Royalty Withholding not taxable under RCM

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata has held that amounts withheld by government departments under the head "Royalty on Mineral" from contractors' bills cannot automatically be treated as royalty paid for mining rights so as to attract Service Tax under the Reverse Charge Mechanism (RCM). 

The Tribunal observed that where the contractor merely purchases minerals from licensed vendors and the so-called royalty represents a temporary withholding pending submission of statutory Forms M and N under the Bihar Minor Mineral Concession Rules, no taxable service is involved. 

It further held that demands raised solely on the basis ofBalance Sheet entries, without corroborative evidence, are unsustainable both on merits and limitation.