Court Stays GST Demand on Mining Royalties, Questions Whether Royalty Payments Constitute Tax or Consideration Under UP GST Act

The HC stayed GST demand and royalty payment orders dated 23.06.2021 and 02.07.2021 issued under UP GST Act for FY 2017-18. The petitioner argued that royalty payments for mining activities constitute a tax rather than consideration for goods/services, making them exempt from GST. The Court recognized potential jurisdictional issues in conducting duplicate proceedings for the same tax period and granted interim relief pending full examination of whether mining royalties attract GST liability. The matter was scheduled for further hearing with time allowed for counter and rejoinder affidavits.

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Issues:
Challenge to appeal order dated 02.07.2021 under Section 73 of the U.P. GST Act, 2017 and ex parte order dated 23.06.2021 by State GST authority for the same tax period of Financial Year 2017-18.

Analysis:
The High Court entertained a writ petition challenging the appeal order dated 02.07.2021 and the ex parte order dated 23.06.2021 concerning the same tax period. The petitioner contests the liability of GST on royalty payment for mining activities. Citing a previous interim order and a Supreme Court decision, it argues that royalty payment is akin to a tax and not subject to GST as it is not consideration for goods or services. The petitioner also highlights a similar issue pending before the Supreme Court in another case. The High Court notes the need for a detailed examination of the liability for GST and royalty, along with a potential jurisdictional error in the second proceeding for the same tax period.

The Court grants the State Standing Counsel six weeks to file a counter affidavit and allows the petitioner two weeks thereafter to file a rejoinder affidavit. The case is listed for further hearing on 07.09.2022. Until further orders, the High Court stays the demand for GST and payment of royalty as per the challenged orders and proceedings initiated based on the notice dated 15.03.2021. The Court's decision indicates a willingness to delve into the complex issues of tax liability and jurisdictional errors raised by the petitioner, emphasizing the importance of a thorough legal analysis in resolving the dispute.

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