Facts of the Case

The petitioner, N. Govindasamy, was carrying on quarry operations after obtaining the necessary licence/permit under the Tamil Nadu Minor Mineral Concession Rules, 1959. The permit was granted for a period of five years by the District Collector through proceedings dated 05.12.2016.

The petitioner challenged a notice dated 01.09.2022 issued by the second respondent. According to the petitioner, the respondents were compelling registration of the quarry operations under the GST Act, 2017 and requiring payment of GST on the Seigniorage Fee paid to the Geology and Mining Department.

The petitioner contended that the Seigniorage Fee itself constituted a tax on quarried minor minerals and, therefore, the levy of GST on such fee was legally unsustainable.

The petitioner further relied upon the pendency of the issue concerning the legality of GST on mining lease/royalty before the Supreme Court in M/s Lakhwinder Singh vs Union of India and Others, W.P.(Civil) No. 1076 of 2021, in which an interim stay concerning payment of GST for grant of mining lease/royalty had been granted.

Issues Involved

  1. Whether GST could validly be demanded on Seigniorage Fee paid in relation to quarry and mining operations.
  2. Whether the Seigniorage Fee, being asserted as a tax on quarried minor minerals, could itself be subjected to GST.
  3. Whether the impugned notice dated 01.09.2022 was liable to be quashed under Article 226 of the Constitution of India.
  4. Whether the writ petition was premature because the impugned proceeding was only at the notice stage.
  5. What effect, if any, should be given to the interim order passed by the Supreme Court in M/s Lakhwinder Singh vs Union of India and Others concerning GST on grant of mining lease/royalty.
  6. Whether recovery proceedings should be restrained until the petitioner’s objections to the notice were considered and disposed of.

Petitioner’s Arguments

The petitioner argued that:

  • He was lawfully conducting quarry operations under a valid licence/permit obtained in accordance with the Tamil Nadu Minor Mineral Concession Rules, 1959.
  • The respondents were compelling registration of the quarry operations under the GST Act, 2017.
  • The respondents were demanding GST on the Seigniorage Fee paid to the Geology and Mining Department.
  • Seigniorage Fee was itself in the nature of a tax on quarried minor minerals and, therefore, levy of GST on the same was unsustainable.
  • The legality of GST on mining lease/royalty was pending consideration before the Supreme Court in M/s Lakhwinder Singh vs Union of India and Others, W.P.(Civil) No. 1076 of 2021.
  • The Supreme Court had granted stay concerning payment of GST for grant of mining lease/royalty by the petitioner in that matter, and the said position had been followed by various Courts.
  • The respondents were demanding tax on Seigniorage Fee as well as on minerals quarried and disposed of.
  • Reliance was also placed on India Cement Ltd. and Others vs State of Tamil Nadu and Others, reported in 1990 (1) SCC 12, in support of the contention concerning levy and collection of tax/sales tax on minerals.
  • The petitioner further referred to Mineral Area Development Authority etc. vs M/s Steel Authority of India & Others, reported in 2011 (4) SCC 450, concerning the true nature of royalty/dead rent payable on minerals produced, mined or extracted and the reference of the issue for consideration by a larger Bench of nine Judges.

Respondents’ Arguments

The learned Additional Government Pleader appearing for the respondents contended that:

  • The impugned proceeding dated 01.09.2022 was only a notice.
  • Since no final adverse order had yet been passed, the writ petition was premature.
  • On that basis, the writ petition was liable to be dismissed.

Court Order / Findings

The Madras High Court noted that the Supreme Court, in M/s Lakhwinder Singh vs Union of India and Others, had granted stay concerning payment of GST for grant of mining lease/royalty by the petitioner in that case.

At the same time, the High Court observed that the impugned proceeding before it was only a notice.

Accordingly, the Court directed as follows:

  1. The petitioner was required to submit objections to the impugned notice within 30 days from the date of receipt of a copy of the High Court’s order.
  2. The petitioner was permitted to rely upon the judgment/order in M/s Lakhwinder Singh vs Union of India and Others.
  3. The petitioner was also permitted to rely upon any other judgments considered relevant.
  4. If objections were filed, the second respondent was directed to consider the same and pass appropriate orders.
  5. Until disposal of the objections, the respondents were restrained from resorting to recovery proceedings.
  6. The writ petition was disposed of with the above directions.
  7. No order as to costs was made.
  8. The connected Writ Miscellaneous Petition was closed.

Important Clarification

The High Court expressly clarified that it had not expressed any view on the merits of the controversy.

Therefore, the order should not be understood as a final judicial determination that GST is either validly or invalidly leviable on Seigniorage Fee, mining lease payments or royalty.

The competent respondents remained free to consider the issues raised by the petitioner on their own merits after examining the objections and the judicial precedents relied upon.

The significant procedural protection granted by the Court was that no recovery proceedings could be initiated until the petitioner’s objections were disposed of.

Sections / Legal Provisions Involved

  • Article 226 of the Constitution of India – Writ jurisdiction of the High Court and prayer for issuance of a Writ of Certiorari.
  • Goods and Services Tax Act, 2017 / GST law – Issue relating to GST registration and levy of GST on Seigniorage Fee connected with quarry operations.
  • Tamil Nadu Minor Mineral Concession Rules, 1959 – Governing the licence/permit under which the petitioner carried on quarry operations.

Link to download the order

https://www.mytaxexpert.co.in/uploads/1783321040_1209compressed.pdf

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