FACTS OF THE CASE

  • Petitioner Profile: A large cluster/bunch of writ petitions was filed by various mining leaseholders, brick kiln operators, stone quarry owners, and lime industries operating across Rajasthan (led by Shree Basant Bhandar Int Udyog).
  • Triggering Event: The GST Department issued show-cause notices (SCNs) and assessment orders demanding the payment of GST under the Reverse Charge Mechanism (RCM) on the royalty paid by leaseholders to the State Mining Department for their respective mining leases.
  • Additional Levy Challenged: In ten specific writ petitions (including M/s Choudhary Lime Industries, M/s Fadak Lime Industries, Leelavati, Roopam Lime Industries, M/s Draipal GCC JV, Rakesh Mordia, Sultane Hind Granites, and Sultane Hind China White Stone), petitioners additionally challenged the statutory demand of GST levied on contributions paid towards the District Mineral Foundation Trust (DMFT).
  • Forum: High Court of Judicature for Rajasthan at Jodhpur (Division Bench).

ISSUES INVOLVED

  1. Levy on Royalty: Whether the GST Department is legally empowered and justified in demanding GST on the royalty paid by mining leaseholders to the Mining Department?
  2. Statutory Remedy vs. Writ Jurisdiction: Whether the availability of a statutory remedy (filing replies to show-cause notices or filing appeals against assessment orders under the GST Act) bars petitioners from seeking extraordinary writ relief?
  3. Applicability of Prior Precedents: Whether the binding decision of the Division Bench in Sudershan Lal Gupta vs. Union of India & Ors. (D.B. CWP No. 8109/2022) conclusively covers and settles the issue regarding the levy of GST on royalty?
  4. DMFT Contribution: Whether the distinct issue regarding the demand of GST on contributions paid to the District Mineral Foundation Trust (DMFT) requires separate judicial consideration and deferment?

PETITIONER’S ARGUMENTS

  • Non-Application of Mind on Merits: The learned counsel for the petitioners fervently contended that the earlier decision of the Jaipur Bench in Sudershan Lal Gupta vs. UOI & Ors. (D.B. Civil Writ Petition No. 8109/2022, decided on 27.09.2022) did not adjudicate the dispute on its actual legal merits.
  • Misreliance on Service Tax Precedents: The petitioners submitted that the earlier decisions relied upon by the Court—namely Udaipur Chambers of Commerce and Industry vs. UOI (D.B. CWP No. 14578/2016), M/s Mateshwari Minerals vs. UOI (D.B. CWP No. 7650/2021), M/s Shivalik Silica vs. UOI (D.B. CWP No. 14849/2021), and Rajasthan Small Mines (Cheja Patthar) Lease Holders Association vs. State of Rajasthan (D.B. CWP No. 5199/2022)—pertained strictly to the demand of Service Tax on royalty.
  • Distinct Legal Regime: Counsel argued that the statutory principles governing Service Tax differ fundamentally from the Goods and Services Tax (GST) framework; hence, applying those decisions directly to GST matters frustrates their right to agitate show-cause notices on actual merits.
  • Prejudice to Rights: The petitioners asserted that dismissing their writ petitions outright based on distinct precedent severely prejudices their statutory rights and natural justice.

RESPONDENT’S ARGUMENTS

  • Settled Law: The learned counsel appearing for the GST and State Departments argued that the legal challenge against demanding GST on royalty paid to the Mining Department was already repelled and conclusively settled by the Coordinate Division Bench of the High Court.
  • Binding Co-ordinate Bench Ruling: Since the judgment dated 27.09.2022 in Sudershan Lal Gupta vs. UOI & Ors. (D.B. CWP No. 8109/2022) upheld identical demands, the present bunch of writ petitions challenging GST on royalty deserved outright rejection.

COURT ORDER & FINDINGS

  • Bench Composition: Hon'ble Mr. Justice Sandeep Mehta and Hon'ble Mr. Justice Kuldeep Mathur.
  • Preservation of Statutory Remedies: The High Court explicitly held that the right of petitioners to file replies/objections to show-cause notices or to file statutory appeals against final assessment orders under the GST Act remains intact as a statutory remedy. Petitioners remain free to avail these remedies regardless of the outcome of the writ petitions.
  • Rejection of Challenge on Mining Royalty: Relying on the final order in Sudershan Lal Gupta vs. UOI & Ors., the Court held that the legal controversy surrounding the demand of GST on mining royalty stands concluded. Consequently, the batch of writ petitions seeking relief against the imposition of GST on royalty was dismissed.
  • Severance & Deferment of DMFT Issue: In respect of the 10 specific writ petitions (CWPs: 6368/2022, 6370/2022, 6373/2022, 6513/2022, 7801/2022, 8629/2022, 8671/2022, 10681/2022, 8407/2022, and 8492/2022), the Court deferred the petitions for separate consideration solely regarding the issue of GST demand on DMFT contributions while turning down their prayer against GST on royalty.

IMPORTANT CLARIFICATION

  • Statutory Appeal Pathway Unharmed: Dismissal of a writ petition challenging a GST show-cause notice or assessment order does not preclude the taxpayer from pursuing formal administrative remedies (e.g., submitting replies to show-cause notices or preferring statutory appeals before Appellate Authorities) provided under the GST framework.
  • Bifurcation of Royalty vs. DMFT Claims: While the levy of GST on basic mining royalty stands affirmed by the Division Bench precedent, the levy of GST on District Mineral Foundation Trust (DMFT) contributions is a distinct issue retained for separate judicial scrutiny.

SECTION INVOLVED

  • Statutory Provisions Under Review: Central Goods and Services Tax Act, 2017 (CGST Act) / State Goods and Services Tax Act, 2017 (SGST Act).
  • Key Areas of Dispute: Levy of GST on Royalty payments and contributions made to the District Mineral Foundation Trust (DMFT) under reverse charge/statutory tax mechanics.

Link to download the order - https://mytaxexpert.co.in/uploads/1784622094_1801compressed.pdf

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