Ramakrishnan vs. The Commissioner / Additional Chief Secretary
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The petitioner, Ramakrishnan, was granted a lease for quarry operations of rough stone for five years by the District Collector on 08.08.2018. Transport permits were issued for collecting statutory charges. 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 received a notice dated 11.08.2022 from the second respondent. The petitioner contends that the levy of GST on mining lease/royalty is already challenged before the Supreme Court and other High Courts, with a stay granted by the Apex Court. The respondents argue that seigniorage charges are consideration for the supply of services (permission to quarry) and are taxable under Section 7 of the SGST Act, 2017, under reverse charge mechanism as per notification 13/17 Central Tax (rate). They also noted the petitioner's failure to reply to a prior notice and attend hearings.
Held
The Court noted 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, a position consistently followed by various courts, including this Court. While acknowledging that the impugned order was merely a notice, the Court directed the petitioner to appear before the respondents within 30 days of receiving a copy of the order and submit their objections with necessary documents. The second respondent was directed to consider these objections and pass appropriate orders in accordance with the law, adhering to the Supreme Court's judgment. Until such disposal, the respondents were directed to maintain the status quo. The Court did not decide on the substantive issue of GST applicability on seigniorage fees but rather provided a procedural path for the petitioner to present their case in light of the existing Supreme Court stay.
Key Issues
1. Whether the seigniorage fee paid by the petitioner for quarry operations constitutes a taxable supply of services under Section 7 of the SGST Act, 2017, attracting GST. 2. Whether the impugned notice dated 11.08.2022 issued by the State Tax Officer is liable to be quashed in light of the pending challenge and stay order from the Supreme Court regarding GST on mining lease/royalty. Petitioner's arguments: The petitioner argued that the levy of GST on mining lease/royalty has been challenged before the Supreme Court in M/S.Lakhwinder Singh Vs. Union of India and others (W.P(Civil) No.1076 of 2021) and other High Courts. The Supreme Court has granted a stay on the payment of GST for mining lease/royalty, which has been followed by various courts, including this Court. Therefore, the impugned notice is improper. Respondents' arguments: The respondents contended that the petitioner's right to use minerals, including extraction, upon payment of seigniorage charges, constitutes a supply of services under Section 7 of the SGST Act, 2017. They cited notification number 13/17 Central Tax (rate) for reverse charge mechanism applicability. They also pointed out that the impugned notice is a procedural step to assess an unregistered person under Section 63 of the GST Act, 2017, and the petitioner had failed to respond to previous notices and attend 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. 2.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.207 (Part-II) to an extent of 1.50 Hectare situated at Thiruchunai Village, Madurai District. The petitioner was declared as successful bidder and lease was granted by the District Collector vide his proceedings in Na.Ka.No.72/2018 dated 08.08.2018 for a 1/3 https://www.mhc.tn.gov.in/judis 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 in the case of M/S.Lakhwinder 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 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. 2/3 https://www.mhc.tn.gov.in/judis
Considering the materials and perusal of the materials available on records, it is seen that the Honourable Apex Court in the case of 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. Assistant Registrar (CS-II) //// /09/2022 Sub Assistant Registrar(CS) vsg To 1.The Commissioner/Additional Chief Secretary, Commercial Tax Department, Ezhilagam, Chepauk, Chennai. 2.The State Tax Officer, Melur Assessment Circle, Madurai. +1 CC to M/s.SPL.GP ( SR-43425[F] dated 06/09/2022 )
and W.M.P.(MD).No.15190 of 2022 02.09.2022 PKP/24.09.2022/3P/4C 3/3 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.