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TMI Blog2024 (5) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... Madhya Pradesh [the Water Department] for drawl of water from the Rihand Reservoir for use by the appellant in its power plant for 30 years. As per the Agreement, the appellant became entitled to draw a specified quantity of water from the Rihand Reservoir in lieu of water charges at rates fixed by the Water Department from time to time. At the time of execution of the Agreement, the charges were specified at Rs. 5.50/- per cubic meter. The appellant was required to make its own arrangements for civil works for the purpose of drawl of water and the Water Department was also required to give prior notice to the appellant in case of an anticipated shortage in the supply of water. 3. The appellant made payment of Rs. 60,19,94,250/- for the period of April 2016 to June 2017 to the Water Department for drawl of water. 4. According to the appellant, the water charges did not constitute consideration for any service and they were in the form of water tax and cess cess collected by the Water Department. 5. A show cause notice dated 20.10.2021 was issued to the appellant demanding service tax of Rs. 8,98,36,065.00/- for the period from Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich assigns the use of natural resources to the any person against payment of monetary consideration determined by the Government and agreed upon by the concerned person for a specific period. I find that this service provided by the Government has been specifically mentioned as taxable service for providing certain exemptions as discussed in para 27.3 above. I also find that services by the government by way of assignment of right to use natural resources to an individual farmer for the purpose of agriculture have been exempted. However, I find that no such exemption have been given for assignment of right to use natural resources for individual one. 27.7 Now coming to the facts of the present case, it is an admitted position that all rights in water of natural resources are vested in Government in terms of Section 26 of MP Irrigation Act. xxxxxxxxxxx Since all the rights in water of natural resources are vested in the Governments, no person is permitted to have access to such water bodies, drawl of water and its use of such water for any purposes unless such persons are assigned the right to have access to such water bodies by the Government by way of permission for drawl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it is not sale of water by the Government to the Noticee as discussed in foregoing paras. 29. Another contention of the Noticee is that in this case there is transfer of right to use the water by the Government to the Noticee which is deemed sale in terms of Article 366(29A) of Constitution of India. In this context I find that first the Noticee has claimed that it is sale of water by the Government to the Noticee as it involves transfer of property in goods. On the other hand the Noticee is claiming that it is deemed sale of water by way of transfer of right to use the water. xxxxxxxxxxxx It is settled legal position that the transfer of right to use goods involves transfer of effective control and possession of goods to the transferee who is totally free to deal with the goods as per his will. In such cases, there is transfer of right to use the goods like machinery, equipment, vehicles etc for a specified period in the agreement/contract and during this period such goods remain in effective control and possession of the transferee who can use it as per his convenience. The goods are returned to the transferor after the specified period in agreement is over. In this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... water, even going by the case of the department the alleged services in relation to assignment of right to use natural resources from State of Madhya Pradesh was received by the appellant by virtue of the Agreement dated 05.01.2013. The alleged provision of services will govern by the provisions, as were in force prior to 01.04.2016 and there can be no tax implication on the appellant. Admittedly, prior to 01.04.2016, the services of assignment of right to use natural resources were not excluded from negative list and as such no service tax can be levied for drawl of water even after 01.04.2016, and payment of water charges will not be subject to service tax. In this connection reliance has been placed on the decision of the Tribunal in M/s. The Madhya Pradesh State Mining Corporation Limited vs. Pr. Commissioner, CGST & Central Excise, Bhopal (M.P.) [2023 (4) TMI 1075 - CESTAT New Delhi] and Commissioner of CGST & Excise, Patna-I vs. M/s. Broad Son Commodities Private Limited [2023 (3) TMI 17 - CESTAT Kolkata], wherein the Tribunal held that services on assignment of right to use natural resources is provided on the date of agreement and it is not concerned with terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. There is no clause in the Agreement that the water will be returned to the Government after the specified period; and (iv) The appellant was aware of tax liablility on the said service but with the intent to evade service tax they suppressed it. Therefore, extended period of limitation and penalty under section 78 is invokable. 9. The submissions advanced by the learned counsel for the appellant and the learned authorised representative appearing for the department have been considered. 10. The reasons assigned by the Commissioner in the impugned order for not accepting the contentions of the appellant are: (i) The contention of the appellant that it is a case of supply of water to the appellant involving transaction of sale and purchase of water for which charges are paid on the basis of volume of water supplied is not correct as it is not a case of supply of water by the government, but a case where mere permission has been granted to the appellant to have access to drawl of specified quantity of water from the reservoir for a specified period. The water charges paid by the appellant are consideration paid by the appellant; (ii) All rights regarding use of natural reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars commencing from the 5 day of January 2013 on terms and condition herein contained. The permission hereby granted shall be subject to the provision of Madhya Pradesh Irrigation Act. 1931 (3 of 1931) amendments thereof and M.P. Irrigation Rules 1974 amended there off and further any executive orders issued in this behalf by the Government from time to time and for the time being in force. (2) The Company shall pay to the Government water rates for water drawn by it from said Government water source at the rates fixed by Water Resources Department No. 18-1/91/Madhyam/31/436, Bhopal Dates 21-04-2010 which is Rs. 5.50 (Rs. Five and paisa fifty) per Cum as on 1.1.2013. Note:- xxxxxxxxxx (3) The company shall make its own arrangements at its own cost to use water either by construction of any civil engineering work which may include construction of pick up weir, barrage, dam, dug well tube well ect. xxxxxxxxx. (4) xxxxxxxxx (5) Subject to the terms and conditions of this agreement nothing herein contained shall be deemed to imply any guarantee on the part of the Government the uninterruptability in the supply of water during an event of Force Majeure. The Government shall al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Madhya Pradesh Irrigation Act 1931 is reproduced below: "40. Supply or water for industrial, urban or other purposes.- The conditions for the supply of water for industrial, urban or other purposes not connected with agriculture. And the charges there for, shall be as agreed upon between the State Government and the company, firm, private person or local body concerned and fixed in accordance with rules made under this act." 14. The permission was also subject to the provision of the Madhya Pradesh Irrigation Rules 1974. Rule 71A of the said Rules is reproduced below: "71A. (1) Water may be supplied with the prior permission of the State Government for any industrial purpose to the Private/Government Organisation at the rates not less than the rates specified in Column (3) of the table below:- (1) (2) (3) 1. From Government Sources Rs. 1.00 per Cum 2. From Natural/Created own source 30 paise per Cum 3. Regained of Water after use from Government source (e.g. Hydel Power Project) 07 paise per Unit (KWH) Generated 4. Regained of Water after use from Natural/Created own source (e.g. Hydel Power Project) 02 Paise per Un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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