Oda-Bassi-Paloda Mines Owners Association vs. State Of Rajasthan Through Principal Secretary TO Government

Held

The Court held that the respondents accepted the proposition that the royalty paid for mining activities is chargeable under the notification dated 28.06.2017, and leaseholders are required to pay GST under the reverse charge mechanism. The respondents clarified that Royalty Contractors are appointed solely for collecting royalty on behalf of the Government, without any supply of natural resources. Since the reverse charge mechanism was not contested by the respondents and 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 letter issued in pursuance of it was also quashed.

Facts

The petitioner, Oda-Bassi-Paloda Mines Owners Association, filed a writ petition challenging a letter dated 08.11.2017 issued by the Finance (Tax) Department, Government of Rajasthan. This letter authorized Royalty Contractors to collect GST at 18% as forward charges on the amount of royalty collected on behalf of the Government. The petitioners are mining leaseholders who are required to pay royalty. The respondents include various departments of the State of Rajasthan and the Union of India. The controversy was stated to be covered by a previous judgment of the same High Court in S.B. Civil Writ Petition No.5354/2018 (Ladu Lal Hiran & Ors. v. State & Ors.).

Key Issues

1. Whether the letter dated 08.11.2017 issued by the Finance (Tax) Department, Government of Rajasthan, authorizing Royalty Contractors to collect GST 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 letter is against Section 9(3) of the CGST Act, 2017 and notification No. 13/2017 Central Tax (Rate) dated 28.06.2017. They also argued that Section 2(105) of the CGST Act, 2017 defines 'Supplier' to include an agent acting on behalf of the supplier, implying a supply of goods or services. Respondent's contention: The Royalty Contractors (ERCC Contractors) are appointed by the Government exclusively for collecting royalty on behalf of the Government from mining leaseholders without any supply of natural resources. Royalty paid for mining activities is chargeable under notification dated 28.06.2017, requiring leaseholders to pay GST under the reverse charge mechanism. The liabilities of leaseholders will not be affected by the amended notification dated 26.07.2018.