Facts of the Case

The petitioners — Special Lime Stone Pvt. Ltd. and, in a connected petition, Amrit Lal Dava and Ghanchi Minerals — challenged show cause notices and assessment orders issued by the GST Department raising demand of GST on royalty paid by them to the Mining and Land Department of the Government of Rajasthan towards their mining leases.

Issues Involved

  1. Whether GST is leviable on royalty paid by a mining lessee to the State Government for grant of mining lease, treated as consideration for a taxable supply of service under reverse charge.

Petitioner's Arguments

  • Learned counsel for the petitioners were unable to dispute that the identical issue — GST demand on royalty paid to the Mining Department for mining lease — had already been decided by the same High Court in Sudershan Lal Gupta v. Union of India (D.B. Civil Writ Petition No. 8109/2022, Jaipur Bench) and Shree Basant Bhandar Int Udyog v. Union of India (D.B. Civil Writ Petition No. 5678/2022).

Respondent's Arguments

  • The learned AAG/Senior Advocate for the State submitted that the issue stood concluded by the Division Bench rulings in Sudershan Lal Gupta and Shree Basant Bhandar Int Udyog, which held that the action of the respondents in imposing GST on royalty was not liable to be interfered with.

Court Order / Findings

  • The Court noted that counsel for the petitioners could not dispute that the question of GST liability on mining royalty stood already decided against similarly placed assessees by two earlier Division Bench decisions of the same Court.
  • Following Sudershan Lal Gupta's case and Shree Basant Bhandar Int Udyog's case, the Court held that the imposition of GST on royalty paid towards mining lease was not liable to be interfered with, and dismissed the writ petitions in terms of those earlier rulings.
  • The connected stay applications were also dismissed.

Important Clarification

As of this ruling, the Rajasthan High Court's settled position (pending final resolution of the larger constitutional question before the nine-judge Constitution Bench of the Supreme Court on whether royalty amounts to "tax") was that GST demand raised on royalty paid by mining lessees to the State Mining Department is valid and enforceable, and assessees challenging such demand on the mining royalty issue alone, without additional distinguishing facts, are unlikely to succeed before that High Court.

Sections Involved

  • Section 9(3), CGST Act, 2017 — provides for reverse charge mechanism, under which GST on services received from government is payable by the recipient/business entity.
  • Notification No. 13/2017-Central Tax (Rate) — notifies services by government/local authority (including mining rights) as taxable under reverse charge.

Decision – In Favour of

In favour of the Department — the writ petitions challenging GST demand on mining royalty were dismissed.

Case Details

  • Court: High Court of Judicature for Rajasthan at Jodhpur
  • Case Number: D.B. Civil Writ Petition No. 1361/2023
  • CNR / Citation: [2023:RJ-JD:26816-DB]
  • Coram: Hon'ble Mr. Justice Vijay Bishnoi & Hon'ble Mr. Justice Yogendra Kumar Purohit
  • Date of Order: 23 August 2023

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