Facts of the Case

The petitioner, Daulat Singh and Sons, a partnership firm represented through its partner Ranjeet Singh, approached the Rajasthan High Court by filing a writ petition challenging the impugned orders/notices issued by the respondent Department demanding GST on royalty collected by the petitioner.

The petitioner sought judicial interference with the GST demand raised on royalty. The controversy was not new before the Rajasthan High Court. An identical challenge concerning the demand of GST on royalty had already been considered by a Division Bench of the Rajasthan High Court at Jaipur in a batch of writ petitions led by Sudarshan Lal Gupta vs Union of India & Ors., D.B. Civil Writ Petition No. 8109/2022, decided by order dated 27 September 2022.

The Court recorded that the Division Bench in the said batch of matters had already repelled the identical challenge to the demand of GST on royalty.

Issues Involved

The principal issues arising before the Court were:

  1. Whether the demand of GST on royalty collected by the petitioner was legally sustainable.
  2. Whether the Rajasthan High Court should reconsider the issue despite a Coordinate Bench having already rejected an identical challenge in Sudarshan Lal Gupta vs Union of India & Ors.
  3. Whether the earlier Division Bench had failed to correctly interpret the Supreme Court judgment in State of Assam vs Barak Upatyaka D.U. Karmachari Sanstha.
  4. Whether the pendency of the broader royalty-related issue before a Nine-Judge Bench of the Supreme Court in Mineral Area Development Authority etc. & Ors. vs M/s Steel Authority of India & Ors. justified taking a different view.

Petitioner’s Arguments

The petitioner, through learned counsel Mr. Vijay Kumar Aggarwal, strongly urged that the writ petition deserved acceptance notwithstanding the earlier Division Bench ruling.

The principal submission was that the Division Bench in Sudarshan Lal Gupta vs Union of India & Ors. had failed to make a correct interpretation of the Supreme Court judgment in State of Assam vs Barak Upatyaka D.U. Karmachari Sanstha, Civil Appeal No. 6492/2002, decided on 17 March 2009.

On this basis, the petitioner sought reconsideration of the issue and contended that the writ petition challenging the GST demand on royalty merited acceptance.

Respondents’ Arguments

The short order does not separately record any detailed oral or written arguments advanced on behalf of the respondents. Significantly, the appearance portion of the order records “--” against the respondents.

Accordingly, no independent or detailed respondent-side submissions should be attributed beyond what is expressly reflected in the judicial order.

The Court, however, considered the existing legal position arising from the Coordinate Bench decision in Sudarshan Lal Gupta vs Union of India & Ors., where an identical challenge to the demand of GST on royalty had already been rejected.

Court Order / Findings

The Rajasthan High Court declined to take a view different from the earlier Coordinate Bench.

The Court noted that:

  • A batch of writ petitions led by Sudarshan Lal Gupta vs Union of India & Ors., D.B. Civil Writ Petition No. 8109/2022, had already considered an identical challenge.
  • By order dated 27 September 2022, the Division Bench of the Rajasthan High Court at Jaipur had repelled the challenge to the demand of GST on royalty.
  • Similar previous judgments had been challenged before the Supreme Court.
  • The broader issue had not been finally decided by the Supreme Court and was pending consideration before a Nine-Judge Bench in Mineral Area Development Authority etc. & Ors. vs M/s Steel Authority of India & Ors., reported in (2011) 4 SCC 450.
  • Nevertheless, because a Coordinate Bench of the Rajasthan High Court had already repelled the selfsame challenge concerning the leviability of GST on royalty, the Court was not inclined to take a different view.

Consequently, the Court held that there was no merit in the writ petition and dismissed it.

Important Clarification

A particularly important aspect of this order is that the Rajasthan High Court did not undertake an independent final determination of the broader constitutional controversy concerning royalty. Rather, the dismissal was materially based on judicial consistency with the Coordinate Bench ruling in Sudarshan Lal Gupta vs Union of India & Ors.

The Court expressly acknowledged that the issue had not been finally decided by the Supreme Court and was pending consideration before a Nine-Judge Bench in Mineral Area Development Authority etc. & Ors. vs M/s Steel Authority of India & Ors.

Therefore, this order should be understood as a refusal by the Rajasthan High Court to depart from its Coordinate Bench’s existing view on the leviability of GST on royalty, rather than as an exhaustive fresh adjudication of every constitutional and statutory question concerning royalty.

Sections / Legal Provisions Involved

The two-page order itself does not expressly mention any specific section number of the CGST Act, 2017, the Rajasthan GST Act, 2017, or any other taxing statute.

Accordingly, to preserve the exact meaning and accuracy of the judgment, no unmentioned statutory section should be attributed to the Court.

The legal controversy recorded in the order concerns:

  • Leviability of GST on royalty
  • GST demand arising from royalty
  • Challenge to departmental orders/notices demanding GST on royalty
  • Binding or persuasive effect of a Coordinate Bench decision
  • Pending Supreme Court consideration of the broader royalty issue

Link to download the order -https://mytaxexpert.co.in/uploads/1783493384_1512compressed.pdf

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