M/S.Tarini Minerals(P LTD. vs. Union Of INDIA

Facts

M/s. Tarini Minerals (P) Ltd. (Petitioner), a lessee of iron ore mines in Odisha, challenged the imposition of service tax on royalty and allied charges paid for minerals extracted. The Petitioner pays royalty, contributions to District Mineral Foundation and National Mineral Exploration Trust, and User Fees under various provisions of the Mines and Minerals (Development and Regulation) Act, 1957, and Odisha Rules. The Directorate General Goods and Service Tax Intelligence summoned the Petitioner, and based on a recorded statement admitting liability for statutory dues upon removal of ores, the authorities concluded that the grant of mining rights by the Government of Odisha constituted a taxable service. Service tax was proposed on royalty, District Mineral Fund contribution, National Mineral Exploration Fund contribution, and User Fees for the period April 1, 2016, to June 30, 2017. A show-cause notice was issued, and an adjudication order dated February 27, 2020, confirmed Service Tax dues of Rs. 4,12,92,553/- along with interest and penalties.

Held

The Court acknowledged that the question of whether service tax is leviable on royalty collected for winning minerals is pending adjudication before the Apex Court, with an interim order having been passed. Therefore, the Court did not decide the substantive issue of leviability. Instead, the Court relegated the Petitioner to approach the appropriate appellate forum. The Court directed that if the Petitioner files an appeal within 15 days, along with an interlocutory application seeking waiver of the pre-deposit amount, the appellate authority shall consider this application sympathetically, taking into account the orders passed by the Apex Court. The appellate authority was directed to pass a reasoned and speaking order after affording an opportunity of hearing to the parties. The writ petition was disposed of in terms of these directions.

Key Issues

1. Whether the Petitioner is liable to pay service tax on royalty and allied charges paid for the extraction of minerals, considering that royalty is a payment for winning minerals and represents the State's share, and not a payment for a 'taxable service' as defined under the Finance Act, 1994? The Petitioner argued that service tax is imposable on the provision of 'service' and not on the sale of goods or winning of minerals. They contended that royalty is the price of winning minerals and not a payment for any service rendered by the State. The Petitioner also highlighted that the question of whether mining royalty is a tax is pending before a Nine-Judge Bench of the Apex Court in Mineral Area Development Authority v. Steel Authority of India, and a Seven-Judge Bench in India Cement Ltd. v. State of Tamil Nadu had held mining royalty to be a tax, thus precluding service tax imposition. The Petitioner relied on various Apex Court orders. 2. Whether the High Court should entertain the writ petition when an appealable order has been passed? The Revenue Department contended that the impugned order is appealable, and the Court should relegate the Petitioner to the appellate forum. The Petitioner acknowledged the appealability but raised concerns about the pre-deposit requirement of 75% of the demanded amount, which would cause prejudice.