Interim protection from GST payment on mining royalty & allied charges granted by Jharkhand HC
Facts and Issue of the case
The present batch of writ petitions have been listed today in view of our order passed in W.P.(T) No. 432 of 2021 dated 24.02.2022, para 3..
The writ petitions at serial no. 40 to 50 [W.P.(T) No. 855 of 2022, W.P.(T) No. 897 of 2022, W.P.(T) No. 903 of 2022, W.P.(T) No. 926 of 2022, W.P.(T) No. 927 of 2022, W.P.(T) No. 933 of 2022, W.P.(T) No. 955 of 2022, W.P.(T) No. 974 of 2022, W.P.(T) No. 979 of 2022, W.P.(T) No. 986 of 2022 and W.P.(T) No. 1282 of 2022] also relate to the common issue of levy of Service Tax and / or GST on royalty and District Mineral Fund (DMF). However, some of the writ petitions such as from Serial No. 41 to 44 [W.P.(T) No. 897 of 2022, W.P.(T) No. 903 of 2022, W.P.(T) No. 926 of 2022, W.P.(T) No. 927 of 2022] relate exclusively to levy of service tax on royalty. Therefore, all these writ petitions are being tagged together. In these cases, no interim order has been passed on the levy of service tax or GST on royalty and DMF. By the order of this Court dated 02.03.2021 passed in W.P.(T) No. 3878 of 2020 in the case of Sunita Ganguly Vrs. Principal Commissioner, Central GST and Central Excise, Ranchi & others this Court had been pleased to grant interim protection in respect of levy of service tax on royalty in the respective petitions.
Following the said interim order, similar interim relief has been granted to other writ petitioner so far as levy of service tax on royalty and DMF is concerned. This Court had however refused to grant interim protection so far as levy of GST on royalty and DMF is concerned at that stage. Later on in view of the order passed by the Apex Court in the case of M/s Lakhwinder Singh Vrs. Union of India & others in Writ petition (Civil) No. 1076 of 2021 dated 04.10.2021 granting interim stay on payment of GST for grant of mining lease / royalty to the petitioners, this Court also granted similar relief to several writ petitioners such as W.P(T) No. 4609 of 2021 in the case of M/s Ratan Black Stone, Sahibganj Vrs. Union of India through Principal Commissioner, Central GST and Central Excise & others and other analogous cases such as W.P(T) No. 4510 of 2021. When the case of M/s Mandhan Minerals Corporation in W.P.(T) No. 432 of 2021 was taken up before this Court on 24.02.2022, this Court was apprised of the judgment dated 04.01.2022 passed in the case of M/s Lakhwinder Singh(supra) wherein the Apex Court had refused to entertain the petition under Article 32 of the Constitution of India at the first instance and relegated the petitioners to avail of the alternative and efficacious remedy before the concerned High Courts under Article 226 of the Constitution of India. The petition was dismissed leaving it open to the petitioners to pursue their remedies in accordance with law. In this background the present batch of writ petitions have been posted for consideration on the continuation of the interim relief granted to them earlier, so far as levy of GST on royalty and DMF is concerned. Some other fresh writ petitions have by now come on board, which have been tagged together by the instant order also on the same issue.
In the respective writ petitions preferred by learned Senior Counsel Mr Biren Poddar and learned counsel Mr. Sumeet Gadodia, the petitioners have laid challenge to the show cause notice/ notices issued by the Respondent Authorities directing them to furnish data relating to payment of royalty against licensing services for right to use minerals including exploration and evaluation for different periods concerning levy of GST on royalty. In some of the writ petitions petitioners have sought declaration that royalty is not a payment in respect of a taxable service and as such there is no liability to pay GST on royalty and DMF.
Learned counsel for the petitioners have pressed the prayer for interim protection from levy of GST on royalty and DMF or continuation of the interim protection granted earlier in some of the writ petitions.
Learned counsel for the respondent State, Additional Advocate General No.-II Mr. Sachin Kumar at the outset submits that the matter may be posted for final hearing on any convenient date and no interim protection may be granted.
Learned counsel for the CGST Mr. Amit Kumar and Mr. P.A.S. Pati in respective cases have also opposed the plea. They have drawn the attention of this Court to Section 7 of the CGST Act, 2017 which explains the expression “supply” and includes all forms of supply of goods or services or both, such as sale, transfer, barter, exchange, license, rental, lease etc. He submits that clause 1(a) under Section 7 provides that activities such as lease are to be treated as supply of services as referred to in Schedule II. Referring to the definition clause of “consideration” under Section 2(31), it is submitted that “consideration” in relation to supply of goods or services or both includes any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government. As such royalty would come within the meaning of consideration in respect of the services received by the petitioners on grant of such lease of exploration of minerals. Based on these contentions learned counsel for the respondents have opposed the prayer.
Observation of the Court
Court has considered the submissions of learned counsel for the parties on the prayer for interim relief on the levy of GST on royalty/DMF. On consideration of the rival pleas in the canvass of facts and the legal propositions advanced by them, it is clear that the levy of GST by the respondents is on the royalty/DMF in respect of the mining lease granted to the petitioners. The decision of the Apex Court by the 7 Judges Constitution Bench in the case of India Cements Ltd. (supra) that royalty is a tax is under consideration before a 9 Judges Constitution Bench of the Apex Court upon reference made in the case of Mineral Area Development Authority & others (supra).
Following the interim order passed by the Apex Court in the case of M/s Lakhwinder Singh (supra) dated 04.10.2021, this Court had been pleased to grant interim protection on levy of GST on mining lease / royalty/DMF. In the background of the legal position that royalty has been considered to be a tax or profit pendre and the issue is pending before the 9 Judge Constitution Bench, we are of the considered view that the petitioners have made out a case for interim protection. As such, there shall be stay of recovery of GST for grant of mining lease/ royalty/DMF from the petitioners till further orders. However, the Revenue is not restrained from conducting and completing the assessment proceedings.
Since interim protection has been granted earlier in the case of Sunita Ganguly and others Vrs. Union of India & others vide order dated 02.03.2021 passed in W.P.(T) No. 3878 of 2020 and other analogous cases on levy of service tax on royalty/DMF, similar interim protection is being granted in W.P.(T) No. 897 of 2022, W.P.(T) No. 903 of 2022, W.P.(T) No. 926 of 2022, W.P.(T) No. 927 of 2022 where the
levy of service tax on royalty/ DMF is under challenge. As such, interim order dated 02.03.2021 shall govern the case of said writ petitioners also.
Learned counsel for the respondent State and CGST are granted 3 weeks’ time to file counter affidavit in respective writ petitions in which no counter affidavit has been filed. 2 week time thereafter is granted to the petitioners to file rejoinder, if any. Let these matters be listed in the 1st week of July, 2022.Mandhan-Minerals-Corporation-Vs-Union-of-India-Jharkhand-High-Court