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2024-VIL-1581-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Mining lease, Royalty, District Mineral Foundation (DMF), National Mineral Exploration Trust (NMET) - Appellant is engaged in the manufacture of cement paid royalty on the excavation of natural resources and discharged the service tax liability on it under the reverse charge mechanism - appellant had also paid additional amounts to the District Mineral Foundation (DMF) and the National Mineral Exploration Trust (NMET) but failed to discharge the service tax liability on these additional amounts under RCM - Whether the amounts paid to DMF and NMET are in the nature of royalty, on which the appellant is liable to pay service tax under the RCM - HELD - Royalty is the consideration paid by the lessee to the Government for the service rendered in the form of granting mining rights - the lease-holder/ the polluter is required to pay an amount, equivalent to certain percentage of amount of royalty paid to the government/ lessor, to DMF & NMET requiring them to render them the activity of rehabilitating, the area, and the people in and around the leased mine. As the lease-holder/ the polluter is liable to pay for such rehabilitation, DMF & NMET have rendered such activity to the appellants which qualifies to be called as “service” defined under section 65B(44) of the Finance Act 1994. Hence the amount paid to both these trusts is nothing but the consideration paid for receiving the said service - The amounts paid to DMF and NMET are also in the nature of consideration for the service rendered by these governmental authorities in the form of rehabilitation and environmental protection in the areas affected by mining operations. Therefore, the appellant is liable to pay service tax on the amounts paid to DMF and NMET under the reverse charge mechanism - the demand of service tax, along with interest and penalty, on the amounts paid by the appellant to DMF and NMET, is upheld and the appeal is dismissed
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