1/13 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 31ST DAY OF OCTOBER, 2017 BEFORE THE HON’BLE Dr.JUSTICE VINEET KOTHARI W.P.No.43223/2017 (T-TAR) BETWEEN BMM ISPAT LIMITED A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT 1956, HAING ITS CORPORATE OFFICE AT No.10, PRIDE ELITE, MUSEUM ROAD BANGALORE-560 001 (REP. BY ITS GENERAL MANAGER-PR Mr. SILAS NERELLA) (BY SRI AJAY J.N. ADVOCATE) AND 1. MONITORING COMMITTEE DEPARTMENT OF MINES AND GEOLOGY KHANIJA BHAVAN RACE COURSE ROAD BANGALORE-560 001 REP. BY ITS CONVENOR.
2. FINANCE MANAGER MONITORING COMMITTEE KHANIJA BHAVAN RACE COURSE ROAD BANGALORE-560 001.
...PETITIONER 3. COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, CLUB ROAD, BELGAUM.
(THIRD RESPONDENT INSERTED VIDE ORDER DATED 31/10/2017) ...RESPONDENTS (BY SRI JEEVAN J. NEERALGI , ADVOCATE FOR R3) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE E-MAIL COMMUNICATION DATED 8.11.2016 AT ANNEX-F ISSUED BY R-2 & ETC., THIS PETITION COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER Mr. Ajay J.N. Adv. for Petitioner. Mr. Jeevan J. Neeralgi, Adv. for R3.
The petitioner-BMM ISPAT Ltd. has filed this writ petition in this Court on 18.09.2017 against the Monitoring Committee constituted in the Department of Mines and Geology under the orders of the Hon’ble Supreme Court in PIL jurisdiction by which the Hon’ble Supreme Court evolved certain guidelines for E-Auction of the Iron Ore within the State of Karnataka, which is a mineral rich State in our Country and a copy of the order passed by the Hon’ble Supreme Court dated 23.09.2011 in Samaj Parivatana Samudaya & Others –vs- State of Karnataka & Others (W.P.(Civil) No.562/2009) in I.A.No.22 is placed on record.
2. The petitioner is one of the E-Auction purchaser of iron ore, which is required as a raw material for the manufacture of Steel by the petitioner-Company and the grievance of the petitioner-Company, in a nutshell, is that the Monitoring Committee has conveyed to the petitioner-Company that the amount of service tax on the Royalty paid by it to Respondent-Monitoring Committee along with the E-Auction price of the iron ore amounting to Rs.1.50 Crores and odd be refunded to it and the same cannot be made over to the Service Tax Department in view of the interim order granted by this Court in W.P.No.43900/2016 in the case of NMDC Limited -vs- Union of India and Others.
3. The relevant portion of Annexure-F communication of the Monitoring Committee to the petitioner-Company by E-mail dated 08.11.2016 is quoted below for ready reference:
“Dear Sir, This is to inform you that as per the direction of the Commissioner of Central Excise, Customs and Service Tax, the Monitoring Committee started collecting service tax on Royalty from you, on the Royalty amount collected, in respect of the e-auctions wherein which you bought the materials.
Accordingly, the total amount of Service Tax on Royalty hitherto collected from you is Rs.1,50,35,812/-. However, on account of the stay order in WP 43900/2016 (T-TAR) dated:18-08-2016 of M/s. NMDC Ltd., Vs Union of India, the Superintend of Central Excise & Service Tax and the State of Karnataka, the Monitoring Committee has taken a decision to stop collecting service tax on Royalty and to retain the amount so collected hither to, with the Monitoring Committee till the outcome of the final order of the Hon’ble High Court of Karnataka.
With regards, Jagannath Poojary, Finance Manager, Monitoring Committee.”
4. The Service Tax Department has not been impleaded as respondent in the present case. However, in view of the circumstances of the case and at the oral request of learned counsel for the petitioner, the same was directed to be impleaded and Mr.Jeevan J. Neeralgi, learned Standing counsel, was directed to accept notice for the said Respondent and the petitioner was directed to supply copy of the petition and annexures to him.
5. Heard learned counsels.
6. W.P.No.43900/2016 filed by NMDC LTD.
came to be dismissed by this Court on 04.09.2017 and just thereafter the present petition was filed i.e., on 18.09.2017 and probably the fact of disposal of the petition W.P.No.43900/2016 was not within the knowledge of the present petitioner-BMM ISPAT Ltd. or the learned counsel appearing for the said Company Mr.Ajay J.N. The said writ petition of NMDC Ltd., who challenged the levy of Service Tax itself w.e.f. 01.04.2016 under the relevant Notification was dismissed with the following observations by this Court:
“4. Upon issuance of notice, the co-ordinate Bench of this Court stayed the further proceedings on 18.08.2016. However, that stay order was vacated by this Court by passing the following order on 21.08.2017:
“Learned ASG has raised a preliminary objection that the petitioner being a Central Public Sector Undertaking, has filed this petition against the mere communication vide Annexure-A dated 04-05-2016, calling upon the petitioner- NMDC Limited to start paying the service tax with effect from 01-04-2016 on the Royalties paid to the Government of Karnataka, since the service tax is also leviable even on the Government or a Local Authority.
