Facts of the Case

Several writ petitions were filed before the Rajasthan High Court challenging the levy of GST on mining royalty paid to the State Government. The petitioners, comprising mining contractors, lease holders and mining entities, contended that royalty paid for extraction of minerals cannot be treated as consideration for supply of services under the GST law. They also challenged the validity of various statutory provisions, notifications, circulars, demand notices and proceedings initiated for recovery of GST on royalty. Certain petitioners additionally questioned the levy of GST on contributions made towards the District Mineral Foundation Trust (DMFT) and Rajasthan State Mineral Exploration Trust (RSMET) and sought classification of royalty under a lower GST rate.

Issues Involved

  1. Whether GST is leviable on mining royalty paid to the State Government.
  2. Whether grant of mining rights constitutes a supply of services under the GST law.
  3. Whether Sections 9, 15, 50, 73 and 74 of the CGST/RGST Acts are unconstitutional to the extent they levy GST, interest and penalty on mining royalty.
  4. Whether Circular No. 164/20/2021-GST and related notifications are legally valid.
  5. Whether GST is leviable on contributions made to DMFT and RSMET.
  6. Whether interim orders passed in similar matters could prevail over earlier final judgments of coordinate benches.

Petitioners' Arguments

  • Mining royalty is not consideration for any taxable supply under the GST regime.
  • Grant of mineral exploration and mining rights does not amount to supply of services.
  • Circular No. 164/20/2021-GST wrongly presumes taxability of mining rights.
  • Levy of GST under reverse charge mechanism on royalty is unconstitutional.
  • Interest and penalty provisions cannot survive when the principal levy itself is challenged.
  • GST should not be levied on DMFT and RSMET contributions.
  • Earlier judgments are under challenge before the Supreme Court, where interim protection has been granted in certain matters, and therefore similar interim relief should be granted in the present cases.

Respondents' Arguments

  • The issue of levy of GST on mining royalty has already been conclusively decided by various coordinate benches of the Rajasthan High Court.
  • Earlier judgments including Udaipur Chambers of Commerce and Industry, Mateshwari Minerals, Shivalik Silica and Rajasthan Small Mines Lease Holders Association have upheld the levy.
  • Mere pendency of Special Leave Petitions before the Supreme Court does not nullify binding judgments of the High Court.
  • Interim orders granted in certain cases do not constitute binding precedents and cannot override final judicial decisions.

Court Order / Findings

The Rajasthan High Court held that the controversy regarding levy of GST on mining royalty had already been settled through several earlier decisions of coordinate benches. Since those judgments remained binding and had not been set aside by the Supreme Court, the Court was bound to follow them.

The Court further held that interim orders granted in other pending matters cannot override final judgments and cannot be treated as precedents. Accordingly, the writ petitions challenging the levy of GST on mining royalty were dismissed.

However, in the connected petition relating to additional issues concerning DMFT and RSMET contributions, only the challenge relating to GST on mining royalty stood rejected, while the remaining independent reliefs were directed to continue for adjudication.

Important Clarification

  • Final judgments of coordinate benches are binding upon subsequent benches until reversed or modified by a higher court.
  • Interim orders are temporary in nature and do not create binding precedents.
  • Mere pendency of SLPs before the Supreme Court does not dilute the precedential value of existing High Court judgments.
  • The Supreme Court had not finally decided the issue of GST on mining royalty at the time of this judgment.
  • The Court noted that the larger question regarding the nature of royalty had been referred to a larger Bench of the Supreme Court in Mineral Area Development Authority vs Steel Authority of India & Others.

Related Case Laws

  • Udaipur Chambers of Commerce and Industry vs Union of India & Another
  • M/s Mateshwari Minerals & Another vs Union of India & Another
  • M/s Shivalik Silica vs Union of India & Others
  • Rajasthan Small Mines (Cheja Patthar) Lease Holders Association vs State of Rajasthan & Others
  • Shree Basant Bhandar INT Udyog vs Union of India & Others
  • State of Assam vs Barak Upatyaka D.U. Karmachari Sanstha (2009) 5 SCC 694
  • Mineral Area Development Authority & Others vs Steel Authority of India & Others (2011) 4 SCC 450

Sections Involved

  • Sections 9, 15, 50, 73 & 74 of the Central Goods and Services Tax Act, 2017
  • Corresponding provisions of the Rajasthan Goods and Services Tax Act, 2017
  • Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017
  • Rajasthan Notification No. F.12(56)FD/Tax/2017-Pt.-I-51
  • Circular No. 164/20/2021-GST dated 06.10.2021
  • Circular No. 192/02/2016-Service Tax dated 13.04.2016

Link to Download the Order-https://www.mytaxexpert.co.in/uploads/1784805574_1916.pdf

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