TaxTMI 
TaxTMI 
2024 (4) TMI 1257
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....4, Civil Writ Jurisdiction Case No. 6389 of 2024. - -<br>GST<br>HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD And HONOURABLE MR. JUSTICE SOURENDRA PANDEY Appearance : (In Civil Writ Jurisdiction Case No. 3531 of 2022) For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate Mr. Suraj Samdarshi, Advocate Mr. Avinash Shekhar, Advocate Mr. Vijay Shanker Tiwari, Advocate Ms. Abhilasha Jha, Advocate Ms. Simran Kumari, Advocate For the UOI : Dr. Krishna Nandan Singh, Sr. Advocate Mr. Anshuman Singh, Sr. SC (CGST & CX), Mr. Shivaditya Dhari Sinha, Advocate (In Civil Writ Jurisdiction Case No. 16361 of 2022) For the Petitioner/s: Mr. Sujit Ghosh, Sr. Advocate Mr. Suraj Samdarshi, Advocate Mr. Avinash Shekhar, Advocate Mr. Vijay Shanker Tiwari, Advocate Ms. Abhilasha Jha, Advocate Ms. Simran Kumari, Advocate For the Respondent/s: Mr.Vikash Kumar (SC-11) (In Civil Writ Jurisdiction Case No. 17070 of 2022) For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate Mr. Suraj Samdarshi, Advocate Mr. Avinash Shekhar, Advocate Mr. Vijay Shanker Tiwari, Advocate Ms. Abhilasha Jha, Advocate Ms. Simran Kumari, Advocate For the Respondent/s : Mr. Vikash Kumar (SC-11) (In Civil Wr....
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.... (GP 7) Ms. Roona, AC to GP-7 (In Civil Writ Jurisdiction Case No. 17700 of 2023) For the Petitioner/s : Mr.Gautam Kumar Kejriwal, Advocate For the Respondent/s : Mr. Standing Counsel (11) (In Civil Writ Jurisdiction Case No. 18206 of 2023) For the Petitioner/s : Mr. Gautam Kumar Kejriwal, Advocate For the Respondent/s : Mr. Standing Counsel (11) (In Civil Writ Jurisdiction Case No. 2730 of 2024) For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate Mr. Suraj Samdarshi, Advocate Mr. Avinash Shekhar, Advocate Mr. Vijay Shanker Tiwari, Advocate Ms. Abhilasha Jha, Advocate Ms. Simran Kumari, Advocate. For the Respondent/s : Mr. Standing Counsel (11). (In Civil Writ Jurisdiction Case No. 4297 of 2024) For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate Mr. Suraj Samdarshi, Advocate Mr. Avinash Shekhar, Advocate Mr. Vijay Shanker Tiwari, Advocate Ms. Abhilasha Jha, Advocate Ms. Simran Kumari, Advocate. For the Respondent/s : Mr. Standing Counsel 11. (In Civil Writ Jurisdiction Case No. 4562 of 2024) For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate Mr. Suraj Samdarshi, Advocate Mr. Avinash Shekhar, Advocate Mr. Vijay Shanker Tiwari, Advocate Ms.....
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.... comprises a composite charge for regulatory and service fee - Negatived 101-106 7. CWJC No. 9140 of 2023, CWJC No. 9162 of 2023 and CWJC No. 9947 of 2023 106-112 8. CWJC No. 11538 of 2023 112-114 9. CWJC No. 16764 of 2023 114-117 10. CWJC No. 17700 of 2023 CWJC No. 18206 of 2023 117-120 11. CWJC No. 2730 of 2024 CWJC No. 4297 of 2024 120-124 12. CWJC No. 4562 of 2024 124-128 13. CWJC No. 6389 of 2024 128-130 CAV JUDGMENT (PER: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD) In the present batch of writ applications, the petitioners are raising a common question for consideration. On the request of the parties, the writ applications have been tagged and heard together on various dates. Mr. Sujit Ghosh, learned Senior Advocate, assisted by Mr. Suraj Samdarshi, learned Advocate has led the arguments. CWJC No. 3531 of 2022 has been taken as lead case. This Court would, therefore, refer the prayers and pleadings in the said writ application at first instance. The other learned Advocates for the petitioners have also made their submissions. The main contesting respondent is the State of Bihar. Mr. Vikas Kumar, learn....
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....e does not involve any skill based or performance based activity and thus the same will not attract the levy of Good and Service Tax. viii) This Hon'ble Court may further adjudicate and hold that the expression "assignment of "right to use" any natural resource" would include within its ambit the right to exploit/extract and sell the natural resource ix) This Hon'ble Court may further adjudicate and hold that the order of Appellate Authority for Advance Ruling, Bihar dated 10.12.2021 is bad in law inasmuch as the same has been passed without considering the order contained in memо nо. 8763 dated 22.12.2020 passed by the Commissioner, Central GST and Central Excise, Patna 1, (Annexure 13), which was an order passed in relation to this petitioner with respect to a proceeding initiated under service tax regime, in which the claim of similar exemption under Sl. No. 61 of the Notification nо. 22/2016-ST dated 13.04.2016 was allowed and the proceeding was dropped. x) To grant any other relief or reliefs which the Petitioner may be found entitled to in the facts and circumstances of the case." Brief Facts of the Case 3. The petiti....
