Pre 2016 Mining Leases Escape Service Tax on Later Royalties

Usha Martin had entered into a 20-year mining lease with the Jharkhand Government in 2005 and subsequently paid royalty for the iron ore extracted. 

Revenue sought Service Tax under reverse charge on royalty payments made between April 2016 and June 2017, after Government services became taxable. CESTAT held that the relevant taxable event was the assignment of mining rights under the 2005 lease, not the subsequent periodic royalty payments. 

Following S.R. Traders and Madhya Pradesh State Mining Corporation, the Tribunal set aside the entire demand of ₹7.14 crore, along with interest and penalty.