service tax. However, with an amendment to Section 66D(a)(iv) of the Finance Act, 1994, with effect from 1.4.2016, any service provided by Government or a local authority to business entities would attract Service tax other than those services specified under sub-clause (i) to (iii) ibid. In para 22 of the impugned Order-in-Original, the adjudicating authority has correctly observed that the assignment of right to use for exploration and production of crude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is set out in the preamble of these enactments. As per the provisions of ORD Act, the Lessee needs to pay Government Royalty, rent and any other amount for assigning the rights over such properties. Thus assignment of rights over the properties for a certain amount of consideration in the name of royalty meets the characteristics of consideration. Further, as per section 2(d) of the Indian Contracts Act, 1872, consideration means when at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstain from doing, or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise . Therefore, the Royalty paid to government in lieu of granting the right for exploration and production of crude oil and gas qualify as consideration for the purpose of the Finance Act, 1994. It is submitted that merely because the Royalty is levied under the provisions of ORD Act, it cannot be presumed that it is a tax as it is imposed under the Central Act. 3.7 Further vide para 28 of the impugned order the Adjudicating authority has clarified that the phrases used in clause (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... devil or to sheer inadvertence. 3.11. In the Kesoram s case the error committed in the India Cements judgement was only pointed out after reading the entire portion of India Cements case. So it cannot be claimed that a new decision is taken in Kesoram s case by a five member bench than the one delivered in the India Cements case by seven member case. It is submitted that the contention of the assesse that now the issue has been referred to nine member bench and the India Cements decision and has not been stayed is not sustainable. Even the decision of Kesoram s case was also not stayed. As Kesoram s decision clarified the decision rendered in India Cements case with legal and logical reasoning, the decision of Kesoram s case is binding being of recent origin. In the judgement, it is stated We declare that even in India Cement it was not the finding of the Court that royalty is a tax. A statement caused by an apparent typographical or inadvertent error in a judgement of the Court should not be misunderstood as declaration of such law by the Court. They have further held We feel constrained rather duty-bound to say so, lest the reading of the judgement containing such an er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent from fees. Therefore, the contention of the appellant is against the provisions of law. 3.14. The adjudicating authority in para 22 of the Order-in-Original has examined the provisions of law and held that the assignment of right to use for exploration and production of crude oil and gas for consideration by the Government of Tamil Nadu is an act of service as per Section 65B (44) of the Finance Act, 1994 and squarely covered under the phrase any service used in the definition. Hence, the right to use of oil fields (natural resources) provided by the Government of Tamil Nadu to M/s.ONGC, Karaikal for exploration and production of crude oil/natural gas on a consideration is not covered under the Negative List of services under Section 66D of the Finance Act, 1994. 3.15. It is submitted that Service tax is an indirect tax and the same is not levied on value addition but on the value of consideration received for rendering such services. The payment of royalty is linked with the well-head price of crude and flat rate for Gas at the fixed rate. The mega exemption Notification No.25/2012 ST dated 20.6.2012 as amended by Notification No.22/2016 ST dated 13.4.2016 provides f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment/Legislature has a wide discretion with regard thereto. The State is allowed to pick and choose objects, persons, methods and even rates for taxation. 3.17. It is submitted that the adjudicating authority in para 32 of the impugned Order-in-Original has observed and clarified that Royalty paid in this case is not rent. Only amount received in the nature of rent in respect of immovable property are covered under declared service of Renting of Immovable Property Services and accordingly Service Tax is applicable on such amount. Renting in common parlance means allowing, permitting or granting access to someone to have the use of a room or house or a property in return for payment. The Tamil Nadu Government has not leased the land per se, the leasing was given for exploring oil and gas available beneath the land, and therefore will not come under definition of renting . 