The Himachal Pradesh High Court in the case M/s. Lakhwinder Singh Stone Crusher v. Union of India & ors. observed and has dismissed a writ petition challenging notifications issued by the Central government for levy of GST on Royalty paid by a Mineral Concession Holder for mining concession granted by the State.
In the present case, the petitioner is a firm who is being engaged in stone crushing, was issued notices and summons under Section 70 of Central Goods and Services Tax Act, demanding GST on royalty.
However, the petitioner’s challenge in the year 2023 was based on a seven-judge Bench decision of the Supreme Court in the case India Cement Ltd. and ors. vs. State of Tamil Nadu and ors., wherein the court declared that royalty itself is a tax.
The petitioner in the plea argued before the court that any demand for GST on royalty by the respondents would prima-facie amount to levying a tax on tax, which should be beyond the legislative.
The Division bench comprising of Acting Chief Justice Tarlok Sngh Chauhan and Justice Satyen Vaidya was hearing the present matter.
The bench in the case observed that India Cement India (Supra) was overruled by a nine-Judged Bench of the Supreme Court in the case Mineral Area Development Authority & anr vs M/s. Steel Authority of India & anr.
The Supreme Court in the case of Mineral Area Development (supra) held that States have the power to levy tax on mineral rights.
Further, it was held that Royalty is not within the nature of a tax as it is contractual consideration paid by the lessee to the lessor under the mining lease. The Supreme Court in the case stated that there being no specific provision in the Mines and Minerals (Development and Regulation) Act 1957 imposing limitations on the taxing powers of the State. Thus, the royalty under Section 9 of the MMDR Act is not in the nature of a tax. Section 9 MMDR Act does not impose any limitation on the power of States of tax mineral and the limitation imposed by Section 9 on royalties do not amount to limitations on the State’s powers. The High Court in the case held that the respondents are well within their rights to levy GST on the royalty paid by the mineral concession holder for any mining concession granted by the state.
Accordingly, the High Court dismissed the petition. The counsel, Advocate Arvind Sharma for Petitioner; Dy SGI Balram Sharma with Advocate Rajeev Sharma for Respondents No. 1,3 and 4;
The cousel, AG Anup Ratan with Addl. AGs Rakesh Dhaulta, Pranay Pratap Singh and Sushant Kaprate, Dy AGs Arsh Rattan and Priyanka Chauhan for Respondent No.2.
Source: The Business Guardian
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