Manogaran.C vs. The Commissioner / Additional Chief Secretary
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The petitioner, C. Manogaran, was granted a lease for quarry operations of rough stone for five years by the District Collector on May 26, 2016. Subsequently, the respondents, the Commissioner/Additional Chief Secretary and the State Tax Officer, insisted that the petitioner register under the GST Act, 2017, and pay GST on the seigniorage fee paid to the Geology and Mining department. The petitioner challenged an impugned notice dated August 11, 2022, issued by the second respondent, seeking its quashment. The petitioner argued that the levy of GST on mining lease/royalty is pending before the Supreme Court and has been stayed by the Apex Court in the case of M/S. Lakhwinder Singh Vs. Union of India and others, a decision followed by various High Courts. The respondents contended that the seigniorage charges paid for mineral extraction constitute a supply of service under Section 7 of the SGST Act, 2017, and are taxable under the reverse charge mechanism as per notification number 13/17 Central Tax (rate). They also noted the petitioner's failure to respond to previous notices and hearings.
Held
The Court noted that the Supreme Court, in the case of M/S. Lakhwinder Singh Vs. Union of India and others, had granted a stay on the payment of GST for mining lease/royalty. This stay order has been consistently followed by various courts, including the present High Court. While acknowledging that the impugned order is merely a notice, the Court directed the petitioner to appear before the second respondent within 30 days of receiving a copy of this order and present their objections along with necessary documents. The second respondent is mandated to consider these objections and dispose of the matter in accordance with the law, specifically following the judgment of the Hon'ble Apex Court cited. Until such disposal, the respondents are directed to maintain the status quo. The Court did not expressly leave any issue undecided, but the ultimate decision on the GST levy is contingent on the Supreme Court's final ruling.
Key Issues
1. Whether the impugned notice dated 11.08.2022, issued by the second respondent, is liable to be quashed, considering the pendency of the issue regarding the levy of GST on mining lease/royalty before the Supreme Court and the existence of a stay granted by the Apex Court in M/S. Lakhwinder Singh Vs. Union of India and others. (Question of law) Petitioner's arguments: The petitioner argued that the levy of GST on mining lease/royalty has been challenged before the Supreme Court and other High Courts. They relied on the Apex Court's stay order in M/S. Lakhwinder Singh Vs. Union of India and others, which has been followed by various courts, including this High Court. Therefore, the impugned notice demanding GST on seigniorage fees is improper. Respondents' arguments: The respondents contended that the seigniorage charges paid by the petitioner for quarrying and exploring minerals constitute a supply of service under Section 7 of the SGST Act, 2017, as it is a right granted in return for consideration. They argued that this supply is taxable under the reverse charge mechanism as per notification number 13/17 Central Tax (rate) and Section 9(3) of the GST Act, 2017. They also pointed out that the impugned notice is a preliminary step for assessment under Section 63 of the Act, and the petitioner failed to respond to prior notices and hearings.