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....e 'Bihar VAT Act' or the 'Act of 2005') was prevailing and according to the Sand Policy, the petitioner was liable to pay Value Added Tax (in short 'VAT') only at the rate of 5%. It is the case of the petitioner that till the promulgation of the Goods and Services Tax Law (hereinafter referred to as the 'GST'), the petitioner was discharging its tax liability under the Bihar VAT Act. The petitioner discharged its tax liability on the royalty paid to the Government under Reverse Charge Mechanism (in short 'RCM') by paying GST at the rate of 5% (2.5% CGST and 2.5% SGST) under the heading 9973, group 99733 and tariff code 99337 "licensing services for the right to use minerals including its exploration and evaluation" which attracted the same rate of GST as on supply of like goods involving transfer of title in goods. 7. It is the case of the petitioner that the aforesaid classification of services has been accepted by the Central Board of Indirect Taxes and Customs (In short 'CBIC') in its Circular No. 164/20/2021 and GST dated 06.10.2021 in which at paragraph '9.3.1' it has been clarified that supply of service by way of granting mineral exploration and mining rights most appropr....
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....the service should be covered by heading 9997, other service group 99979 service code 999799 on which GST is payable at the rate of 18%. The appeal was registered as Case No. AAAR/01/2021. A memo of appeal has been enclosed with the writ application as Annexure '9'. 11. It is the case of the petitioner that the petitioner appeared before the Appellate Authority for advance ruling, Bihar and filed its counter affidavit raising all the grounds. The petitioner claimed exemption from levy of GST by virtue of entry at serial no. 64 of Notification No. 12 of 2017 dated 28.06.2017. The petitioner also placed reliance on the order contained in Memo No. 8763 dated 22.12.2020 passed by the Commissioner, Central GST and Central Excise, Patna 1 which was an order passed in relation to this petitioner with respect to a proceeding initiated under service tax regime, in which the claim of similar exemption under Serial No. 61 of the Notification No. 22/2017-ST dated 13.04.2016 was allowed and the proceeding was dropped. 12. Learned counsel for the petitioner has further stated that vide order contained in Memo No. 341 dated 10.12.2021, the Appellate Authority for advance ruling allowed the ....
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....ly of services, the imposition of GST on such a transaction is violative of Article 14 and 19(1)(g); B. Assuming arguendo that the grant of mineral concession/mining leases are not hit by Article 14 and 19(1)(g), the imposition of GST under Article 246A is without jurisdiction, since the power to levy tax on mineral rights is exclusively with the State Government under Entry 50, List II of the Seventh Schedule; C. Assuming arguendo that grant of mineral concession/mining leases entail supply of services for a consideration, such consideration does not comprise only of service fee. Instead, it is a composite charge for regulatory as well as service fee and absent any mechanism to statutorily split these two elements, a charge of GST on the entire sum would be bad in law; D. Assuming arguendo that the entire royalty amount is construed as being towards service fee, then, if the taxable event has taken place prior to coming into force of GST, the State would have no jurisdiction to impose GST on such cases, merely because periodic payment of royalty is made post the commencement of GST; and E. Assuming arguendo that this Hon'ble Court is not per....
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....Mineral Area Development Authority And Anr. Vs. M/s Steel Authority of India and Anr. Etc. reported in (2024) 10 SCC 1 (hereinafter referred to as the 'MADA Judgment') where while examining whether royalty is a tax or not in the context of mining leases, the Hon'ble Supreme Court made an observation which in the submission of the petitioner goes to establish the contextual similarity between mining leases and licences for carrying out business in alcohol. It is his submission that even though these two sets of businesses form part of the same class, the State vide Notification No. 25/2019-Central Tax (Rate) dated 30.09.2019 has declared that services by way of grant of alcoholic liquor licence, against consideration in the form of licence fee or application fee or whatever name called is to be treated neither as supply of goods nor as supply of services. The said Notification also explains that the same has been issued to implement the recommendations of the 26th GST Council Meeting where it was recommended that no GST shall be leviable on licence fee/application fee of the aforesaid nature. It is submitted that once a transaction is treated neither as a supply of goods nor a suppl....
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....can be put at par with the liquor industry only from that date. However, the petitioner cannot claim any exclusion from GST for the period from 01.01.2017 to 29.09.2019 on this ground alone. (ii) Article 246A, notwithstanding the Non-obstante clause cannot be pressed into service to confer legislative power on the State and the Centre to impost GST. 18. As regards his submission under (B) of paragraph '15' hereinabove, it is submitted that in terms of Entry 50, List II of the Seventh Schedule of the Constitution of India, the field of legislation in respect of taxes on mineral rights has been exclusively conferred on the States subject to any limitation imposed by Parliament relating to mineral development. This field of legislation relates back to Article 245 read with Article 246, which confers the source of power for enacting legislation in respect of the fields of legislation enumerated in the Seventh Schedule. The legislative competence to impose GST is however, located in Article 246A and it also contains a non-obstante clause seeking to override the provisions of Article 246. 19. Learned Senior counsel has submitted that conferment of mining licences is essentially ....
