Facts of the Case

  • Petitioner: Saroj Dudi, W/o Rakesh Dudi, Aged About 36 Years, Proprietor of M/s Dudi Int Udyog, Bikaner, Rajasthan.
  • Respondents: Union of India (through Secretary Finance Department), The State of Rajasthan (through Secretary Finance Department - Tax Division), and The State of Rajasthan (through Secretary Mining and Land Department).
  • Background: The petitioner filed a writ petition (D.B. Civil Writ Petition No. 12355/2022) under Article 226 of the Constitution of India before the High Court of Judicature for Rajasthan at Jodhpur.
  • Trigger: The petitioner challenged the impugned orders/notices issued by the respondent authorities demanding Goods and Services Tax (GST) on the royalty collected/paid in connection with mining operations.

Issues Involved

  1. Whether the demand/levy of GST on royalty paid for mining rights is legally valid and sustainable.
  2. Whether the Rajasthan High Court (Jodhpur Bench) can take a different view when a Coordinate Division Bench at Jaipur has already repelled a similar challenge regarding GST on royalty.
  3. Whether the decision in Sudarshan Lal Gupta vs. Union of India & Ors. misinterpreted the Supreme Court judgment in State of Assam vs. Barak Upatyaka D.U. Karmachari Sanstha.

Petitioner’s Arguments

  • Counsel for the petitioner (Shri Vijay Kumar Agarwal) vehemently argued that the demand notice/order imposing GST on royalty was liable to be set aside.
  • The counsel contended that the Division Bench of the Rajasthan High Court (Jaipur Bench) in its decision dated 27.09.2022 (D.B. Civil Writ Petition No. 8109/2022 - Sudarshan Lal Gupta vs. Union of India & Ors.) failed to correctly interpret the Supreme Court judgment in State of Assam vs. Barak Upatyaka D.U. Karmachari Sanstha (Civil Appeal No. 6492/2002) decided on 17.03.2009.
  • Thus, the petitioner fervently urged that the current writ petition merits acceptance despite the existing Division Bench precedent.

Respondent’s Arguments

  • The respondents relied upon the settled position established by the Coordinate Division Bench of the High Court of Judicature for Rajasthan at Jaipur.
  • In Sudarshan Lal Gupta vs. Union of India & Ors. (D.B. Civil Writ Petition No. 8109/2022), the Division Bench had already rejected identical challenges raised against the levy and demand of GST on royalty.

Court Order / Findings

  • Judges: Hon'ble Mr. Justice Sandeep Mehta and Hon'ble Mr. Justice Kuldeep Mathur.
  • Date of Order: 29/09/2022.
  • Key Observations & Ruling:
    1. The Division Bench observed that the identical challenge regarding the demand of GST on royalty had already been repelled by the Jaipur Bench of the High Court on 27.09.2022 in Sudarshan Lal Gupta vs. Union of India & Ors.
    2. The Court noted that even if previous similar judgments have been challenged before the Hon’ble Supreme Court, and even though the broader issue of royalty classification is pending before a 9-Judge Constitution Bench in Mineral Area Development Authority etc. & Ors. vs. M/s. Steel Authority of India & Ors. [(2011) 4 SCC 450], a Coordinate Bench of the High Court had already settled the self-same challenge.
    3. Following judicial discipline, the Court held that it was not inclined to take a different view from the Coordinate Division Bench.
  • Outcome: The High Court found no merit in the writ petition and dismissed it accordingly.

Important Clarifications

  • Judicial Discipline & Precedent: The High Court clarified that once a Coordinate Division Bench of the same High Court (Sudarshan Lal Gupta vs. Union of India & Ors.) has already settled and rejected an identical challenge regarding the levy of GST on mining royalty, a bench of equal strength cannot take a conflicting view.
  • Impact of Pending Supreme Court Litigation: The Court clarified that even though the broader constitutional issue regarding royalty classification is pending before a 9-Judge Constitution Bench of the Supreme Court (Mineral Area Development Authority vs. M/s. Steel Authority of India & Ors.), and even though similar High Court judgments are under challenge before the Apex Court, it does not automatically bar the High Court from following its existing Division Bench precedents.
  • Interpretation of Supreme Court Precedents: The Court rejected the petitioner's argument that the previous Division Bench ruling misapplied the Supreme Court ratio in State of Assam vs. Barak Upatyaka D.U. Karmachari Sanstha, reaffirming that the demand for GST on royalty remains legally binding at the High Court level.

Sections Involved

  • Section 9 of the Central Goods and Services Tax Act, 2017 (CGST Act) (Levy and Collection of GST)
  • Section 9 / Section 15 of Rajasthan Goods and Services Tax Act, 2017 (RGST Act) (Scope of Taxability and Valuation)
  • Article 226 of the Constitution of India (Power of High Courts to issue certain writs)

Link to download the order - https://mytaxexpert.co.in/uploads/1784623450_1812compressed.pdf

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