Vinod Kumar Sharam vs. State Of Rajasthan

Held

The Court held that the respondents accepted that the Royalty Contractor (ERCC Contractor) is appointed exclusively for collecting royalty on behalf of the Government from mining leaseholders without the supply of natural resources. The respondents further clarified that royalty paid for mining activities, as chargeable under the notification dated 28.06.2017, requires leaseholders to pay GST under the reverse charge mechanism. Since the respondents did not contest the reverse charge mechanism and it 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 it were also quashed.

Facts

The petitioner, Vinod Kumar Sharam, is a mining lease holder. The State of Rajasthan, through its Finance Department, issued a letter dated 08.11.2017 authorizing Royalty Contractors (ERCC Contractors) to collect GST at 18% as forward charges on the amount of royalty collected on behalf of the Government. The petitioner challenged this letter, arguing it created a double burden and was contrary to GST provisions. The respondents, including the State and Union of India, contended that Royalty Contractors are appointed solely to collect royalty without supplying natural resources. They further clarified that under notification dated 28.06.2017, leaseholders are required to pay GST under the reverse charge mechanism, and this procedure would continue unaffected.

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, is contrary to Section 9(3) of the CGST Act, 2017 and notification No. 13/2017 Central Tax (Rate) dated 28.06.2017? Petitioner's contention: The letter is 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. The definition of 'Supplier' under Section 2(105) of the CGST Act, 2017, which includes an agent acting on behalf of the supplier, was also highlighted. Revenue/State's contention: Royalty Contractors are appointed exclusively for collecting royalty on behalf of the Government without supply of natural resources. The royalty paid for mining activities is chargeable under notification dated 28.06.2017, requiring leaseholders to pay GST under the reverse charge mechanism. This procedure would continue, and the liabilities of leaseholders would not be affected by the amended notification dated 26.07.2018.