Facts of the Case

The petitioner, C. Manogaran, was granted a quarry lease by the District Collector for rough stone quarrying over 4.00.0 hectares of government poramboke land at Pattur Village, Melur Taluk, for five years, following a successful tender under the Tamil Nadu Minor Mineral Concession Rules. The State Tax Officer, Melur, issued a notice dated 11.08.2022 insisting the petitioner register under GST and pay GST on the seigniorage fee paid to the Geology and Mining Department, treating it as reverse-charge consideration for a "supply" under Section 7 of the SGST Act read with Notification No. 13/2017-Central Tax (Rate). The petitioner did not respond to the notice and did not attend the personal hearings scheduled on 23.05.2022 and 21.07.2022, following which assessment proceedings under Section 63 (assessment of unregistered persons) were set in motion.

Issues Involved

  1. Whether the impugned notice demanding GST registration and payment on seigniorage fee could proceed while the underlying question of GST/tax liability on mining royalty was pending stay before the Supreme Court and before a nine-judge Constitution Bench.

Petitioner's Arguments

  • The levy of GST on seigniorage fee/royalty for mineral extraction had already been challenged before the Supreme Court in Lakhwinder Singh v. Union of India (W.P.(Civil) No. 1076 of 2021), where the Apex Court stayed payment of GST on mining lease/royalty, and the broader question of whether royalty amounts to tax was pending before a nine-judge Constitution Bench.
  • Various High Courts, including this Court, had followed the Supreme Court's stay, making issuance of the impugned notice improper at this stage.

Respondent's Arguments

  • Seigniorage charges paid for the right to extract minerals constitute "supply" under Section 7 of the SGST Act, taxable under reverse charge per Notification No. 13/2017-Central Tax (Rate), and the notice was merely a first step calling for objections; despite service, the petitioner neither replied nor attended two scheduled personal hearings, leading to proposed Best-of-Judgment assessment under Section 63.

Court Order / Findings

  • The Court noted that the Supreme Court in Lakhwinder Singh had granted a stay on payment of GST for grant of mining lease/royalty, a position consistently followed by various High Courts including this Court, and that the impugned communication was, at this stage, only a notice.
  • The Court directed the petitioner to appear before the second respondent within 30 days with objections and supporting documents, and directed the respondent to dispose of the objections in accordance with law and consistently with the Supreme Court's ruling in Lakhwinder Singh, while status quo was to be maintained by the respondents in the meantime.
  • The writ petition was disposed of on these directions, with no costs.

Important Clarification

Pending the Supreme Court's final resolution (before a nine-judge Constitution Bench) of whether royalty/seigniorage fee on mineral extraction constitutes "tax" and is exigible to GST under reverse charge, tax authorities may continue to issue notices and call for objections, but coercive assessment action should await the outcome and remain consistent with any interim protection granted by the Supreme Court, such as in Lakhwinder Singh v. Union of India.

Sections Involved

  • Section 63, CGST Act, 2017 — permits Best-of-Judgment assessment of unregistered persons liable to be registered.
  • Section 7, SGST Act, 2017 — defines "supply," relied on to treat mining rights as a taxable supply.
  • Notification No. 13/2017-Central Tax (Rate) — places services by government (including mining rights) under reverse charge on the business recipient.

Decision – In Favour of

Disposed of with directions, in part in favour of the Assessee — the notice was not quashed, but the assessee was given a fresh opportunity to object with status quo maintained, pending consistency with the Supreme Court's stay in Lakhwinder Singh.

Case Details

  • Court: Madurai Bench of Madras High Court
  • Case Number: W.P.(MD).No.20948 of 2022
  • CNR / Citation: W.P.(MD).No.20948 of 2022
  • Coram: Hon'ble Mr. Justice M. Nirmal Kumar
  • Date of Order: 2 September 2022

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