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.... that on a perusal of paragraph '9' of the Board Circular dated 06.10.2021, it would appear that GST on mining leases is sought to be imposed on services by way of grant of mineral exploration and mining rights in exchange for which the State receives royalty. The Circular at Para '9.3.1' makes a reference to Service Code 997337 as the appropriate classification. The said Service Code refers to licensing service for the right to use minerals including its exploration and evaluation. The crux of these entries inevitably goes to demonstrate that, the lessor in exercise of its mineral rights (one of them being the right to receive royalty and the other being the transfer of mineral rights) recovers such royalty, by execution of lease agreements in exchange of receipts of such royalty. As such therefore, the substance of the transaction (even though it may be termed as grant of mining rights) is intrinsically exercise of mineral right by lessor while making available such grant. It is submitted that although the pith and substance of the two articulations i.e. right to receive royalty and grant of mineral rights is one and the same and consequently if the jurisdiction to levy tax on mi....
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....ve any rendition of service and accordingly does not fall within the ken of Article 246A. (iii) Royalty is a hybrid of two constituents i.e. distinction between fee for services and Compensatory fee 23. To support his submissions under (C) of paragraph '15' hereinabove, learned Senior counsel for the petitioner admits that the argument under this head is predicated on the assumption that there is some element of service that is entailed in a mining lease, in respect of which royalty is paid, however, the entire royalty is not necessarily towards any alleged service. Referring to paragraph '130' of the MADA judgment, it is submitted that their Lordships have held that royalty is a consideration paid by the mining lessee to the lessor for enjoyment of mineral rights and also to compensate for loss of value of minerals suffered by the owner of the minerals. 24. At paragraph '131', their Lordships have held that Section 9 of Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter referred to as 'the MMDR Act') statutorily regulates the right of the lessor to receive consideration in form of royalties from the lessee. It is, thus submitted that on perusal of two ....
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.... the services rendered. Learned Senior counsel has relied upon the decision of the Hon'ble Supreme Court in the case of State of Tripura and Ors. vs. Sudhir Ranjan Nath reported in AIR 1997 SC 1168 (paragraph '14' and '15') and the decision in the case of Vam Organic Chemicals Ltd. & Anr. v. State of UP and Ors. reported in (1997) 2 SCC 715. It is submitted that in the case of State of Bihar and Ors. vs. Shree Baidyanath Ayurved Bhawan (P) Ltd. & Ors. reported in (2005) 2 SCC 762 in the context of the Bihar Excise Act, the distinction between regulatory fee and compensatory fee was once again reiterated. 26. It is submitted that power to levy tax under Article 246A is restricted only to supply of goods and services and does not extend to transactions involving loss of mineral, compensation of damages, charges which are regulatory in nature. According to him, power to levy tax is restricted only on the service element. The portion of royalty relatable to enjoyment of mineral right may be a service, whereas, the compensation for loss of minerals read with Section 9 of MMDR Act is a regulatory fee and not fee for services. It is thus submitted that for a valid imposition of tax und....
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.... that the importance of the fact that taxable event must take place on or after the date when the legislation imposing tax is in force and not prior to that date had come for consideration before the Hon'ble Supreme Court in the case of Collector of Central Excise, Hyderabad vs. Vazir Sultan Tobacco Company Limited reported in 1996 (83) ELT 3 (SC) : (1996) 3 SCC 434. Learned Senior counsel has also relied upon Constitution Bench judgment in the case of 20th Century Finance Corporation Limited & Anr. vs. State of Maharashtra reported in (2000) 6 SCC 12 where the purposes of ascertaining when transfer of right to use any goods (as contemplated under Article 365(29A)(d) takes place, it was observed in paragraph '27' that the transfer of right takes place once a written contract is entered into between the parties and the taxable event would be the execution of contract for the right to use goods. It is submitted that in respect of grant of mineral exploration rights which is manifested by execution of mining lease, the taxable event for transfer of such right would therefore be the date on which the formal contractual arrangement is executed transferring and vesting of such mineral ri....
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....ght took place was issued on 06.11.2014 and even the first agreement for the calendar year 2015 also contemplated that the settlement amounts are to be paid for the five calendar years, thereby binding the petitioner with an obligation to pay the settlement amounts for those five years. Under these circumstances, the petitioner humbly submits that (a) Those settlement deeds which were signed prior to 01.07.2017, the taxable event has taken place pre-commencement of GST (i.e. 01.01.2017), charge of GST on settlement payments made under these agreements cannot be subjected to GST. (b) In respect of those settlement agreements that may have been signed post 01.01.2017, since both the principle sanction orders and the settlement deed for the calendar year 2015 clearly bound down the petitioner with an obligation to pay the settlement amount for the five calendar years clearly indicating the amounts payable for each calendar year, the rights and obligations of the parties stood frozen on that date, which would be in substance the date when the petitioner acquired the right which would have given rise to approaching the writ court for protection of such right. The subsequent execution of....
