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The challenge in these writ petitions are in two parts. One relating to levy of service tax on royalty till the coming of the GST regime. The other is to challenge to both service tax and GST upon royalty.

Levy of Service Tax and GST on Royalty paid —–- The petitioner are lessees of minor minerals awarded by the State. The petitioners have sought declaration that royalty is not a payment in respect of any taxable service, in respect of any minerals 'removed or consumed' by the holder of a mining lease. They have sought declaration that Notification No. 22/2016-ST dated 13.04.2016 and its clarification for levy of service tax is ultra-vires the provisions of the Finance Act, 1994. In other similar petitions, the petitioners challenged the levy of GST. The petitioners submitted that no service tax and/or GST is leviable on the amount of Royalty and District Mineral Fund contribution paid by the petitioners, since no consideration in involved and there is no element of service involved. They have relied upon the decision of the Apex Court in the case of "India Cement Limited and Others Vs. State of Tamil Nadu and Others" and submitted that as per the ratio of this decision, royalty is a tax. Therefore, service tax or GST cannot be levied thereupon. These petitioners have sought quashing of the notices directing them to furnish data relating to payment of royalty. The respondent counsel submitted that meaning of 'consideration' under Section 2(31) covers the licensing services for the right to use minerals including its exploration and evaluation. At this stage, the department has only called for data and information relating to royalty for the purposes of determining the tax liability. The State would however file a comprehensive counter-affidavit on the legal issues raised by the petitioners concerning the leviability of the GST. The court observed that the issues concerning the leviability of the GST can be answered after considering the response of the respondents. As regards the service tax, the court relied upon the judgment of the Apex Court in the case of Udaipur Chambers of Commerce and Industry and Others, and other High Courts wherein they have passed interim orders relating to payment of service tax on royalty. Held that:- The Hon’ble High Court in respect of the levy of service tax on royalty held that while the revenue is not restrained from conducting the assessment proceedings, until further orders recovery of service tax for grant of mining lease/royalty from the petitioners shall remain stayed. Directed the respondents to file counter-affidavit within a period of three weeks. Listed the matter on 26th April, 2021.
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