2024 (2) TMI 427 - HC - GST

Sand Mining Royalty Dispute: Challenging GST Classification and Tax Implications Under Existing Legal Precedents

HC examined whether royalty payment for sand mining constitutes GST or tax. Petitioner argued royalty is tax, referencing SC precedent in India Cement ... Royalty as tax - consideration - goods and services tax - stay of payment of GST - mining lease/royalty - correction of party array - correction of court recordRoyalty as tax - consideration - goods and services tax - mining lease/royalty - stay of payment of GST - Interim relief staying payment of GST claimed to be leviable on royalty/grant of mining lease - HELD THAT: - The court recorded the petitioner's contention that royalty paid for the privilege granted by the State to mine sand is in the nature of a tax and not consideration for supply of goods or services, and noted reliance on the Constitution Bench decision in India Cement Ltd. v. State of Tamil Nadu. The court also observed that an identical controversy is pending before the Supreme Court in Writ Petition (Civil) No. 1076 of 2021 and that the Supreme Court has earlier stayed GST payment in related proceedings. In view of these circumstances and the pendency of the larger issue before the apex court, the High Court granted interlocutory relief restraining the respondents from demanding or recovering GST payable by the petitioner in respect of grant of mining lease/royalty until further orders.Payment of GST in respect of grant of mining lease/royalty by the petitioner shall remain stayed until further orders.Correction of party array - correction of court record - Amendment of petition to delete petitioner no.1 and correction of party numbering and court record - HELD THAT: - The court granted the petitioner leave to delete the name of petitioner no.1 from the array of parties and permitted correction of the numbering of parties during the day, with liberty to file a fresh petition on behalf of members of the Society. The office was directed to correct petitioner details in the computer record. Appearance of counsel for respondent no.3 on filing of power was accepted and to be shown in the cause list when next listed.Deletion and correction of parties and corresponding correction in court records permitted; power filed for respondent no.3 accepted.Final Conclusion: The petition was permitted to amend the array of parties and court records as directed, and an interim stay was granted restraining recovery or payment of GST claimed on grant of mining lease/royalty by the petitioner until further orders. Issues involved:The judgment addresses the issue of whether royalty payment for mining sand is subject to Goods and Services Tax (GST) or if it should be considered as tax instead of consideration for the privilege granted by the State.Royalty Payment as Tax:The petitioner argued that the royalty payment should be classified as tax and not consideration for the privilege of mining sand. Citing a Supreme Court decision in India Cement Ltd. and Others vs. State of Tamil Nadu, it was contended that royalty payment is akin to tax. The petitioner also highlighted a similar ongoing matter in the Supreme Court, M/s Lakhwinder Singh vs. Union of India & Ors., where the payment of GST for grant of mining lease/royalty was stayed. The High Court directed the office to update the petitioner's details accordingly and listed the case for further hearing in two months.Conclusion:The High Court granted the petitioner leave to amend the parties involved and correct the details in the records. The court considered the argument that royalty payment for mining sand should be treated as tax rather than consideration for GST purposes, drawing parallels to relevant legal precedents and an ongoing Supreme Court case. The payment of GST for grant of mining lease/royalty was ordered to remain stayed until further notice.