Tvl. A.Venkatachalam Vs Assistant Commissioner (ST) (Madras High Court)
The Madras High Court addressed several writ petitions filed by petitioners challenging the imposition of Goods and Services Tax (GST) on royalties paid for mining leases. The petitioners argued that royalties constitute a ‘tax’ and not a ‘service,’ and thus should not fall under the purview of GST as defined under Sections 7 and 9 of the CGST Act, 2017. The petitioners contended that the lack of a taxable event, such as the provision of service, nullified the GST charge on royalties. The court examined conflicting rulings on the matter, including decisions by the Rajasthan High Court and the Supreme Court, and acknowledged the ongoing controversy over the nature of royalties, which was referred to a Constitution Bench of nine Supreme Court judges.
The court issued interim orders, directing that no GST recovery should take place on royalties until the Supreme Court’s Constitution Bench resolves the issue. The court also provided petitioners an opportunity to submit objections to show cause notices within four weeks and directed authorities to adjudicate the cases only after affording petitioners a reasonable hearing. The adjudication process would remain on hold until the final decision of the Supreme Court. Thus, the petitioners were granted temporary relief from GST levies on royalty payments, with all legal contentions left open for future proceedings.
