2018 (8) TMI 1995 - HC - GST

High Court Quashes Finance Dept's Letter Allowing Royalty Contractors to Collect GST on Royalty

The High Court quashed a letter issued by the Finance (Tax) Department, Rajasthan Government, empowering Royalty Contractors to collect GST on royalty on ... Power of Royalty Contractors to collect GST - It is contended by Learned Counsel for the respondents that lessee/lease holders will continue to submit and follow the existing procedure for filing of GST Returns, and payment of GST under the reverse charge mechanism is according to the provisions of law - HELD THAT:- Once, the reverse charge mechanism itself has not been contested by the respondents and it is an accepted proposition and the same is further supported by the pleadings filed by the respective respondent parties, we do not find any reason to make any further adjudication in the matter. The present writ petitions are allowed and the letter dated 8-11-2017 issued by the Finance (Tax) Department, Government of Rajasthan is hereby quashed and set aside. Issues:1. Quashing of a letter issued by the Finance (Tax) Department, Rajasthan Government2. Clarification on GST collection on royalty3. Correct method of GST collection on royalty4. Any other suitable order5. Costs of the writ petitionAnalysis:Issue 1: Quashing of the LetterThe petitioners, engaged in mining activities with lawful mining leases, challenged a letter empowering Royalty Contractors to collect GST on royalty on behalf of the Government. The letter was contested as contrary to Section 9(3) of the CGST Act, 2017. The petitioners argued that the Royalty Contractors were appointed exclusively for royalty collection without supplying natural resources. The High Court, considering the submissions, quashed the letter dated 8-11-2017 issued by the Finance (Tax) Department, Government of Rajasthan, along with any related subsequent letters.Issue 2: Clarification on GST CollectionThe petitioners sought a clarification to avoid double burden on miners/lease holders and requested suitable amendments in the law. They demanded the correct position of GST collection on royalty and urged for consequential directions to ensure the accurate method of GST collection. The respondents clarified that lease holders were required to pay GST under the reverse charge mechanism as per the notification dated 28-6-2017. The Court acknowledged the reverse charge mechanism and accepted the submissions of the respondents, thereby not delving further into the matter.Issue 3: Correct Method of GST CollectionThe petitioners highlighted that the Finance Department's letter allowing GST collection by Royalty Contractors was in conflict with the CGST Act provisions. The respondents, however, defended the appointment of Royalty Contractors for royalty collection without supplying natural resources. They emphasized that lease holders must pay GST under the reverse charge mechanism as per the law. The Court, considering the submissions and lack of contestation on the reverse charge mechanism, allowed the writ petitions and quashed the contentious letter dated 8-11-2017.Issue 4: Any Other Suitable OrderApart from seeking the quashing of the letter and clarification on GST collection, the petitioners requested any other suitable order deemed fit by the Court. However, the judgment primarily focused on the quashing of the contentious letter and did not delve into additional orders or reliefs sought by the petitioners.Issue 5: Costs of the Writ PetitionThe petitioners also requested costs of the writ petition to be allowed in their favor. While the judgment did not explicitly mention the decision on costs, it can be inferred that the petitioners were likely granted the costs considering the writ petitions were allowed in their favor.