3.18. It is further submitted that it is pertinent to note the FAQ Governmental Services issued by the CBIC in the present GST regime, wherein under Question No.30 explanation has been given to the applicability of GST under RCM for Royalty charges: Question 30: Whether an amount in the form of ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 1.4.2016, the exemption is limited to one time charges (whether paid in full or in instalments) for assignment of right to use such natural resource. In other words, the periodic charges/payments made by business entities to Government or a local authority have been kept out of the exemption and thus would be taxable. The payment of royalty is linked with the well-head price of crude and flat rate for Gas at the fixed rate. The mega exemption Notification No.25/2012-ST dated 20.6.2012 as amended by Notification No.22/2016-ST dated 13.4.2016 provides for exemption to service tax payable on one-time charge payable, in full upfront or in instalments, for assignment of right to use such natural resources for the period before 1.4.2016. So the onetime charge should be fixed which has to be paid in full time or in instalments. In the instant case, the royalty is on a fixed percentage of prices. So royalty varies from month to month. Hence the same cannot be equated with one time charges. The Ld. Special Counsel for the department prayed that the appeal may be dismissed. 4. The parties were heard on 6.9.2023, and the matter was reserved for orders. The parties were given the liberty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements Ltd., is rendered by seven judges bench of the Hon ble Apex Court, the said decision would prevail, as the reference is still pending. 5.5. In a recent decision, the Hon ble Apex Court in the case of Rajnish Kumar Rai Vs UOI in SLP (Civil) No.20054/2003 dt. 6.9.2023, held that judicial proprietary does not allow to ignore the decision laid by the Court even though referred to larger bench. 5.6. The Ld. Counsel for appellant has adverted to case of Union Territory of Ladakh vs. Jammu and Kashmir National Conference and Anr., Civil Appeal No.5707 of 2023 decided on 6.9.2023, where in it was held at para 35, by the Hon ble Supreme Court that Courts shall decide matters on the basis of the law, as it stands and not wait for the outcome of the review/reference. It is not open for courts to refuse to follow any decision by stating that it has been doubted by a later Bench. The relevant para of the said decision is reproduced as under: We are seeing before us judgements and orders by High Courts not deciding cases on the ground that the leading judgement of this court on this subject is either referred to a larger Bench or a review petition relating thereto is pending. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices, we find that the demand of service tax on royalty is not sustainable. As we hold this issue in favour of the appellant, the requirement for discussing other arguments put forward by both sides is of no relevance. However, for completeness, we proceed to discuss other rival contentions also. 5.10. To appreciate better, it would be beneficial to notice the relevant provisions of law. Section 65B (44) of the Finance Act, 1994 provides the definition of service and reads as under: 65B (44) service means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include - (a) an activity which constitutes merely, - (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, enhancement, implementation of information technology software; (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; (f) transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods; (g) activities in relation to delivery of goods on hire-purchase or any system of payment by instalments; (h) service portion in the execution of a works contract; (i) service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity; (j) assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof. 5.10.2. Again, invoking the powers under sub-section (1) of Section 93 of the Finance Act, 1994 and in supersession of Notification No.12/2012-ST dt.17.3.2012, the Notification no.25/2012-ST dt.20.6.2012 was issued which is often referred to as the Mega exemption notification. This Notification exempts certain taxable services from service tax. Later, the Notification no.22/2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion which is paid or payable in the form or royalty, PEL/PML dead rent and surface rent. Accordingly, M/s. ONGC Karikkal is undertaking the exploration and mining activities in the licensed oil fields. Thus it appears that M/s. ONGC Karaikkal is paying royalty, PEL/PML, dead rent and surface rent in lieu of consideration for assigning the rights to use of oil blocks. 9. From the discussion in the preceding paragraphs, It appears that the Government of Tamil Nadu has granted the License or right to use the oil fields located in the territorial jurisdiction of Tamil Nadu to M/s. ONGC for exploration and mining of crude oil and natural gas against consideration which is payable in the form of royalty or dead rent, Mining Lease charges and Surface rent. Further, it appears M/s. ONGC Karaikal is also paying dead rent in the form or royalty in case where there is no production activities are being carried out in any allotted oi fields. 