Case Law Details
Lakhwinder Singh Stone Crusher Vs Union of India & ors. (Himachal Pradesh High Court)
In Lakhwinder Singh Stone Crusher Vs. Union of India & Ors., the Himachal Pradesh High Court addressed whether Goods and Services Tax (GST) can be levied on mining royalty paid by mineral concession holders for state-granted mining rights. The petitioner challenged various notifications and notices that imposed GST on the royalty, arguing that such royalty was a tax and, therefore, should not be subject to GST. This argument was based on the Supreme Court’s 1990 decision in India Cement Ltd. v. State of Tamil Nadu, which declared royalty to be a form of tax. The petitioner sought to quash the notifications and stay the GST demand during the pendency of the petition.
However, the court noted that the legal position had changed after the India Cement judgment was overruled by the Supreme Court in Mineral Area Development Authority v. Steel Authority of India (2024). In this case, the nine-judge bench ruled that royalty is not a tax, thereby clearing the way for the levy of GST on the royalty paid by mineral concession holders. The High Court found the demand for GST to be legally valid and upheld the impugned notices and summons issued under the CGST Act. As a result, the petition was dismissed, and the court left the parties to bear their own costs.
FULL TEXT OF THE JUDGMENT/ORDER OF HIMACHAL PRADESH HIGH COURT
The instant petition has been filed for grant of following substantive reliefs:
i. Issue a writ in the nature of Certiorari for quashing the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 (Annexure P-5), Notification No. 1/2017 – Central Tax (Rate) dated 28.06.2017 (Annexure P-6), Himachal Pradesh Govt. Notification No.11/2017 dated 30.06.2017 (Annexure P-7), Himachal Pradesh Govt. Notification No. 1/2017 dated 30.06.2017 (Annexure P- 8), Notification No. 27/2018 – Central Tax (Rate) dated 31.12.2018 (Annexure P-10) and Himachal Pradesh Govt. Notification No.27/2018 dated 31.12.2018 (Annexure P-11), to the effect that no GST on can be levied on Royalty paid by a Mineral Concession Holder for any mining concession granted by the State is illegal, unjust, unconstitutional and without authority of law.
ii. Issue a writ in the nature of Certiorari for quashing the Notices dated 15.12.2022 (Annexure P-17), 22.06.2023 (Annexure P-19), 12.10.2023 (Annexure P-20) issued in pursuance to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (Annexure P5), Notification No. 1/2017 Central Tax (Rate) dated 28.06.2017 (Annexure P-6), Himachal Pradesh Govt. Notification No.11/2017, dated 28.06.2017 (Annexure P-7), Himachal Pradesh Govt. Notification No. 1/2017 dated 28.06.2017 (Annexure P.-8), Notification No. 27/2018 Central Tax (Rate) dated 31.12.2018 (Annexure P-10) and Himachal Pradesh Govt. Notification No.27/2018 dated 31.12.2018 (Annexure P-11) Summon dated 23.10.2023 (Annexure P-26) under Section 70 of the CGST Act, 2017 being totally illegal erroneous and bad in law.
iii. Stay further proceedings emanating from Notices dated 15.12.2022 (Annexure P-17), 22.06.2023 (Annexure P-19), 12.10.2023 (Annexure P-20) and Summon dated 23.10.2023 (Annexure P-26).
iv. Stay the levy of GST/Service Tax on Mining Royalty payable under mining concession granted by State, during the pendency the present writ petition.
2. The question, which arises for consideration in this petition is whether there can be levy of GST on royalty paid by the mineral concession holder for any mining concession granted by the State.
3. This petition was based upon the judgment rendered by Seven-Judge Bench of the Hon’ble Supreme Court in India Cement Ltd. and ors. vs. State of Tamil Nadu and ors. (19901) 1 SCC 12, wherein it was declared that royalty itself is a tax.
4. It was in this background that demand for GST on royalty by the respondents was stayed by the Division Bench of this Court.
5. It is not in dispute that the judgment rendered in India Cement Ltd.’s case (supra) has now been overruled by Nine-Judge Bench of the Hon’ble Supreme Court in Mineral Area Development Authority & anr. vs. M/s Steel Authority of India & anr., 2024 INSC 554, wherein it has been held that royalty is not a tax. Therefore, the respondents are well within their rights to levy GST on the royalty paid by the mineral concession holder for any mining concession granted by the State.
6. Consequently, the orders impugned herein i.e. notices (Annexure P-17) dated 15.12.2022 17), (Annexure P-19) dated 22.06.2023, (Annexure P-20) dated 12.10.2023, (Annexure P-27) dated 30.10.2023 and summons (Annexure P-26) dated 23.10.2023 are upheld and the instant petition is accordingly dismissed, so also the pending application(s), if any, leaving the parties to bear their own costs.
Notes:
1 Whether reporters of the local papers may be allowed to see the judgment? Yes.
Author Bio
Sir,
This judgment is against the Ratio decidendi of Hon’ble Supreme court 9 Judge bench (8:1)
decision. Refer my article titled “Royalty on Mines─Whether State has authority to levy GST─No authority under GST Act” (2024) J.K.Jain’s GST & VR, pages A9-A10 as well as my analysis on HC Judgment in the same magazine on page No.256, which needs rectification/Review. My another article was also published on the Tax Guru Site dated 21.12.2024.
CA Om Prakash Jain s/o J.K.Jain, Jaipur
Tel 9414300730/9462749040/0141-3584043