- 206C(1C) obliges collection of tax at source only from a person to whom rights in a mine or quarry are granted and who is liable to pay royalty to the State Government, and such obligation cannot be extended to persons involved in illegal mining or illegal transportation of minerals. Compounding fee or fine collected under S. 23A of the Mines and Minerals (Development and Regulation) Act, 1957 r/w Rule 71(5) of the 2015 Rules arises from compounding of offences, the effect of which is cessation of criminal proceedings akin to acquittal, and such compounding fee is distinct and mutually exclusive from royalty. In absence of any legislative mandate under S. 206C(1C) to collect TCS on compounding fee/fine, demand raised along with interest and penalty for non-collection of TCS was unsustainable. The Tribunal erred in treating compounding fee/fine as covered by the definition of transfer under S. 2(47). Accordingly, the order of the Tribunal was set aside. (AY. 2018-19)
District Mining Officer v. DCIT (2025) 345 CTR 600 / 251 DTR 460 / 175 taxmann.com 1008 (Chhattisgarh)(HC) Editorial : SLP dismissed, DCIT (TDS) v. District Mining Officer (2026) 183 taxmann.com 119 (SC).
S. 206C : Collection at source-Trading-Alcoholic liquor-Forest produce-Scrap-Compounding fee and fine collected from offenders of illegal mining or transportation-No legislative mandate to collect TCS on compounding fee/fine collected under S. 23A of the MMDR Act-Obligation to collect TCS applies only to royalty payable by lawful lease or licence holders-Order of Tribunal set aside. [S. 2(47), 206(IC), Mines and Minerals (Development and Regulation)Act, 1957, S.9, 23A, Rules 2015, R. 71(5)]
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