2. Instead of showing cause before the Service Tax Authority, the present Central PSU, a Government Company has approached this Court and has obtained an exparte interim order as granted by the Co-ordinate Bench of this Court on 18-08-2016, for which, I.A.No.1/2017 has been filed by the Respondent- Department for vacating that interim order.
3. Prima facie, this Court is seriously concerned about the Central Public Sector Undertaking approaching the High Court against a mere show cause notice against the Central Government Department itself.
4. It is most unfortunate and least desirable litigation in the Courts of Law.
5. Therefore, the learned Counsel for the Petitioner is called upon to file an affidavit of the Managing Director or Director dealing with legal affairs of the Petitioner-Company as to under what circumstances, the Assistant General Manager (Finance) Mr.Pradip Kumar Mahapatra whose affidavit is filed along with the petition was authorized to file a petition before this Court. The copy of relevant Board Resolution if any and Authority given to the said officer be produced along with such an affidavit positively by the next date of hearing, failing which, the said Director of the petitioner-Company will remain present before this Court.
6. The petitioner-Company may also show cause why exemplary costs not be imposed upon the petitioner-Company for filing such a frivolous petition before this Court.
7. Interim order dated 18-08-2016 shall stand vacated.
8. List on 28-08-2017.”
5. Today, learned counsel appearing for the petitioner submitted before the Court that since the said communication, interalia made a demand for payment of service tax from the petitioner Company to pay the Service Tax on the Royalties, a cause of action arose to the petitioner company to approach this Court. He has also submitted that even the Association of the Iron Ores Miners approached the respondent Department for seeking a clarification in the matter, however, that clarification was never issued. He has also submitted that certain petitions involving similar issues are pending in other High Courts also. However, none of the documents with regard to these submissions made, have been placed before this Court.
6. On the contrary, learned counsel for the respondent Department has submitted before the Court that the impugned communication – Annexure “A” dated 04.05.2016 is not even a show cause notice issued to the petitioner company under Section 73 of the Finance Act, 1994 and if the petitioner had any objection to the payment of the said service tax, the petitioner company could very well approach the concerned authority by way of suitable representations or objections and it would be premature for this Court to pronounce upon the claim of the petitioner under Article 226 of the Constitution of India.
7. Having heard the learned counsels, this Court is of the opinion that the litigation between the two Government Undertaking and Department is most unfortunate and least desirable, to say the least. If the Union of India has thought it proper to impose service tax by these Notifications referred to above, even on the Government Undertakings or Local Authority, such Organizations cannot claim exemption or immunity from such payment of tax on their own, nor they can refuse to appear before the concerned competent authority and make out their case. On the contrary, the law should have been followed by them without any demur or objection. Such an attitude on the part of the Government Undertakings to take the cause straightaway before the Court of law, without even getting the claim adjudicated by the competent authority of the Respondent Department, is indeed unfortunate and deserves to be deprecated. This Court does not find any material on record to hold that the petitioner is not liable to pay Service Tax ex-facie but, on the contrary, the Notifications referred to in the impugned communication prima facie, may enjoin the said liability of Service Tax on the petitioner company.
8. Be that as it may, this Court would not make any observation or give a finding about the exigibility of the Service Tax on the petitioner company on such Royalties paid by the petitioner company to the State of Karnataka, at this stage and would dismiss this petition as premature, leaving it free for the petitioner company to agitate its claim before the respondent Authority in accordance with law.
Petition is accordingly dismissed. No costs.”
7. In view of the aforesaid dismissal of the writ petition filed by the NMDC Ltd., the question of levy of Service Tax on Royalty itself is now subject to the adjudication by the concerned authorities of the Service Tax Department. The question of giving input tax credit to the present petitioner will naturally depend upon such adjudication in the hands of the seller/Mining lease holders of these Mines like NMDC Ltd.
8. In these circumstances, the mandamus direction as prayed in the present petition filed by BMM ISPAT Ltd., to either refund the Service Tax on Royalty deposited by it with Respondent-Monitory Committee to the extent of Rs.1.50 Crores cannot be given nor the mandamus direction to the Respondent-Monitoring Committee to deposit the same with the Service Tax Department can be given. The present petition is therefore found to be premature in this Court.
9. Like the seller-assessee-NMDC Ltd., the present petitioner-BMM ISPAT Ltd., also therefore has even to be relegated back to the adjudication process to be undertaken by Respondent-Commissioner of Central Excise and Service Tax. The purchasing units under the E-Auction Scheme evolved by Respondent-Monitory Committee under the directions and approval of the Hon’ble Supreme Court also equally therefore deserve to comply with the relevant provisions and get its liability to pay Service Tax and entitlement to claim input tax credit before the Departmental authorities of Service Tax Department. The concerned and competent authorities of the Service Tax Department can also call upon Respondent-Monitoring Committee to deposit the amount of Service Tax collected by them from the purchasing Units like the present petitioner with it in the course of such assessment proceedings.
10. In view of the aforesaid, the present petition is also disposed of by relegating the present petitioner- Company and other similarly placed purchasing Units to approach the concerned authorities of the Service Tax Department where they can make their claims in accordance with law. It is expected that Respondent- Commissioner of Central Excise and Service Tax Department and the present petitioner and its like also shall co-operate for the assessment and adjudication proceedings before the Respondent-authorities, who in turn will expeditiously conclude the proceedings.
With the above observation, the present petition is disposed of. No costs.
Copy of this order may be supplied to the concerned authorities.
Sd/- JUDGE TL