Usha Martin Limited Vs Commissioner of CGST And C.X. (CESTAT Kolkata)
Summary: CESTAT Kolkata allowed the appeal of Usha Martin Limited and set aside a Service Tax demand of Rs.7,14,46,604/- along with interest and penalty arising from royalty paid to the Government of Jharkhand during April 2016 to June 2017 under an iron ore mining lease executed on 16.08.2005. The Tribunal held that where the underlying assignment of mining rights had taken place before 01.04.2016, subsequent periodic royalty payments could not make the transaction taxable merely because they were made after services provided by Government to business entities were brought within the Service Tax net.
The appellant was engaged in production and clearance of iron and steel products from its manufacturing facility at Adityapur Industrial Area, Jharkhand. It had entered into a mining lease agreement with the State of Jharkhand on 16.08.2005 for allocation of iron ore mines at Badajamda for captive consumption. In terms of Section 9 of the Mines and Mineral (Development and Regulation) Act, 1957, periodical royalty was paid to the State Government for iron ore extracted from the mines. Prior to 01.04.2016, Section 66D(a)(iv) of the Finance Act, 1994 covered only specified support services provided by Government or a local authority to business entities outside the negative list. With effect from 01.04.2016, the provision was amended so that services provided by Government to business entities became taxable. Following investigation, a show cause notice dated 24.01.2019 demanded Service Tax under reverse charge in terms of Notification 30/2012 ST dated 20 June 2012 on royalty paid during April 2016 to June 2017. The demand, interest and penalty were confirmed by Order-in-Original dated 28.01.2025.
