Sanjay Singh Kaswan vs. State Of Rajasthan

Held

The Court allowed the writ petition. The primary issue revolved around the validity of the letter dated 8/11/2017, which authorized Royalty Contractors to collect GST as forward charges on royalty. The Court noted that the respondents (State) had taken a stand that Royalty Contractors are appointed solely for collecting royalty on behalf of the Government without any supply of natural resources. Crucially, the respondents also clarified that leaseholders are required to pay GST under the reverse charge mechanism as per the notification dated 28.06.2017. Since the respondents accepted the reverse charge mechanism and did not contest it, and this position was supported by their pleadings, the Court found no reason for further adjudication. Consequently, the letter dated 08.11.2017 issued by the Finance (Tax) Department, Government of Rajasthan, was quashed and set aside. Any subsequent letters issued in pursuance of this letter were also quashed.

Facts

The petitioner, Sanjay Singh Kaswan, filed a writ petition before the Rajasthan High Court challenging a letter dated 8/11/2017 issued by the Finance (Tax) Department, Government of Rajasthan. This letter authorized Royalty Contractors (ERCC Contractors) to collect GST at 18% as forward charges on the amount of royalty collected on behalf of the Government. The petitioners, who are mining leaseholders, argued that this led to a double burden. The State, through its counsel, clarified that Royalty Contractors are appointed solely for collecting royalty on behalf of the Government from mining leaseholders without any supply of natural resources. The State further contended that leaseholders are required to pay GST under the reverse charge mechanism as per notification dated 28.06.2017, and this procedure would not be affected by any amended notification.

Key Issues

1. Whether the letter dated 8/11/2017 issued by the Finance (Tax) Department, Government of Rajasthan, authorizing Royalty Contractors to collect GST @ 18% as forward charges on royalty collected on behalf of the Government, is contrary to the provisions of Section 9(3) of the CGST Act, 2017 read with notification No. 13/2017 Central Tax (Rate) dated 28.06.2017? Petitioner's contention: The petitioners argued that the said letter was against Section 9(3) of the CGST Act, 2017 and notification No. 13/2017 Central Tax (Rate) dated 28.06.2017. They also relied on the definition of 'Supplier' under Section 2(105) of the CGST Act, 2017, suggesting that an agent acting on behalf of a supplier is also considered a supplier. Revenue's contention: The respondents (State) clarified that Royalty Contractors are appointed exclusively for collecting royalty on behalf of the Government from mining leaseholders without any supply of natural resources. They further submitted that leaseholders are required to pay GST under the reverse charge mechanism as per the notification dated 28.06.2017, and their existing procedure for filing GST returns and payment under reverse charge would not be affected.