Govindasamy.N vs. The Commissioner / Additional Chief Secretary

Held

The Court acknowledged that the Supreme Court in M/S.Lakhwinder Singh Vs. Union of India and others had granted a stay on the payment of GST for the grant of mining lease/royalty. The Court also noted that the impugned proceeding was merely a notice. Consequently, the Court directed the petitioner to submit their objections to the notice within 30 days of receiving a copy of the order. The petitioner was permitted to rely on the judgment in M/S.Lakhwinder Singh Vs. Union of India and others, and any other relevant judgments. The 2nd Respondent was instructed to consider these objections and pass appropriate orders. Until the disposal of the objections, the Respondents were restrained from initiating recovery proceedings. The Court explicitly stated that it had not expressed any views on the merits of the case and that the Respondents were free to consider the issues raised on their own merits. The Court did not express any opinion on the merits of the petitioner's contentions regarding the sustainability of GST on Seigniorage Fee or the permissibility of tax on minerals.

Facts

The petitioner, N. Govindasamy, operates a quarry under a license obtained in 2016. The petitioner was directed by the respondents to register under the GST Act, 2017, and pay GST on the Seigniorage Fee paid to the Geology and Mining Department. The petitioner contends that Seigniorage Fee is itself a tax on quarried minerals, making the levy of GST unsustainable. The petitioner also highlighted that the legality of levying GST on Seigniorage Fee is pending before the Supreme Court in M/s Lakhwinder Singh Vs Union of India, where a stay of payment of GST for mining lease/royalty had been granted. The petitioner further argued that tax on minerals is impermissible as per the Supreme Court's decision in India Cement Ltd. and others Vs State of Tamil Nadu and others, and that the nature of royalty/dead rent on minerals is being considered by a larger bench in Mineral Area Development Authority etc., Vs. M/s.Steel Authority of India & others. The impugned action under challenge is a notice dated 01.09.2022 issued by the Proper Officer, Assistant Commissioner (ST), Theni – 1 Assistant Circle.

Key Issues

1. Whether the levy of GST on Seigniorage Fee paid for quarried minor minerals is sustainable, considering that Seigniorage Fee is itself a tax on such minerals? (Question of law) 2. Whether the demand for GST on quarried and disposed minerals is permissible, in light of Supreme Court judgments regarding the levy of tax on minerals? (Question of law) Petitioner's Arguments: The petitioner argued that Seigniorage Fee is a tax, and therefore, levying GST on it is unsustainable. They relied on the Supreme Court's stay in M/s Lakhwinder Singh Vs Union of India regarding GST on mining lease/royalty, and the Supreme Court's judgment in India Cement Ltd. and others Vs State of Tamil Nadu and others, which held that levy and collection of tax/sales tax on minerals is not permissible. The petitioner also referred to the ongoing consideration by a larger bench of the Supreme Court on the nature of royalty/dead rent payable on minerals in Mineral Area Development Authority etc., Vs. M/s.Steel Authority of India & others. Respondents' Arguments: The respondents, through the Additional Government Pleader, argued that the writ petition is premature as the impugned action is only a notice and thus liable to be dismissed.