Facts of the Case

The petitioner, R. Murugan, was carrying on quarry operations after obtaining the necessary licence/permit under the Tamil Nadu Minor Mineral Concession Rules, 1959. The licence/permit had been granted for a period of five years by the District Collector through proceedings in Na.Ka.No.213/Mines/2018 dated 27.05.2020.

The petitioner challenged the notice dated 09.09.2022 issued by the second respondent, namely the State Tax Officer, Office of the Assistant Commissioner (ST), Theni-2.

According to the petitioner, the respondents were compelling him to register 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 itself constituted a tax on quarried minor minerals and, therefore, levy of GST on such Seigniorage Fee was unsustainable.

The petitioner further relied upon the pendency of the issue concerning the legality of GST levy on Seigniorage Fee before the Hon’ble Supreme Court in M/s Lakhwinder Singh vs Union of India, W.P.(Civil) No.1076 of 2021, order dated 04.10.2021.

Issues Involved

  1. Whether GST could validly be demanded on Seigniorage Fee paid in connection with quarrying/mining operations.
  2. Whether the levy of GST on Seigniorage Fee was sustainable when, according to the petitioner, Seigniorage Fee itself constituted a tax on quarried minor minerals.
  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 payment of GST for grant of mining lease/royalty.
  4. Whether the writ petition challenging a mere notice was premature.
  5. Whether recovery proceedings should be restrained until the petitioner’s objections to the impugned notice were considered and disposed of.

Petitioner’s Arguments

The petitioner submitted that he was being compelled by the respondents to register the quarry operations under the GST Act, 2017 and to pay GST on the Seigniorage Fee paid to the Geology and Mining Department.

It was argued that Seigniorage Fee was itself a tax on quarried minor minerals and, consequently, the levy of GST thereon was unsustainable.

The petitioner further submitted that the legality of GST levy on Seigniorage Fee was pending consideration before the Hon’ble Supreme Court in M/s Lakhwinder Singh vs Union of India, W.P.(Civil) No.1076 of 2021, in which the Hon’ble Supreme Court had granted stay of payment of GST for grant of mining lease/royalty by the petitioner therein.

It was also submitted that the protection granted in the said matter had been followed by various Courts.

The petitioner further contended that the respondent was demanding tax on Seigniorage Fee as well as on minerals quarried and disposed of.

Reliance was also placed upon India Cement Ltd. and Others vs State of Tamil Nadu and Others, reported in (1990) 1 SCC 12, in support of the contention regarding impermissibility of levy and collection of tax/sales tax on minerals.

The petitioner additionally 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, wherein the matter had been referred for consideration by a larger Bench of nine Judges and placed on the administrative side before the Chief Justice for appropriate orders.

Respondents’ Arguments

The learned Government Advocate appearing for the respondents submitted that the impugned proceeding dated 09.09.2022 was only a notice.

Accordingly, it was contended that the writ petition was premature and liable to be dismissed.

Court Order / Findings

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

The High Court also observed that the impugned proceeding challenged before it was only a notice.

Accordingly, the Court directed the petitioner to submit objections to the notice within a period of 30 days from the date of receipt of a copy of the High Court’s order.

The Court expressly permitted the petitioner to place reliance upon the judgment/order in M/s Lakhwinder Singh vs Union of India and Others and upon any other judgments which the petitioner intended to rely upon.

The Court further directed that, if such objections were filed, the second respondent should consider the same and pass appropriate orders.

Importantly, the Court directed that until disposal of the objections, the respondents should not resort to recovery proceedings.

With these directions, the writ petition was disposed of without costs, and the connected Writ Miscellaneous Petition was closed.

Important Clarification by the Court

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

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

Therefore, the order should not be understood as a final adjudication holding that GST on Seigniorage Fee or mining lease/royalty was either valid or invalid. The operative protection granted by the Court was procedural in nature: the petitioner was permitted to submit objections, the authority was required to consider those objections and pass appropriate orders, and recovery proceedings were restrained until disposal of the objections.

Sections / Statutory Provisions Involved

Article 226 of the Constitution of India – Jurisdiction of the High Court to issue writs; the petitioner sought a Writ of Certiorari against the notice dated 09.09.2022.

GST Act, 2017 / Applicable GST Law – The controversy concerned the demand for GST in relation to Seigniorage Fee connected with quarry operations. The judgment refers generally to the “GST Act 2017” and does not identify a specific charging or demand section in the operative discussion.

Tamil Nadu Minor Mineral Concession Rules, 1959 – The petitioner’s quarry operations were carried on pursuant to the necessary licence/permit obtained under these Rules.

Important Accuracy Note: No specific section number of the CGST Act, 2017 or TNGST Act, 2017 is expressly identified in the judgment as the substantive provision under which the disputed GST demand was raised. Therefore, no additional GST section number should be attributed to the decision without reference to the underlying notice or other case records.

Link to download the order -

https://mytaxexpert.co.in/uploads/1783505427_1537compressed.pdf

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