Chinnaraja.M 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 mining lease/royalty. The Court also noted that the impugned proceeding was merely a notice. Consequently, the Court directed the petitioner to submit 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 directed 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. No specific issue was left undecided, as the matter was remanded for consideration of objections.

Facts

The petitioner, M. Chinnaraja, operates a quarry under a license obtained from the District Collector in 2019. The petitioner was compelled 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, making the levy of GST unsustainable. The impugned action is a notice dated 09.09.2022 issued by the 2nd respondent, the State Tax Officer. The petitioner argues that the issue of levying GST on Seigniorage Fee is pending before the Supreme Court in W.P.(Civil).No.1076 of 2021, where a stay has been granted. The petitioner also relies on Supreme Court judgments concerning the levy of tax on minerals. The respondents argued that the writ petition is premature as the impugned action is merely a notice.

Key Issues

1. Whether the levy of GST on Seigniorage Fee paid for quarry operations is legally sustainable, considering that Seigniorage Fee is itself a tax? (Question of law, turning on the interpretation of GST provisions and the nature of Seigniorage Fee). Petitioner's contention: The levy is unsustainable as Seigniorage Fee is a tax. Reliance is placed on the pending Supreme Court case of M/s Lakhwinder Singh Vs Union of India, which has granted a stay on payment of GST for mining lease/royalty, and the judgment in India Cement Ltd. Vs State of Tamil Nadu, which held that levy and collection of tax/sales tax on minerals is not permissible. The petitioner also refers to the Supreme Court's consideration of referring the nature of royalty/dead rent to a larger bench in Mineral Area Development Authority etc., Vs. M/s.Steel Authority of India & others. Revenue's contention: The writ petition is premature as the impugned action is only a notice and should be dismissed.