M/S. Calcium Minerals vs. State Of Rajasthan

Held

The Court allowed the writ petitions. The primary issue revolved around the legality of collecting GST on royalty as a forward charge by Royalty Contractors, as authorized by the impugned letter. The petitioners argued this was contrary to Section 9(3) of the CGST Act and relevant notifications. The respondents clarified that GST on royalty is to be paid by the leaseholders under the reverse charge mechanism, as per the notification dated June 28, 2017. Since the respondents accepted that the reverse charge mechanism is the correct method and that the leaseholders' liabilities remain unaffected, the Court found no reason for further adjudication. Consequently, the letter dated November 8, 2017, and any subsequent letters issued in pursuance thereof, were quashed and set aside.

Facts

The petitioners, who are mining lease holders and engaged in mining activities, challenged a letter dated November 8, 2017, issued by the Finance (Tax) Department, Rajasthan government. This letter authorized Royalty Contractors (ERCC Contractors) to collect GST at 18% as forward charges on the royalty collected on behalf of the government. The petitioners argued that this collection method was contrary to law. The respondents, including the State of Rajasthan and its departments, clarified that royalty for mining activities is chargeable under a notification dated June 28, 2017, requiring leaseholders to pay GST under the reverse charge mechanism. They further stated that the liabilities of the leaseholders 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 at 18% as forward charges on royalty, is contrary to the provisions of Section 9(3) of the CGST Act, 2017, read with notification No. 13/2017 Central Tax (Rate) dated June 28, 2017? The petitioners contended that the letter was illegal and imposed a double burden. They argued that the definition of 'Supplier' under Section 2(105) of the CGST Act, 2017, did not support the forward charge collection by the contractor. The respondents, however, clarified that leaseholders are required to pay GST under the reverse charge mechanism as per the notification dated June 28, 2017, and their liabilities would not be affected.