Landmark Ruling: GST Authority's Ex Parte Order Challenged, Mining Royalty Dispute Halted with Jurisdictional Concerns Raised

The HC allowed the writ petition challenging GST authority's ex parte order for mining royalty. The court stayed further proceedings, noting jurisdictional concerns and potential GST liability issues. No coercive action was permitted against the petitioner, with Standing Counsel directed to file a counter affidavit and the petitioner granted opportunity to file a rejoinder.

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Issues involved: Challenge to First Appeal Order u/s 73 of U.P. GST Act, 2017 and ex parte order by State GST authority for same tax period; Liability of GST on royalty payment for mining activity; Jurisdictional error in second proceeding for same tax period.

First Issue - Challenge to First Appeal Order and Ex Parte Order: The petitioner filed a writ petition challenging the First Appeal Order dated 02.07.2021 u/s 73 of the U.P. GST Act, 2017 and the ex parte order dated 23.06.2021 by the State GST authority for the tax period of Financial Year 2017-18. The Tribunal had not been constituted, so the writ petition was entertained. The petitioner argued that no liability of GST may arise on payment of royalty for mining activity, citing relevant case laws and orders. The Supreme Court had stayed GST payment for grant of mining lease/royalty in a related case. The matter required consideration on the issue of GST liability and royalty payment, as well as jurisdictional error in the second proceeding for the same tax period.

Second Issue - Liability of GST on Royalty Payment: The petitioner contended that the royalty payment for mining activity should not attract GST as it is not consideration for sale of goods or services provided. Reference was made to a Division Bench decision and a Constitution Bench decision of the Supreme Court which considered royalty payment as akin to tax. The petitioner sought benefit from similar orders in other cases with comparable issues.

Third Issue - Jurisdictional Error in Second Proceeding: The petitioner raised concerns about jurisdictional error in the second proceeding for the same tax period. The matter was listed for further consideration, with the Standing Counsel granted time to file a counter affidavit and the petitioner given the opportunity to file a rejoinder affidavit. No coercive action was to be taken against the petitioner pending further orders.

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