Sections Cited
Section 7, Section 9(3), Section 63
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Before: and
This writ petition has been filed to quash the impugned notice issued by the second respondent dated 11.08.2022. 1/7 https://www.mhc.tn.gov.in/judis
Mr.S.Kameswaran, learned Government Advocate takes notice for the respondents. By consent, this writ petition is taken up for final disposal at the admission stage itself. 3.The learned counsel appearing for the petitioner submitted that the petitioner participated in the tender process called by the District Collector under the Tamil Nadu Minor and Mineral Concession Rules for grant of lease for carrying out quarry operations of rough stone for a period of five years for Government Porampoke land in Survey No.198 (Part-II) to an extent of 4.00.0 Hectare situated at Pattur Village, Melur Taluk, Madurai District. The petitioner was declared as successful bidder and lease was granted by the District Collector vide his proceedings in Na.Ka.No.1627/2015 dated 26.05.2016 for a period of five years and transport permits issued by the authorities for collecting the necessary statutory charges and other charges. Now the respondents are insisting and compelling the petitioner to register the quarry operations under the GST Act, 2017 and to pay the GST on the seigniorage fee paid by the petitioner to the Geology and Mining department. He further submitted that the said Act of levying GST has already been challenged before the Honourable Apex Court in W.P(Civil) No.1076 of 2021 2/7 https://www.mhc.tn.gov.in/judis in the case of M/S.Lakhwinder Singh Vs. Union of India and others, dated 04.10.2021 as well as before various other high Courts. The issue with regard to the royalty collected for the transport of minerals has been considered as tax or profit pentra, is pending before the Honourable 9 Judges Constitution Bench of the Honourable Supreme Court. Further, the Honourable Apex Court has granted stay for payment of GST for grant of mining lease/royalty by the petitioner, which has been followed by the various Courts including this Court. This being so, the issuance of the impugned notice is improper. Hence, the present petition has been filed. 4.The learned Government Advocate appearing for the respondents submitted that the petitioner was given right to use this minerals including its extraction and exploration upon payment of certain charges to the Government in the name of Seigniorage charges. It is a kind of royalty that is paid to the Government for removal for consumption of the minerals for the service received. According to Section 7 of the SGST Act, 2017, the petitioner's business would include supply. Hence, the supply of services in terms of permitting to quarrying and exploring of minerals such as sand, gravel and stones etc, for which seigniorage charges collected will be treated as supply, as it is the right given in return of consideration in the form of 3/7 https://www.mhc.tn.gov.in/judis charges collected. According to entry Number 5 of notification number 13/17 Central Tax (rate), dated 28.06.2017, on the services supplied by the Central Government or any other authorities, GST shall be paid by the business entity as a service recipient under reverse charge mechanism under Section 9(3) of the GST Act 2017. Hence, notice has been send and the petitioner had received the notice on 21.04.2022 and he has not filed any reply to the notice and failed to attend personal hearing, which was scheduled on 23.05.2022 and 21.07.2022. Thereafter, to assess the petitioner under Section 63 (assessment of Unregistered Person) of the Act. Thereafter, entry number 12 of the impugned order clearly mentioned that the petitioner has been called for giving his objections within 15 days from the date of receipt of the notice and thereafter, failing which assessment will be made under Best of Judgment under Section 63 of the GST Act, 2017 and penalty and interest will also be levied according to the provisions of the TNGST Act. Hence, it is only a notice. It is for the petitioner to file his objections along with supporting documents and citations referred by the petitioner. Thereafter, the State Tax Officer to consider and pass appropriate orders. 5.Considering the materials and perusal of the materials available on records, it is seen that the Honourable Apex Court in the case of 4/7 https://www.mhc.tn.gov.in/judis M/S.Lakhwinder Singh Vs. Union of India and others, had granted stay for payment of GST for grant of mining lease/royalty by the petitioner. Further, it has been followed consistently by various Courts including this Court. It is further seen that the impugned order is only a notice. The petitioner is directed to appear before the respondents and make his objections with necessary documents. The petitioner is directed to approach the second respondent within a period of 30 days from the date of receipt of a copy of this order and make his objections. Further , the second respondent is directed to consider the petitioner's objections and dispose the same in accordance with law following the judgment of the Hon'ble Apex Court (cited Supra). Till such time, Status quo to be maintained by the respondents. 6.With the above directions, this Writ Petition is disposed of. No costs. Consequently, the connected Writ Miscellaneous Petition is closed.
2022 Index : Yes / No Internet : Yes/ No vsg 5/7 https://www.mhc.tn.gov.in/judis To 1.The Commissioner/Additional Chief Secretary, Commercial Tax Department, Ezhilagam, Chepauk, Chennai. 2.The State Tax Officer, Melur Assessment Circle, Madurai. 6/7 https://www.mhc.tn.gov.in/judis M.NIRMAL KUMAR, J.
vsg and W.M.P.(MD).No.15194 of 2022 02.09.2022 7/7 https://www.mhc.tn.gov.in/judis
Reproduced from the public record of the Madras High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.