Hardev Ram Choudhary vs. The State Of Rajasthan

Held

The Court allowed the writ petitions. The primary issue was the validity of the letter dated November 8, 2017, which authorized Royalty Contractors to collect GST as forward charges on royalty. The Court noted that the respondents themselves accepted the principle of reverse charge mechanism for royalty payments, as supported by their pleadings. They clarified that leaseholders are required to pay GST under the reverse charge mechanism, and their existing procedures for filing returns and payment would remain unaffected. Given this stand by the respondents, the Court found no reason for further adjudication. Consequently, the letter dated November 8, 2017, issued by the Finance (Tax) Department, Government of Rajasthan, was quashed and set aside. Any subsequent letters issued in pursuance of this impugned letter were also deemed quashed.

Facts

The petitioners, engaged in mining and holding mining leases, challenged a letter dated November 8, 2017, issued by the Finance (Tax) Department, Rajasthan government. This letter authorized Royalty Contractors (ERCC Contractors), appointed by the government to collect royalty on behalf of the State from mining leaseholders, to collect GST @ 18% as forward charges. The petitioners argued this created a double burden and was contrary to law. The respondents, including the State of Rajasthan and its departments, clarified that royalty payments for mining activities are subject to GST under the reverse charge mechanism, as per notification dated June 28, 2017. They stated that leaseholders are required to pay GST under reverse charge, and their existing procedure for filing returns and payment would not be affected by any amended notification.

Key Issues

1. Whether the letter dated November 8, 2017, issued by the Finance (Tax) Department, Rajasthan government, authorizing Royalty Contractors to collect GST @ 18% as forward charges on royalty collected on behalf of the government, is liable to be quashed and set aside? (Question of law, turning on Section 9(3) of the CGST Act, 2017 and Notification No. 13/2017 Central Tax (Rate) dated 28.06.2017). Petitioner's Contention: The petitioners argued that the impugned letter was against the provisions of Section 9(3) of the CGST Act, 2017, read with Notification No. 13/2017 Central Tax (Rate) dated 28.06.2017. They also referred to Section 2(105) of the CGST Act, 2017, defining 'Supplier', to argue against the contractor collecting GST as forward charges. Respondent's Contention: The respondents clarified that Royalty Contractors are appointed solely for collecting royalty on behalf of the government without any supply of natural resources. They further stated that royalty paid for mining activities is chargeable under the notification dated 28.06.2017, requiring leaseholders to pay GST under the reverse charge mechanism. They asserted that the liabilities of leaseholders would not be affected by any amended notification.