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....cencing services for right to use minerals, including their exploration and evaluation. 30. It is submitted that the petitioner did not file an appeal against the said order, the Revenue filed an appeal before the appellate authority of advance ruling. On perusal of grounds of appeal set out in the appeal memo, it can be seen that the only ground of the appeal was qua the correctness of service accounting code applicable to the petitioner which was held by the original authority to fall under 997337. In specific terms, the Revenue in its appeal memo had contended that the correct service accounting code should be 999113 and if there is any doubt then the correct classification should be 999799. Vide the impugned order dated 10.12.2021, the appellate authority upheld the classification as held by the original authority i.e. 997337. To that extent, such an affirmation was against the appellant revenue's contention. However, in breach of the basic propriety of an appellate authority's jurisdiction, it travelled beyond the scope of appeal by holding that rate of GST payable would be 18% with effect from 01.01.2017 and for that purposes reliance was placed on a circular of the Board ....
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....ore a writ court. In response to the pointed query, the petitioner had submitted that the grounds on which the non-taxability was canvassed before the Court are aspects which go to the jurisdiction of the legislatures to levy GST and are also pure questions of law. Reliance has been placed on the recent judgment of Hon'ble Supreme Court in the case of Raju Ramsing Vasave vs. Mahesh Deorao Bhivapurkar reported in (2008) 9 SCC 54 where in paragraph '32' the Hon'ble Supreme Court had categorically held that the principle of res judicata though undoubted is a salutary principle, the said principle however amongst other has some exceptions, for example (i) when judgment is passed is without jurisdiction, (ii) a matter involves pure question of law or (iii) when judgment has been obtained by committing fraud on court. The petitioner also relied upon Constitution Bench judgment in Basheshar Nath vs. Commissioner of Income Tax, Delhi reported in AIR 1959 SC 149 (paragraph '15' and '19'). Reliance has also been placed on the judgment of the Hon'ble Supreme Court in the case of Olga Tellis and Ors. vs. Bombay Municipal Corporation and Ors. reported in (1985) 3 S....
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....ST Act it would appear that any activity of awarding license for sand mining comes under the category of service and payment of settlement amount is the consideration against that service. 34. It is submitted that the mining lease executed is nothing but a contract to undertake mining operations in the leased mining area. The settlement amount paid by the settlee to the Government is nothing but a "consideration" to have mining operations in the leased area on execution of a mining lease. It is a part of agreement arrived between the parties to have lease of a mining area for undertaking mining operations. The settlement amount being consideration certainly places assignment of right to use natural resources deposited in the leased area as a service as any activity carried out by a person for another for consideration is a service. 35. The stand of the respondent department regarding its taxability is substantiated by the scope of supply under Section 7 of GST Act and scheme of classification of services wherein it is clearly visible that this activity not only comes under the category of service but is also a service taxable at 18%. Learned counsel has referred Section 7 and....
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....g Counsel-11 for the State have been summarised in paragraph '16' of the counter affidavit which we quote hereunder for a ready reference:- "16. That from the submission made hereinabove it is clear that- i. The taxable event in GST is "supply" of goods or services or both. ii. As per the provision of Section-7 of CGST/GST Act, 2017 license, rental or lease covered within the meaning of "supply" iii. Scheme of Classification of services and rate of tax on different types of services notified vide Notification No. 11/2017 CT(rate) dt. 28/06/2017 iv. As per the annexure appended with the above notification, Leasing services have been classified under entry no.257 under Group No.99733 and sub Heading 997337 which are as follows... v. "Licensing services for the right to use minerals including its exploration and evaluation." vi. Settlement amount paid by the Settlee (of sand ghats) to the government is nothing but an amount paid for getting right to use the minerals granted to it for a specified period as per term of lease. vii. As per above explanation leasing /settlement of Sand Ghats covered at Sr. no. 17 of No....
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....so far as the scope of the present writ applications are concerned, it is liable to be restricted to the issues raised by the petitioner before the Advance Ruling Authority. The petitioner itself admits in paragraph '16' of the writ application that the petitioner under bona fide advise discharged its tax liability on the royalty paid to the Government under reserve charge mechanism by paying GST at the rate of 5% (2.5% CGST and 2.5% SGST) under the heading 9973, group 99733 and tariff code 997337 "Licensing services for the right to use minerals including its exploration and evaluation." The only issue which was raised by the petitioner before the Advance Ruling Authority was with regard to the rate and whether the petitioner was rightly discharging its tax liability of royalty paid to the government under 'RCM' at the rate of 5%. 43. It is submitted that the petitioner did not raise any grievance before the appellate authority for advance ruling against the order of the Advance Ruling Authority. It was the Department who had gone to the appellate authority. It would appear from the submissions of the writ petitioner made before the Advance Ruling Authority recorded in the orde....
