MNH Shakti Limited Vs Commissioner (CESTAT Kolkata)
The appeal before CESTAT Kolkata arose from an order confirming service tax, interest and penalties on compensation received by the appellant following cancellation of coal block allocations. The appellant, a joint venture company engaged in coal mining and sale, had been allotted coal blocks by the Government of India in 2005. These allocations were cancelled by the Supreme Court on 24 September 2014 along with similar allocations made to other mining companies. Subsequently, the Coal Mines (Special Provisions) Act, 2015 (CMSPA) and the Coal Mines (Special Provisions) Rules, 2015 were enacted to provide compensation to the previous allottees for financial losses incurred on account of investments made in the mines. Under Section 9 of the CMSPA, part of the proceeds collected from the new allottees was paid as compensation to the former allottees. The appellant received such compensation through the Government.
A show cause notice dated 18 October 2019 alleged that the appellant had “tolerated” the cancellation of the coal blocks and received compensation for such tolerance. The Revenue treated this as a taxable service under Sections 65B(44), 65B(22) and 66E(e) of the Finance Act, 1994, demanded service tax with interest, invoked the extended limitation period under Section 73(1), and proposed penalties under Sections 76, 77 and 78. The adjudicating authority confirmed the demand, interest and penalties.
