Facts of the Case

  • Petitioner's Identity: The petitioner, Harbans Singh, aged about 53 years, is the proprietor of M/s Nimiwal Traders, situated at M No. 32/43 Chak 5 MLK Gharsana, District Sri Ganganagar, Rajasthan.
  • Imputed Impugned Action: The petitioner filed a writ petition under Article 226 of the Constitution of India before the High Court of Judicature for Rajasthan at Jodhpur (D.B. Civil Writ Petition No. 13996/2022).
  • Core Grievance: The petitioner challenged the impugned orders and demand notices issued by the respondent authorities demanding the payment of Goods and Services Tax (GST) on the royalty paid/collected in relation to mining activities.
  • Respondents in the Petition: The respondents impleaded in the matter were:
    1. Union of India, through the Secretary, Finance Department, New Delhi.
    2. The State of Rajasthan, through the Secretary, Finance Department (Tax Division), Jaipur.
    3. The State of Rajasthan, through the Secretary, Rajasthan Mining and Land Department, Jaipur.
  • Bench Composition & Date: The matter was heard and decided on September 29, 2022, by the Division Bench comprising Hon'ble Mr. Justice Sandeep Mehta and Hon'ble Mr. Justice Kuldeep Mathur.

Issues Involved

  1. Whether GST is leviable on the royalty collected/paid in respect of mining operations under the provisions of the Central Goods and Services Tax (CGST) Act, 2017 and Rajasthan Goods and Services Tax (RGST) Act, 2017.
  2. Whether the Division Bench at Jodhpur should take a view divergent from the earlier coordinate Division Bench judgment of the Jaipur Bench in Sudarshan Lal Gupta vs. Union of India & Ors. (D.B. Civil Writ Petition No. 8109/2022).
  3. Whether the decision in Sudarshan Lal Gupta (supra) improperly interpreted the Supreme Court ruling in State of Assam vs. Barak Upatyaka D.U. Karmachari Sanstha.
  4. Whether the pendency of the referral to a Nine-Judge Bench of the Supreme Court in Mineral Area Development Authority & Ors. vs. M/s. Steel Authority of India & Ors. prevents the High Court from relying on binding coordinate bench precedent.

Petitioner’s Arguments

  • Flawed Interpretation in Precedent: The learned counsel for the petitioner, Mr. Vijay Kumar Agarwal, fervently argued that the coordinate Division Bench at the Jaipur Bench in Sudarshan Lal Gupta vs. Union of India & Ors. (decided on 27.09.2022) failed to correctly interpret the law laid down by the Hon'ble Supreme Court.
  • Misapplication of Apex Court Decision: Counsel specifically asserted that the Jaipur Bench erred in its application and understanding of the Supreme Court's judgment in State of Assam vs. Barak Upatyaka D.U. Karmachari Sanstha (Civil Appeal No. 6492/2002, decided on 17.03.2009).
  • Lack of Finality: It was urged that since the core character of royalty and tax status is pending consideration before a 9-Judge Constitution Bench of the Supreme Court in Mineral Area Development Authority & Ors. vs. M/s. Steel Authority of India & Ors. [(2011) 4 SCC 450], the impugned demand of GST on mining royalty warrants setting aside or acceptance of the writ petition.

Respondent’s Arguments

  • Binding Judicial Discipline: The respondents maintained that the identical challenge concerning the applicability of GST on royalty had already been examined and rejected by the Division Bench of the same High Court in Sudarshan Lal Gupta vs. Union of India & Ors..
  • Settled Position by Coordinate Bench: Since the coordinate Division Bench at Jaipur Bench repelled the identical challenge on 27.09.2022, judicial discipline requires that the same position be upheld in subsequent similar petitions.

Court Order & Findings

  • Judicial Discipline & Precedent: The Hon’ble High Court observed that a coordinate Division Bench at the Jaipur Bench in Sudarshan Lal Gupta vs. Union of India & Ors. (and connected matters) had already repelled the self-same challenge against the levy/demand of GST on mining royalty vide order dated 27.09.2022.
  • Adherence to Settled View: The Court held that even though similar matters are pending before higher forums and the issue regarding royalty is currently under reference before a Nine-Judge Bench of the Supreme Court in Mineral Area Development Authority vs. M/s Steel Authority of India & Ors. [(2011) 4 SCC 450], a coordinate bench cannot depart from an established view taken by another coordinate bench on the identical issue.
  • Dismissal of Writ Petition: Finding no compelling ground to take a divergent view, the High Court held that the writ petition lacked merit and accordingly dismissed it.

Important Clarification

  • Binding Nature of Coordinate Bench Rulings: The ruling reinforces the doctrine of stare decisis and judicial precedent, emphasizing that a Division Bench will not deviate from a ruling handed down by another Division Bench of the same High Court on identical facts, even if the matter remains sub-judice before a Nine-Judge Constitution Bench of the Supreme Court.
  • GST Status on Mining Royalty: Until resolved otherwise by the Apex Court, the taxability/applicability of GST on royalty in the State of Rajasthan stands upheld by the High Court.

Sections Involved

  • Article 226 of the Constitution of India (Writ Jurisdiction).
  • Central Goods and Services Tax Act, 2017 / State Goods and Services Tax Act, 2017 (Levy and Collection of GST on Royalty/Reverse Charge Mechanism).

Link to download the order - https://mytaxexpert.co.in/uploads/1784623085_1809compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content.The material has been prepared with the assistance of AI tools.