HC stayed payment of GST for grant of mining lease/royalty

A.D. Agro Foods Private Limited Vs Union of India (Allahabad High Court)

Heard Shri Vishnu Kesarwani, learned counsel for the petitioner, Shri Sudarshan Singh, learned counsel for the Union of India and Shri Manu Ghildyal, learned Standing Counsel for the State.

While entertaining the writ petition, we had passed the order dated 06.09.2021 which is quoted hereinbelow:-

“On the last date, time was granted to the respondents for filing counter affidavit and the same is still awaited.

Learned counsel for the respondent prays for and is granted three weeks’ further time to file counter affidavit. Rejoinder affidavit, if any, may be filed within one week, thereafter.

Put up on 08.11.2021, in the additional cause list.”

In pursuance of the aforesaid order, counter affidavit has been received.

Upon the matter being taken up, learned counsel for the petitioner has vehemently urged that the royalty payment is tax and not consideration in the context of the privilege parted by the State allowing the petitioner and others to mine sand. That being the nature of the payment made by the petitioner, the same is not amenable to GST as it is not consideration either for sale of goods or service provided.

Further reliance has been placed on a Constitution Bench decision of the Supreme Court in India Cement Ltd. and Others vs. State of Tamil Nadu and Others (1990) 1 SCC 12, wherein, nature of royalty payment was considered and it was opined to be in the nature of tax, (in paragraph 34 of the report).

Also, it has been shown that a similar controversy is engaging the attention of the Supreme Court in M/s Lakhwinder Singh vs. Union of India & Ors. in Writ Petition (Civil) No. 1076 of 2021. On 04.10.2021, the Supreme Court has passed the below quoted order:-

“1 Issue notice.

2 Tag with SLP(C) No 37326 of 2017.

3 Until further orders, payment of GST for grant of mining lease/royalty by the petitioner shall remain stayed.”

List after two months.

Until further orders, payment of GST for grant of mining lease/royalty by the petitioner shall remain stayed.