Back
2017 Supreme(Raj) 1760
IN THE HIGH COURT OF RAJASTHAN
Govind Mathur, Vinit Kumar Mathur, JJ.
Udaipur Chambers of Commerce and Industry – Appellant
Versus
Union of India – Respondent
Civil Writ Petition No. 14578 of 2016
Decided On : 24-10-2017
For the Appellants : M.S. Singhvi, Mr. Varun Singhvi, Mr. Vivek Aggarwal, Mr. D.D. Thanvi, Mr. B.M. Bohra, Mr. Amit Vyas, Mr. Arvind Shrimali.
For the Respondent: Vipul Singhvi.
Royalty paid by mining lease holders under the Mines and Minerals (Development and Regulations) Act, 1957, is a "consideration" for the assignment of the right to use natural resources, and therefore, the grant of mining lease by the Government to a mining lease holder is a "service" as defined under Section 65-B(44) of the Finance Act, 1994.
Headnote:
SERVICE TAX - Assignment of Right to Use Natural Resource - Mining Lease - Applicability of Service Tax on Yearly Installments Due After April 1, 2016 - Notification No. 25/2012-ST and 22/2016-ST - Interpretation of Service and Declared Services - Royalty as Consideration - Legality of Service Tax Levy.
Fact of the Case:
The issue in question is whether service tax is applicable on yearly installments due after April 1, 2016, in respect of the assignment of the right to use any natural resource, specifically a mining lease granted by the Government. The case involves the interpretation of service and declared services under the Finance Act, 1994, and the legality of service tax levy on royalty payments made by mining lease holders.
Finding of the Court:
The court held that the royalty paid by mining lease holders under the Mines and Minerals (Development and Regulations) Act, 1957, is a "consideration" for the assignment of the right to use natural resources. Therefore, the grant of mining lease by the Government to a mining lease holder is a "service" as defined under Section 65-B(44) of the Finance Act, 1994. Consequently, the notification dated 13.4.2016, which imposed service tax on yearly installments due after April 1, 2016, in respect of the assignment of the right to use natural resources, is not in conflict with the enabling Act and is legally valid.
Issues: 1. Whether the royalty paid by mining lease holders under the Mines and Minerals (Development and Regulations) Act, 1957, is a "consideration" for the assignment of the right to use natural resources. 2. Whether the grant of mining lease by the Government to a mining lease holder is a "service" as defined under Section 65-B(44) of the Finance Act, 1994. 3. Whether the notification dated 13.4.2016, which imposed service tax on yearly installments due after April 1, 2016, in respect of the assignment of the right to use natural resources, is in conflict with the enabling Act and is legally valid.
Ratio Decidendi: The court relied on the definition of "service" under Section 65-B(44) of the Finance Act, 1994, which states that any activity carried out by a person for another for consideration is a service. The court also considered the definition of "consideration" under Section 2(d) of the Indian Contract Act, 1872, which defines consideration as the price for a promise and an essential ingredient for a contract. The court concluded that the royalty paid by mining lease holders is a "consideration" for the assignment of the right to use natural resources and, therefore, the grant of mining lease is a "service" as defined under the Finance Act, 1994.
Final Decision: The court dismissed the petitions challenging the legality of service tax levy on yearly installments due after April 1, 2016, in respect of the assignment of the right to use natural resources.
Govind Mathur, J.
1. In this batch of petitions for writ the issue under consideration before us is relating to applicability of service tax on yearly installments due after April 1, 2016 in respect of assignment of right to use any natural resource, more specifically a mining lease granted by Government in the context to notification No. 25/2012-ST dated 20.6.2012 read with notification No. 22/2016 dated 13.4.2016, issued by the Government of India.
2. The facto legal background necessary to be noticed to examine the issue under consideration is that the parliament by way of the Finance Act, 1994 (hereinafter referred to as "the Act of 1994") imposed service tax on the services defined and described under Section 65-B(44). The definition since then subjected to amendments time to time and w.e.f. 1.7.2012 system of negative list of service tax was introduced in it. The existing definition of "service" as given under Section 65-B(44) of the Act of 1994 is as follows:-
"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.
(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:-
(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 received any consideration in performing the functions of that office as such member.
(B) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity.
(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.
Explanation 2 - For the purposes of this Chapter:-
(a) an unincorporated association or a body of persons, as the case may be and a member thereof shall be treated as distinct persons.
(b) an establishment of a person in the taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct person.
Explanation 3 - A person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an establishment in that territory.
Explanation 4 - A person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an establishment in that territory.
Sub clause (i) of sub clause (a) of the aforesaid subsection clearly exempts the transfer of goods or immovable property from charge of service tax."
The Act of 1994 also interprets the term "declared services" under Section 66-E and that is as follows:-
"Declared services - The following shall constitute declared services, namely:-
Renting of immovable property construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion-certificate by the competent authority.
Explanation - For the purpose of this clause:-
(I) the expression "competent authority" means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:-
Architect registered with the Council of Architec