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....ase to submit that the views expressed in the said paragraph is the minority view and this is not the view of the majority. Learned counsel has taken this Court through paragraph '135' to '137' and paragraph '365' of the MADA judgment. It is submitted that the judgment of the Hon'ble Supreme Court in the case of 20th Century Finance Corpn. Ltd (supra) has nothing to do with the grant of mining rights. This case is related to the Finance Act. In the present case, the only issue is the classification issue. The petitioners were already making payment under the Bihar VAT Act and thereafter under the GST Act. Under Bihar VAT Act, 5% was payable as advance tax which they were paying. 46. Learned counsel submits that GST is payable on settlement amount. It is payable with payment of every installment of the settlement amount and in case where royalty on extracted quantity of sand which is more than the settlement amount, then the settlee shall be liable to pay additional settlement amount. The settlement amount is the consideration. Learned counsel submits that from the order of the Advance Ruling Authority, (Annexure '4') it would appear that the petitioner agreed to deposit GST liab....
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....tion 4 applies to minor minerals, Sections 5-13 inter alia includes Section 9 pertains to royalty would not apply to minor minerals. In fact, Section 15 confers powers on the State Government to make rules in respect of minor minerals. Pursuant to that power at present Bihar Minerals (Concession, Prevention of Illegal Mining, Transportation & Storage) Rules, 2019 (hereinafter called the '2019 Rules') are in force, though earlier the 1972 Rules used to prevail. In the said Rules, in Rule 2(xvi), the term 'mining concession' has been defined to mean mining lease or settlement in respect of minor minerals and includes quarrying permits permitting the mining of minor minerals. 50. The term 'mineral concession holder/ settlee/ lessee has been defined in Rule 2(xvii) to mean a person holding a valid mineral concession for quarrying sand and other minor minerals from the settled/leasehold areas. Rule 2 (xxvi) defines the term 'settlement' to mean the mining right given on behalf of the government to quarry, win, work and carry away sand and other minor minerals through a competitive bidding process. Rule 11 of the said Rules echoes the same principle as provided in Section 4 of the....
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....ADA case, it is submitted that the State are wholly in error in making such submission. Since the petitioner has relied upon the specific para forming part of majority view of the Court which starts from paragraph '1' and ends at paragraph '343' whereas the minority decision starts at paragraph '1.1' and ends at paragraph '44'. The only place where the minority decision was referred to was to assist the Court in appreciating the law laid down by the Hon'ble Supreme Court in the case of Govind Saran (supra) in paragraph '10.10' and to that extent there is no divergence between majority and minority view on this aspect. In fact, even at paragraph '184' read with foot note 254 of the majority decision the said judgment has also been referred thereupon. 53. Learned counsel for the petitioner submits that the contention of the State justifying Notification No. 25/2019 dated 30.09.2019 saying that the recommendations of the GST Council are binding and that on the recommendation of the Council the services by way of grant of alcoholic liquor license was held to be neither supply of goods nor supply of service is unfounded and the same is to be rejected. It is contended that if the reco....
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.... be non-existent, no question of any exemption would arise. 56. Dr. K.N. Singh, learned ASG, who is assisted by Mr. Anshuman Singh, learned Senior Standing Counsel, appears for the Union of India. The Union of India has endorsed the submissions of learned SC-11. Consideration 57. Having heard learned Senior counsel for the petitioners and learned SC-11 for the State as also learned ASG for the Union of India, at first instance, we find that at least six out of eleven writ applications which are under consideration have been filed by M/s BSCPL. M/s 'BSCPL' had filed an application under Section 97 of the CGST/BGST Act, 2017 before the Advance Ruling Authority. 58. Section 97 permits filing of an application for obtaining advance ruling, stating the question as enumerated under Sub-Section (2) of Section 97 on which advance ruling is sought. The scope and ambit of Section 97 may be appreciated on going through the said Section which we quote hereunder:- "97. Application for advance ruling. (1) An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and manner and accompanied by such fee as may be pr....
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....) Whether M/s Broad Son Commodities Pvt. Ltd. is rightly discharging the taxable liability @ 5% through reverse charge mechanism?" Order of the Advance Ruling Authority 61. In the aforementioned background, after hearing learned Advocates for the parties, the concerned authority recorded a finding in paragraph '12.3', '12.4' and '12.5' which are relevant to take note of hereunder for the purpose of this case:- "12.3. The applicant has obtained Government land on lease for mining sand. The leasing of the Government land to the applicant is considered as supply of services, as per sub-section (1) of Section 7 of the CGST Act, 2017. 12.4. Regarding the classification of service received by the applicant an annexure to the Notification No. 3.-11/2017-Central Tax (Rate) dated 28.06.2017 has been referred. The annexure attached to the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 has defined the Service Accounting Code for each type of services. After meticulous observation of the above mentioned service accounting codes, it has been found that the nature of service received by the application is covered under the Service Accounting Code 9073 37- "l....
