M/S Bhawya Enterprises vs. Union Of INDIA And Others

Held

The Court held that the Supreme Court's judgment in India Cement Ltd. and ors. vs. State of Tamil Nadu and ors. (1990) 1 SCC 12, which declared royalty as a tax, has been overruled by a Nine-Judge Bench of the Supreme Court in Mineral Area Development Authority & anr. vs. M/s Steel Authority of India & anr., 2024 INSC 554. The latter judgment clarified that royalty is not a tax. Consequently, the respondents are within their rights to levy GST on royalty paid by mineral concession holders for mining concessions granted by the State. The Court upheld the impugned notices dated 15.02.2024 and summon dated 15.03.2024. The petition was dismissed, and parties were left to bear their own costs. No issue was expressly left undecided.

Facts

The petitioner, M/s Bhawya Enterprises, filed a writ petition challenging several notifications issued by the Central and Himachal Pradesh governments concerning the levy of Goods and Services Tax (GST) on royalty paid by mineral concession holders. The petitioner sought to quash these notifications and refund any GST collected on royalty. The petition was initially based on the Supreme Court's judgment in India Cement Ltd. vs. State of Tamil Nadu, which held royalty to be a tax. This led to a stay on the demand for GST on royalty by a Division Bench of the High Court. The respondents are the Union of India and the State of Himachal Pradesh.

Key Issues

1. Whether GST can be levied on royalty paid by a mineral concession holder for mining concessions granted by the State, in light of the Supreme Court's decision in India Cement Ltd. vs. State of Tamil Nadu (1990) 1 SCC 12, which declared royalty as a tax? Petitioner's Contention: The petitioner argued that royalty is a tax, as per the precedent set in India Cement Ltd. vs. State of Tamil Nadu. Therefore, GST, being a tax, cannot be levied on royalty, which is itself a form of tax. The petitioner relied on this Supreme Court judgment to challenge the impugned notifications and subsequent demand notices. Respondents' Contention: The respondents contended that the Supreme Court's judgment in India Cement Ltd. has been overruled. They asserted their right to levy GST on royalty paid by mineral concession holders, as royalty is not a tax.