Facts of the Case

The petitioner, P. Balaji, was carrying on quarry operations after obtaining the necessary licence/permit under the Tamil Nadu Minor Mineral Concession Rules, 1959. The quarry permission was granted for a period of five years by the District Collector through proceedings dated 16.08.2018.

The petitioner challenged a notice dated 12.09.2022 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 Seigniorage Fee was itself in the nature of a tax on quarried minor minerals and, therefore, the levy of GST thereon was unsustainable.

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

The petitioner also referred to India Cement Ltd. and Others vs State of Tamil Nadu and Others, 1990 (1) SCC 12, concerning levy and collection of tax/sales tax on minerals, and Mineral Area Development Authority etc. vs M/s Steel Authority of India & Others, 2011 (4) SCC 450, concerning the true nature of royalty/dead rent payable on minerals produced, mined or extracted.

Issues Involved

  1. Whether GST could be demanded on Seigniorage Fee paid in connection with quarry/mining operations.
  2. Whether Seigniorage Fee, alleged by the petitioner to be itself a tax on quarried minor minerals, could validly suffer a further levy of GST.
  3. Whether the petitioner could rely upon the interim protection granted by the Hon’ble Supreme Court in M/s Lakhwinder Singh vs Union of India concerning GST on grant of mining lease/royalty.
  4. Whether the writ petition challenging a mere notice was premature.
  5. Whether coercive recovery proceedings could continue before consideration and disposal of the petitioner’s objections.

Petitioner’s Arguments

The petitioner argued that:

  • He was carrying on quarry operations pursuant to a valid licence/permit granted under the Tamil Nadu Minor Mineral Concession Rules, 1959.
  • The respondents were compelling registration of the quarry operations under the GST Act, 2017.
  • GST was being demanded on the Seigniorage Fee paid to the Geology and Mining Department.
  • Seigniorage Fee was itself a tax on quarried minor minerals and, therefore, levy of GST on such fee was unsustainable.
  • The legality of GST on mining lease/royalty was already pending consideration before the Hon’ble Supreme Court in M/s Lakhwinder Singh vs Union of India, W.P.(Civil) No. 1076 of 2021.
  • The Hon’ble Supreme Court had granted stay concerning payment of GST for grant of mining lease/royalty, and such interim protection 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 placed on India Cement Ltd. and Others vs State of Tamil Nadu and Others, 1990 (1) SCC 12.
  • Reference was also made to Mineral Area Development Authority etc. vs M/s Steel Authority of India & Others, 2011 (4) SCC 450, involving 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.

Respondents’ Arguments

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

  • The impugned proceeding was only a notice.
  • Since only a notice had been issued, the writ petition was premature.
  • On that basis, the writ petition was liable to be dismissed.

Court Order / Findings

The Madurai Bench of the Madras High Court considered the materials available on record.

The Court noted that the Hon’ble 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 therein.

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

Accordingly, the Court issued the following directions:

  1. The petitioner was directed to submit objections to the impugned notice within 30 days from the date of receipt of a copy of the 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 passed.
  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 dispute concerning the levy of GST on Seigniorage Fee.

The respondents remained free to consider the issues raised by the petitioner independently and on their own merits.

Therefore, the order should not be understood as a final judicial declaration that GST on Seigniorage Fee is either valid or invalid. The principal relief granted was procedural protection: the petitioner was allowed to submit objections, rely upon relevant judgments, and remain protected against recovery proceedings until those objections were disposed of.

Sections / Legal Provisions Involved

  • Article 226 of the Constitution of India – Writ jurisdiction of the High Court.
  • GST Act, 2017 – Levy of GST in relation to quarry operations and Seigniorage Fee paid to the Geology and Mining Department.
  • Tamil Nadu Minor Mineral Concession Rules, 1959 – Licence/permit governing quarry operations.
  • The dispute concerned the proposed levy and recovery of GST on Seigniorage Fee connected with quarry/mining operations.

 Key Legal Takeaway

Where a GST demand concerning Seigniorage Fee or mining lease/royalty is raised through a notice, the notice recipient may place detailed objections before the Proper Officer and rely upon relevant judicial precedents. In this case, the High Court protected the petitioner from recovery proceedings until disposal of such objections but deliberately left the substantive issue open for determination on merits.

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1783321567_1210compressed.pdf

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