Facts of the Case

M/s Hariom Mines and Minerals, through its partner Mr. Hemendra Kalal, filed a writ petition before the Rajasthan High Court at Jodhpur challenging the impugned orders/notice issued by the respondent Department demanding GST on royalty collected by the petitioner.

The respondents included:

  1. Union of India through the Secretary, Finance Department, Government of India;
  2. State of Rajasthan through the Principal Secretary, Finance Department (Tax Division);
  3. Secretary, Mining Department, Government of Rajasthan; and
  4. Deputy Commissioner, Circle A, Enforcement Branch II, State Tax, Jaipur, Rajasthan.

The controversy concerned the levy of GST on royalty. The Court noted that an identical challenge had already been considered by a Division Bench of the Rajasthan High Court at Jaipur Bench in a batch of writ petitions led by D.B. Civil Writ Petition No. 8109/2022, Sudarshan Lal Gupta vs Union of India & Others and connected matters.

By order dated 27 September 2022, the coordinate Division Bench had repelled the identical challenge to the demand of GST on royalty.

Despite that earlier ruling, the petitioner pressed the present writ petition and contended that the earlier Division Bench had failed to correctly interpret the relevant Supreme Court precedent.

Issues Involved

The principal issues arising from the judgment were:

  1. Whether the impugned orders/notice demanding GST on royalty collected by the petitioner were liable to be interfered with by the High Court.
  2. Whether the challenge to the leviability of GST on royalty could be entertained despite an earlier coordinate Division Bench decision of the Rajasthan High Court rejecting an identical challenge.
  3. Whether the earlier decision in Sudarshan Lal Gupta vs Union of India & Others had incorrectly interpreted the Supreme Court judgment in State of Assam vs Barak Upatyaka D.U. Karmachari Sanstha.
  4. Whether the pendency of the broader issue before a nine-Judge Bench of the Supreme Court in Mineral Area Development Authority etc. & Others vs M/s Steel Authority of India & Others justified a different view by the present Division Bench.
  5. Whether judicial discipline and consistency required the present Division Bench to follow the coordinate-bench view on the same challenge concerning GST leviability on royalty.

Petitioner’s Arguments

The petitioner challenged the Department’s demand of GST on royalty and urged that the writ petition deserved acceptance.

The petitioner’s principal submissions, as recorded by the Court, were:

  • The earlier Division Bench decision in Sudarshan Lal Gupta vs Union of India & Others had not correctly interpreted the law.
  • The learned Division Bench in Sudarshan Lal Gupta allegedly 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 that basis, the petitioner urged that notwithstanding the earlier coordinate-bench ruling, the present writ petition merited acceptance.

The Court’s order specifically records that learned counsel for the petitioner pressed this contention “vehemently and fervently”.

Respondents’ Arguments

The short order records no separate detailed oral submissions on behalf of the respondents. The appearance portion of the order shows no counsel recorded for the respondents.

Accordingly, it would not be appropriate to attribute any additional argument to the respondents beyond what is expressly contained in the judicial order.

However, the Departmental action under challenge was the issuance of orders/notice demanding GST on royalty collected by the petitioner.

Court Order / Findings

The Rajasthan High Court dismissed the writ petition after considering the earlier coordinate-bench decision and the pending larger legal controversy.

1. Identical Challenge Already Rejected in Sudarshan Lal Gupta

The Court noted that a batch of writ petitions led by:

D.B. Civil Writ Petition No. 8109/2022 – Sudarshan Lal Gupta vs Union of India & Others

had already considered an identical challenge.

The Jaipur Bench of the Rajasthan High Court, by order dated 27 September 2022, had repelled the challenge to the demand of GST on royalty.

This prior coordinate-bench ruling was central to the disposal of the present petition.

2. Petitioner Alleged Incorrect Interpretation of Supreme Court Judgment

The petitioner argued that the Division Bench in Sudarshan Lal Gupta failed to correctly interpret:

State of Assam vs Barak Upatyaka D.U. Karmachari Sanstha, Civil Appeal No. 6492/2002, decided on 17 March 2009.

The present Division Bench considered this submission but did not accept it as a sufficient basis for taking a different view.

3. Similar Previous Judgments Were Under Challenge Before the Supreme Court

The High Court expressly acknowledged that similar previous judgments had been challenged before the Supreme Court.

Thus, the Court was conscious that the broader legal controversy had not necessarily attained finality at the Supreme Court level.

4. Issue Had Not Been Finally Decided by the Supreme Court

The Court further recorded that the issue had not been finally decided by the Supreme Court.

This is an important qualification in understanding the judgment: the High Court did not state that the larger controversy had been conclusively settled by the Supreme Court.

5. Nine-Judge Bench Proceedings in Mineral Area Development Authority Case Noted

The Court referred to:

Mineral Area Development Authority etc. & Others vs M/s Steel Authority of India & Others, reported in (2011) 4 SCC 450.

The order recorded that the issue was pending consideration before a Bench of nine Judges.

Nevertheless, the existence of the pending larger-bench proceedings did not persuade the Court to depart from the coordinate-bench view already taken by the Rajasthan High Court on the same challenge concerning GST on royalty.

6. Coordinate Bench Had Rejected the Self-Same Challenge

The decisive reasoning of the Court was that a coordinate Bench of the Rajasthan High Court had already repelled the self-same challenge to leviability of GST on royalty.

The present Division Bench therefore held that it was not inclined to take a different view in the matter.

7. Writ Petition Found to Be Without Merit

Based on the above reasoning, the Court concluded that there was no merit in the writ petition.

Accordingly, the writ petition was dismissed.

Final Order

The Rajasthan High Court held that, since a coordinate Division Bench had already rejected the same challenge to the leviability of GST on royalty, the present Bench was not inclined to adopt a different view.

Result: The writ petition was dismissed for lack of merit.

Important Clarification

This judgment should be understood with precision.

The Court dismissed the petition primarily because:

  • an identical challenge had already been rejected by a coordinate Division Bench in Sudarshan Lal Gupta vs Union of India & Others;
  • the present Bench was not inclined to take a different view from the coordinate Bench on the self-same challenge; and
  • the petitioner’s argument regarding alleged incorrect interpretation of State of Assam vs Barak Upatyaka D.U. Karmachari Sanstha did not persuade the Court to depart from the earlier Rajasthan High Court ruling.

At the same time, the Court expressly acknowledged that:

  • similar previous judgments had been challenged before the Supreme Court;
  • the issue had not been finally decided by the Supreme Court; and
  • the broader issue was pending consideration before a nine-Judge Bench in Mineral Area Development Authority etc. & Others vs M/s Steel Authority of India & Others.

Therefore, the judgment should not be overstated as recording that every broader constitutional question concerning the legal character of royalty had been finally settled by the Supreme Court as of the date of this order.

The precise ratio of this short order is that the present Division Bench declined to take a different view because a coordinate Bench of the same High Court had already rejected the identical challenge to GST leviability on royalty.

Sections Involved

·         GST Levy on Royalty – Statutory Context

·         Article 226 of the Constitution of India

·         Relevant GST Framework Concerning Royalty

Link to download the order - https://www.mytaxexpert.co.in/uploads/1783491946_1462compressed.pdf

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