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....reinafter called BGST Act) classifying mining activity in the nature of licensing services for the right to use minerals including its exploration and evaluation taxable at the rate of 9% CGST and 9% BGST with effect from 01.01.2019 under the residual entries of serial no. 17 of the Notification No. 11/2017, Central Tax dated 28.06.2017 as amended by Notification No. 27/2018 dated 31.12.2018 Central Tax (Rate) dated 31.12.2018 be quashed. ii) for a declaration that licensing services for the right to use minerals including its exploration and evaluation fall specifically under heading 9973 (licensing or rental services with or without operator) as notified in item 17 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 particularly clause (iii) thereof read with the subsequent Notification No.31/2017-Central Tax (Rate) dated 13.10.2017, Notification No.1/2018-Central Tax (Rate) Central Tax (Rate) dated 25.01.2018 and Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018. iii) for a declaration that classification of mining activity in the nature of licensing services for the right to use minerals including its exploration and evaluation taxable a....
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....ples of natural justice; (f) Opportunity of hearing shall be afforded to the parties to place on record all essential documents and materials, if so required and desired; (g) During pendency of the appeal, no coercive steps shall be taken against the petitioner. (h) The Appellate Authority shall pass a fresh order only after affording adequate opportunity to all concerned, including the writ petitioner; (i) Petitioner through learned counsel undertakes to fully cooperate in such proceedings and not take unnecessary adjournment; (j) The Appellate Authority shall decide the appeal on merits expeditiously, preferably within a period of two months from the date of filing of the appeal; (k) The Appellate Authority shall pass a speaking order assigning reasons, copy whereof shall be supplied to the parties; (l) Liberty reserved to the petitioner to challenge the order, if required and desired; (m) Equally, liberty reserved to the parties to take recourse to such other remedies as are otherwise available in accordance with law; (n) We are hopeful that as and when petitioner takes recourse to such remedies, be....
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.... for payment of the yearly installment amount was also provided for in all the documents. The first installment of 50% of the yearly installment amount was to be paid by 15th December of the previous year, 25% was to be paid before 15th April and rest 25% was to be paid before 15th September. The said settlement period was extended till 31.10.2020 vide Resolution contained in Memo No. 4948 dated 27.12.2019 with an increase of 50% of the settlement amount. Thereafter, it was further extended till 31.12.2020 vide Resolution No. 2646 dated 14.09.2020 and then it was extended till 31.03.2021 vide Resolution No. 3435 dated 30.12.2020. The extension was lastly granted vide Notification No. 986/M Patna dated 31.03.2021 from 01.04.2021 to 30.09.2021. It is in this background, at this stage, in this writ application, it is being contended that the petitioner cannot be subjected to GST because the taxable event has taken place prior to coming into force of the GST regime. Admittedly, this issue was not raised before the Advance Ruling Authority in the application filed under Section 19 of the SGST/BGST Act, 2017. 68. This Court further finds that another issue which was in the counter aff....
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.... quash the order dated 17.09.2020 passed by respondent nos. 1 and 2 under Section 98 of the CGST Act, 2017 and BGST Act, 2017 by which the mining activity of the petitioner was classified in the nature of licensing services for the right to use minerals including its exploration and evaluation taxable at the rate of 9% CGST and 9% BGST with effect from 01.01.2019 under the residual entries of serial no. 17 of the Notification No. 11/2017, Central Tax dated 28.06.2017 as amended by Notification No. 27/2018 dated 31.12.2018. It is evident that the petitioner did not challenge the entire order dated 17.09.2020 of the Advance Ruling Authority. Further, the petitioner sought for a declaration that licensing services for the right to use minerals including its exploration and evaluation fall specifically under heading 9973 (licensing or rental services with or without operator) as notified in item 17 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 particularly clause (iii) thereof read with the subsequent Notification No.31/2017-Central Tax (Rate) dated 13.10.2017 Notification No.1/2018-Central Tax (Rate) Central Tax (Rate) dated 25.01.2018 and Notification No. 27/2018-Ce....
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....a matter of record that in the writ filed before this Court, the respondent-M/s BSCPL was rather looking for a declaration that licensing services for the right to use minerals including its exploration and evaluation fall specifically under heading 9973 (leasing or rental services, with or without operator) as notified in Item No. 17 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 particularly clause (iii) thereof read with the subsequent Notification No. 31/2017-Central Tax (Rate) dated 13.10.2017, Notification No. 1/2018-Central Tax (Rate) Central Tax (Rate) dated 25.01.2018 and Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018. Thus, in no way, the submissions which are being advanced by learned Senior Counsel for the petitioner under 'A' to 'D' of paragraph '37' hereinabove were ever raised at any stage of the proceeding. We are, therefore, of the considered opinion that the law being very clear on the subject, the present petitioners well understood the law and never raised any issue of taxability under head 9973. Royalty is not a Statutory Impost/Tax -- MADA Judgment 74. We further find that when the present writ application was filed, the pe....
