Facts of the Case

The petitioner, Shrimati Rasal, a resident of Village Sheelgaon, Tehsil and District Nagaur, Rajasthan, challenged the show cause notice and consequential assessment orders issued by the respondent GST Department, raising a demand of GST on royalty paid by her to the respondent Mining and Geology Department towards a mining lease. The writ petition, originally filed in 2018, came up for final hearing before the Division Bench of the Rajasthan High Court at Jodhpur on 20th December, 2023, along with a connected stay application.

Issues Involved

  1. Whether GST is leviable on royalty paid by a mining lessee to the State Mining Department for grant of a mining lease.
  2. Whether the show cause notice and assessment orders raising such a demand were sustainable.

Petitioner's Arguments

  • The petitioner challenged the show cause notice and assessment orders as an unwarranted levy of GST on royalty paid for a mining lease.
  • Learned counsel for the petitioner, when confronted with the Division Bench's earlier rulings on the identical issue, was not in a position to dispute that the point stood already decided against the petitioner's position.

Respondent's Arguments

  • The respondents relied on the Division Bench's decision in Shree Basant Bhandar Int Udyog vs Union of India & Ors. (D.B. Civil Writ Petition No.5678/2022), which in turn followed the Jaipur Bench's ruling in Sudershan Lal Gupta vs Union of India & Ors. (D.B. Civil Writ Petition No.8109/2022) and a bunch of connected petitions.
  • It was submitted that in Sudershan Lal Gupta's case, the Division Bench had already held that the respondents' action of imposing GST on royalty did not call for interference.
  • The respondents accordingly urged that the present petition, raising an identical challenge, be dismissed in terms of the binding precedent.

Court Order/Findings

  • The Court noted that the issue of demand of GST on royalty paid to the Mining Department towards a mining lease had already been conclusively decided by the same High Court in Sudershan Lal Gupta's case and Shree Basant Bhandar Int Udyog's case.
  • Following binding Division Bench precedent, the Court held that the levy of GST on royalty paid for a mining lease is not liable to be interfered with, and dismissed the writ petition in terms of those earlier orders.
  • The connected stay petition was also dismissed as a consequence.

Important Clarification

  • The Rajasthan High Court has consistently upheld the levy of GST on royalty paid to State Mining/Geology Departments for mining leases, following its own Division Bench rulings in Sudershan Lal Gupta and Shree Basant Bhandar Int Udyog.
  • Lessees challenging GST on mining royalty in Rajasthan on identical grounds are likely to face dismissal unless they can distinguish their facts from these binding precedents or the issue is revisited by a larger bench or the Supreme Court.
  • The correctness of taxing royalty under GST remains the subject of wider litigation at the apex court level; practitioners should track those developments even where a High Court has already ruled against the assessee on this point.

Sections Involved

  • CGST Act, 2017 / Rajasthan GST Act, 2017 — the statutory basis on which royalty paid for mining leases has been treated as consideration for a taxable supply of service (licence to extract minerals) and subjected to GST.

Decision – In Favour of

Decided in favour of the Department. The writ petition challenging the levy of GST on mining royalty was dismissed, following binding precedent that upholds the levy.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Judicature for Rajasthan at Jodhpur
  • Case No.: D.B. Civil Writ Petition No. 12005/2018
  • CNR: Not available on record
  • Coram: Hon'ble Mr. Justice Vijay Bishnoi and Hon'ble Dr. Justice Nupur Bhati
  • Decision Date: 20 December 2023
  • Disposal Nature: Writ petition dismissed — GST on mining royalty upheld following binding precedent

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