6.1 As per Sl.No.61 of the negative list, as introduced by notification 22/2016-ST w.e.f. 13.4.2016, the exemption is from payment of service tax for assignment of right to use natural resources granted before 1.4.2016. So also, if the charges are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment) Act, 1948, royalty is to be paid on the quantum of mineral oil extracted. The rate of royalty is also determined by the Schedule given in the Act. It gets revised by issue of notifications. The Ld. Counsel has contended that there is no quid pro quo, as the amount of royalty paid is not based on the agreement/contract entered with the government and the appellant has no say or voice in fixing the amount of royalty that has to be paid. The Ld. Special Counsel, appearing for department has countered these arguments by submitting that royalty is paid for the activity of assignment of right to use natural resources. The Circular issued by Board No.192/2016 dt.13.4.2016 has also been adverted to by the department. The royalty is to be paid as per an enactment and not an agreement. It does not arise out of a contractual obligation, where both parties exercise and arrive at a consensus to fix the amount. It is more akin to a regulatory fee, as the Act itself is intended for Oil fields Regulation and Development. It can also be said to be a license fee for the right to extract the crude oil and natural gas. Even if a license fee or regulatory fee, if the fee levied is entirely reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he preliminary expenses such sum, not exceeding Rs.10,000 (Rupees ten thousand) Government or the State Government, with the approval of the Central Government, may determine; (2) On the grant of a lease, the lessee (a) shall pay to the Central Government or the State Government, as the case may be, for every year a fixed yearly dead rent at the following rates: Rs.12.50 per hectare or part thereof for the first 100 sq.km. and Rs.25 per hectare or part thereof for area exceeding the first 100 sq.km. provided that the lessee shall be liable to pay only the dead rent or the royalty, whichever is higher in amount but not both; (b) shall also pay to the State Government for the surface area of the land actually used by him for the purpose of the operations conducted under the lease, surface rent at such rate, not exceeding the land revenue and cess assessed or assessable on the land, as may be specified by the State Government with the approval of the Central Government. 17. Transfer or Assignment : The licensee or the lessee shall not assign or transfer his right, title and interest, in respect of the license or the lessee or in respect of the land or mineral underlyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would show that the assignment of right to use is considered by department by as the taxable service. The Ld. Counsel for appellant has argued that the grant of mining lease is not an assignment of right. Several decisions have been relied to submit that in an assignment the right of one party is completely relinquished to another, and further that lease is not an assignment . On perusal of the document dt.6.8.2009, issued by the Government of Tamil Nadu, it is mentioned therein as a Mining Lease. The document does not use the words assignment of right to use of oil/natural gases . The relevant part of the document reads as under: 9. In the circumstances stated above, the Government of Tamil Nadu, after detailed examination, grant Petroleum Mining Lease to M/s.ONGC Ltd., for an extent of 2.3 sq.kms. in Kanchipuram block, Thiruvallur District for a period of 20 years from 3.4.2007 to 12.4.2007, under Rule 5(1) of PNG Rules 1959 (as amended from time to time) subject to terms and conditions mentioned in the Annexures 1 11 of this order. 8. The document is in the nature of Lease and not assignment of right to use . Further, Rule 17 prohibits transfer of assignm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice tax payable only on one time payment, in full upfront or in instalments. Thus it is an exemption from payment of service tax on services provided by government/local authority for assignment of right to use natural resources prior to 1.4.2016, subject to the proviso. The Ld. Special Counsel for department has argued that the activity of such assignment falls within the definition of service as under Section 65B (44) introduced as early as w.e.f. 1.7.2012 itself. Though it is contended by department that the activity of grant of lease for mining right falls within the definition of service under Section 65B (44), the demand is raised alleging that it falls within Sl.No.61 (introduced w.e.f 13.4.2016) and that the activity is an assignment of right to use natural resources. 10. In the case of Kiran Spinning Mills, Thane vs. CCE, Bombay II 1984(17) ELT 396 (Tri) the larger Bench of the Tribunal analysed the issue as to whether an exemption notification can create duty liability. The Tribunal held that an exemption notification clearly is not a charging provision and it cannot be interpreted so as to create a duty liability where none existed under the tariff entry. In the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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