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.... fixes the rates of royalty, but it is still paid to the proprietor by virtue of a mining lease. In case the minerals vest in the government, the mining lease is signed between the State Government (as lessor) and the lessee in pursuance of Article 299 of the Constitution. Through the mining lease, the government parts with its exclusive privilege over mineral rights. A consideration paid under a contract to the State Government for acquiring exclusive privileges cannot be termed as an impost. Since royalty is a consideration paid by the lessee to the lessor under a mining lease, it cannot be termed as an "impost". 77. The Hon'ble Supreme Court in MADA judgment specifically held in paragraph '129' and '130' that the principles applicable to royalty apply to dead rent because: (i) dead rent is imposed in the exercise of the proprietary right (and not a sovereign right) by the lessor to ensure that the lessee works the mine, and does not keep it idle, and in a situation where the lessee keeps the mine idle, it ensures a constant flow of income to the proprietor; (ii) the liability to pay dead rent flows from the terms of the mining lease; (iii) dead rent....
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....on 105 of the Transfer of Property Act.118 In case of a mining lease, the property can be enjoyed by working the mine as indicated in Section 108 of the Transfer of Property Act. 342. Section 110 of the Transfer of Property Act deals with the exclusion of the day on which the term of the ease commences. It provides that where the time limited by a lease of immoveable property is expressed as commencing from a particular day, in computing that time such day shall be excluded. It further provides that in situations where the lease does not mention the day of commencement, the time limited by the lease commences from the day of the making of the lease. The model mining lease under Form K specifies the day from which the mineral rights are granted and demised unto the lessee. Thus, the transfer of right to enjoy the property under a mining lease commences from the specified day of commencement. Resultantly, the rights and interests in the minerals specified in the mining lease are transferred from the State Government to the lessee on the specified day of the commencement of the lease deed. 343. Once the interest in the minerals is transferred under a mining lease, th....
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....e of minerals right, that is removal or consumption of minerals. This gains importance as it resolves the issues raised by learned Senior Counsel for the petitioner in his submissions in terms 'D' of paragraph '15'. Learned Senior Counsel for the petitioner has argued that merely because periodic payment of royalty is made post the commencement of GST, the State would have no jurisdiction to impose GST because the taxable event has taken place prior to coming into force of GST. It is his submission that the petitioner was declared the highest bidder on 21.10.2014 in respect of auction of sand ghats for a period of five years advancing from 01.01.2015 to 31.12.2019. The submission in this regard have been taken note of hereinabove in paragraph '50' of the judgment. According to him, the the vestitute of the right to carry out mining activity was conferred upon the petitioner as early as in September, 2015 and even prior to that the in-principle sanction order was issued sometime in November, 2014, all of which took place prior to 01.07.2017 i.e. the date of commencement of GST. While learned Senior Counsel admits that yearly settlement deeds were executed and there were agreements t....
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....d in paragraph '365' of the judgment which we reproduce hereunder for a ready reference:- "365. In view of the above discussion, we answer the questions formulated in the reference in terms of the following conclusions: 365.1. Royalty is not a tax. Royalty is a contractual consideration paid by the mining lessee to the lessor for enjoyment of mineral rights. The liability to pay royalty arises out of the contractual conditions of the mining lease. The payments made to the Government cannot be deemed to be a tax merely because the statute provides for their recovery as arrears; 365.2. List II Entry 50 does not constitute an exception to the position of law laid down in [M.P.V. Sundararamier & Co. v. State of A.P., 1958 SCC OnLine SC 22 : AIR 1958 SC 468 : 1958 SCR 1422]. The legislative power to tax mineral rights vests with the State legislatures. Parliament does not have legislative competence to tax mineral rights under List I Entry 54, it being a general entry. Since the power to tax mineral rights is enumerated in List II Entry 50, Parliament cannot use its residuary powers with respect to that subject-matter; 365.3. List II Entry 50 envisage....
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....ds and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council. Explanation.-For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce. (2) The amount apportioned to a State under clause (1) shall not form part of the Consolidated Fund of India. (3) Where an amount collected as tax levied under clause (1) has been used for payment of the tax levied by a State under Article 246-A, such amount shall not form part of the Consolidated Fund of India. (4) Where an amount collected as tax levied by a State under Article 246-A has been used for payment of the tax levied under clause (1), such amount shall not form part of the Consolidated Fund of the State. (5) Parliament may, by law, formulate the principles for determi....
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....ed on different dates. The Central Government appointed the 22nd Day of June 2017 as the date on which the provisions of Sections 1, 2, 3, 4, 5, 10, 22, 23, 24, 25, 26, 27, 28, 29, 30, 139, 146 and 164 of the said Act shall come into force (Notification No. 1/2017-Central Tax, dated 19.06.2017 w.e.f. 22.06.2017). Again vide Notification No. 9/2017-Central Tax, dated 28.06.2017, the Central Government appointed the First day of July, 2017 as the date on which the provisions of Sections 6 to 9, 11 to 21, 31 to 41, 42 except the proviso to sub-section (9) of section 42, 43 except the proviso to sub-section (9) of sections 43, 44 to 50, 53 to 138, 140 to 145, 147 to 163, 165 to 174 of the said Act to come into force. 87. For the purpsoe of the present case, we take note of the definition of the word "services" as provided under Section 2, clause (102) -- "services" means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; 1[Explanation.--For the removal of dou....
