Prakash.N vs. The Commissioner / Additional Chief Secretary

Held

The Court acknowledged that the issue of GST levy on mining lease/royalty is pending before the Apex Court in M/s Lakhwinder Singh Vs. Union of India, where a stay has been granted. The Court also noted that the impugned proceeding was 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 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 writ petition was disposed of with these directions.

Facts

The petitioner, N. Prakash, operates a quarry under a license obtained from the District Collector. The petitioner was directed by the respondents to register its quarry operations under the GST Act, 2017, and to 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 argues that demanding tax on minerals quarried and disposed of is impermissible, citing previous Supreme Court judgments. The impugned action is a notice dated 21.09.2022 issued by the 2nd respondent, the State Tax Officer. The petitioner filed a writ petition challenging this notice.

Key Issues

1. Whether the levy of GST on Seigniorage Fee paid for quarrying minor minerals is legally sustainable, considering that Seigniorage Fee is itself a tax? (Question of law, turning on the nature of Seigniorage Fee and its taxability under GST). 2. Whether the demand for tax on quarried and disposed minerals is permissible, in light of previous Supreme Court pronouncements on the levy of tax/sales tax on minerals? (Question of law, turning on the interpretation of Supreme Court judgments). Petitioner's arguments: The petitioner argued that Seigniorage Fee is a tax, and therefore, levying GST on it is unsustainable. They relied on the pendency of a similar issue before the Apex Court in M/s Lakhwinder Singh Vs Union of India, where a stay of payment of GST for mining lease/royalty had been granted. They also cited the Supreme Court 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 further referred to the Supreme Court's consideration of the true 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, represented by the Government Advocate, argued that the impugned action was merely a notice, making the writ petition premature and liable for dismissal.