A bench comprising Justices Harsha Devani and A S Supehia was hearing a petition filed by Gujmin Industry Association wherein the petitioners contended that the royalty is not a payment in respect of any taxable service at all and it is imposed under section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 in respect of any mineral “removed or consumed” by the holder of a mining lease from the leased area, at the rate specified in the Second Schedule. It was submitted that royalty is a price of winning minerals from the land and represents the State’s share in such minerals and that there is no element or provision of any service by the State in this respect and the levy of Service Tax is clearly ultra vires the Act.
The bench observed that a similar issue is pending before the Supreme Court against the order of the Rajasthan High Court.
“In the light of the fact that the Supreme Court in the appeal preferred against the decision of the Rajasthan High Court has been pleased to protect the appellants therein, at this stage the interests of both the sides can be duly protected if similar relief as granted by the Supreme Court is granted subject to the members of the petitioner associations filing undertakings to the effect that if ultimately they do not succeed in the petitions they shall pay the service tax on the royalty.”
While granting an interim relief to the petitioners, the bench held that “until further orders, payment of service tax for grant of mining lease/royalty by the members of the petitioner associations shall remain stayed subject to each of the members of petitioners associations, filing an undertaking before this court and endorsing a copy thereof to the respective departments undertaking that in case they ultimately do not succeed in the petitions, they would discharge their obligations for payment of service tax on the royalty. In case the respondents succeed in the Civil Appeal before the Supreme Court, this court shall hear the learned counsel for the respective parties on the other issues, which have been raised in the present petition for the purpose of continuation of the interim relief, including the contention that other rights being in the nature of profit a pendre.”Subscribe Taxscan AdFree to view the Judgment