Rural infrastructure levies and forest transit fees attract service tax under reverse charge.

Northern Coalfields Limited, a coal-mining company, paid amounts to the Madhya Pradesh Government under the Madhya Pradesh Gramin Avsanrachna Tatha Sadak Vikas Adhiniyam, 2005, and as forest transit fees under the Madhya Pradesh Transit (Forest Produce) Rules, 2000.

The dispute concerned the period April 2016 to June 2017.

The Revenue treated both payments as fees for services and demanded service tax under the reverse-charge mechanism; the company maintained that they were taxes and not taxable fees.

The appeals challenged the Commissioner’s common order-in-original dated 30 November 2022.

Whether the amounts paid under the Madhya Pradesh Gramin Avsanrachna Tatha Sadak Vikas Adhiniyam, 2005, and as forest transit fees were fees for services or taxes.

Whether service tax was payable under the reverse-charge mechanism on those payments and, if so, what consequential relief was available.

The Tribunal stated that service tax is not leviable on taxes paid to State Governments, but may be leviable on fees charged by them in return for services.

It considered the Madhya Pradesh High Court’s decision in South Eastern Coal Ltd. v. Commissioner of CGST & CE, 2026 (5) TMI 1016, which addressed the rural infrastructure and road development levy under the 2005 Adhiniyam and treated the levy as a fee for a service benefiting mining holders.

The Tribunal also referred to section 142 of the CGST Act, under which an amount accruing as Cenvat credit after the transition to GST could be claimed as a cash refund.

The Tribunal noted its earlier decision in South Eastern Coal Fields v. CCE & ST, Raipur, which had treated the payments as taxes, but followed the Madhya Pradesh High Court’s decision on the issue.

Applying that decision, it held that both disputed payments were fees for services rather than taxes and therefore attracted service tax under reverse charge.

Because the demand was for the normal limitation period and the company could pay the service tax and claim the corresponding Cenvat credit, the Tribunal found no basis to attribute mala fides to the company.

It further stated that any credit accruing after the Cenvat Credit Rules ceased to apply could be sought as a cash refund under section 142 of the CGST Act.

It stated that the company could claim the resulting credit as a cash refund under section 142 of the CGST Act.

All five appeals were dismissed, and the impugned orders were upheld.