IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL EASTERN ZONAL BENCH : KOLKATA REGIONAL BENCH – COURT NO. 1 Service Tax Appeal No. 76822 of 2025 (Arising out of Order-in-Appeal No.251/ST/BBSR-GST/2025 dated 17.10.2025 passed by Commissioner of Customs, Kolkata)

Brahmani River Pellets : Appellant IPICOL House, 5^th Floor, Janpath Annex Building, Bhojnagar, Bhuvneshwar-751022.

VERSUS Commissioner of GST, Central Excise & Customs, : Respondent Revenue Building, Rajaswa Vihar, Bhubaneswar-751007.

APPEARANCE:

Mr. Jnanesh Mohanty & Ms. Shreya Mundhra, Advocates for the Appellant Shri S.Dutta, Authorized Representative for the Respondent CORAM:

HON’BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)

HON’BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)

FINAL ORDER NO. 75137/ 2026 DATE OF HEARING :21.01.2026 DATE OF DECISION:21.01.2026 Order : [Per Shri Ashok Jindal]

The appellant is in appeal against the impugned order wherein the demand of Service Tax has been confirmed alongwith interest and an equivalent amount of penalty has also been imposed on the appellant under Section 78 of the Finance Act, 1994.

2. The facts of the case are that the Appellant is engaged in the manufacture of iron ore pellets at its beneficiation plant located at Tanto, via Bhadrasahi, Barbil, Odisha.

2.1. The dispute in the present case relates to levy of Service tax on water charges paid by the appellant to the Government of Odisha for supply of water against charges / consideration at a specified rate stipulated in the Renewal Agreement dated October

14, 2015.

2.2. The present dispute emanates from the audit of financial records, which observed that supply of water by the Government from natural water sources, i.e., River Baitarani to the appellant falls under the category of "allocation / auction of natural resources" which is liable to Service tax w.e.f. 01.04.2016. The authorities observed that the liability has arisen in terms of Sl. 59 of Notification No. 25/2012-ST dated 20.06.2012 as amended vide Notification No. 22/2016-ST dated 13.04.2016 read with Circular no. 192/02/2016-ST dated 13.04.2016. 2.3. A Show Cause Notice dated February 12, 2020 was issued proposing the demand of Service tax against the appellant along with interest and equivalent penalty to the Service Tax imposed on the appellant.

2.4. The appellant duly filed its reply rebutting the allegations and submitted that the agreement pertains to supply of water, which falls within the definition of "goods", and is not leviable to Service tax. However, without considering the contentions of the Appellant, the demand was confirmed by the Order-in-Original dated August 30, 2024 on the following grounds:

(a) As per Section 24 of the Orissa Irrigation Act, 1959 all rights in water of natural resources are vested in Government. Since all the rights in water of natural resources are vested in the Government, no person is permitted to have access to such water bodies, drawl of water and its use for any purposes, unless such persons are assigned the right by the Government by way of permission for drawl of water. (b) The access to the natural water sources viz. Baitarani River has been permitted by the Government of Odisha to the Appellant and allowed drawl of specified quantity of water for non-irrigation purpose for specified period for which the monetary consideration is charged in the form of water charges.

(c) The machinery and equipment required for drawl of water and arrangements like pipelines etc. for its conveyance up to their plant has been installed by the Appellant. The water charges paid by the Appellant are the fees or consideration paid for permitting the drawl of the water from the water sources and not monetary consideration for purchase of water.

(d) The terminology of the Renewal Agreement indicates that the State Government has licensed the Appellant to draw water for industrial/commercial purposes from a specific source. The Appellant has also been denoted as a 'licensee'.

(e) The restriction that t