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.... by way of annexure. The relevant classification of group 99733 is as under:- 250 Group 99733 Licensing services for the right to use intellectual property and similar products 251 997331 Licensing services for the right to use computer software and databases 252 997332 Licensing services for the right to broadcast and show original films, sound recordings, radio and television programme and the like 253 997333 Licensing services for the right to reproduce original art works 254 997334 Licensing services for the right to reprint and copy manuscripts, books, journals and periodicals 255 997335 Licensing services for the right to use research and development products 256 997336 Licensing services for the right to use trademarks and franchises 257 997337 Licensing services for the right to use minerals including its exploration and evaluation 258 997338 Licensing services for right to use other natural resources including telecommunication spectrum 259 997339 Licensing services for the right ....
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.... (c) The rate applicable on the service of grant of mineral exploration license and mining lease under Service Tax was also the standard rate of 15.5%. Services under this category have been standard rated in GST at 18%; (d) Therefore, the intention has always been to tax this activity/supply at standard rate of 18%." Order of the Appellate Authority on Advance Ruling -- Approved 96. In paragraph '7.4' of the appellate order, the Appellate Authority has quoted the relevant part of the circular which states that "as recommended by the Council, it is clarified that even if the rate schedule did not specifically mention the service by way of grant of mining rights, during the period 01.07.2017 to 31.12.2018, it was taxable at 18% in view of principle laid down in the 14th meeting of the Council for residuary GST rate. Post 1st January, 2019, no dispute remains as stated above". 97. We find from the above-mentioned notifications that the Notification No. 11 of 2017 under serial no. 17 made the leasing or rental services, with or without operator other than (i), (ii), (iii) and (iv) above taxable at the same rate of central tax as applicable on supply of like good....
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....aised this issue of exemption under any of his formulations of arguments which have been noted in paragraphs 'A' to 'D' of the written notes of submissions which we have reproduced in paragraph '15' hereinabove. Transfer of Interest is Different from Exercise of Mineral Rights - Royalty can be used as a Measure of Tax on Royalty 101. From the entire discussions made hereinabove, to this Court it is crystal clear that the submissions advance by learned Senior Counsel for the petitioner under paragraphs A to E of paragraph '15' have no basis to stand. The judgment of the Hon'ble Supreme Court in MADA case has made it very clear that royalty is not a tax. It is a contractual consideration paid by the mining lessee to the lessor for enjoyment of minerals rights. Royalty becomes payable only upon exercise of minerals rights by the lessee that is removal or consumption of minerals. The transfer of interest in minerals is distinct from the exercise of the mineral rights and further it is evident that since royalty is determined on the basis of the mineral produce, royalty can also be used as a measure to determine the tax on royalty. Contention that Royalty Comprises a Composite ....
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.... the impugned order of the Appellate Authority on advance ruling, has gone to the extent of saying that the liquor industry and the mining industry should be treated at par. The fallacy in the argument of learned Senior Counsel may be found apparent on the face of it. Once the GST Council being a Constitutional body has taken a view that the grant of licence to a liquor industry is not sale of goods or supply of services and for that reason no GST would be chargeable on the license fee/application fee, it cannot be allowed to be contended that the grant of license for sale of liquor is in the nature of a supply of 'services' for consideration. Grant of mineral rights under a lease deed is not the same as a license for sale of liquor. The contention of learned Senior Counsel on this score is liable to be rejected. In Liberty Cinema (supra), the Hon'ble Supreme Court has considered the distinction between fee for services and fee for licenses. Imposition of license fee does not lead to a conclusion that the fee is for the services rendered, paragraphs '7', '14' and '17' of the judgment is being reproduced hereinafter:- "7. Now, on the first question, that is, whether the lev....
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....as beyond the competence of the Madras Legislature which had enacted the statute. It would appear that the services here considered were not for controlling the institutions but for doing work which secured to them their funds and the proper application of them. The statute might have involved a check on the conduct of the Mathadipatis who managed the institutions but that control also was for the benefit of the institutions. It has to be remembered, as was said in another case to which we shall presently refer, that the Mathadipatis were in the position of trustees of the institutions. It would follow that control of their wrongful activities must result in special benefits to the institutions for their funds would not then be frittered away. 17. The other case to which we wish to refer in this connection is Hingir Rampur Coal Co. Ltd. v. State of Orissa, (1961) 2 SCR 537 : (AIR 1961 SC 459). There the imposition by a certain statute of a levy on lessees of coal mines in a certain area and the creation of a fund with it, was called in question. It was held that the levy was a fee in return for services and was valid. It was there said at p. 549 (of SCR) : (at p. 466 of AI....
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.... 2014) and notifications issued thereunder. The copy of agreement dated 28.05.2019 entered into with the Mining Department, State Government of Bihar for mining of sand has been annexed as Annexure '1'. 108. The petitioner has been served with a notice under Section 73 of the CGST Act, 2017 on the grounds inter alia that he had not paid the tax due. The authority of the State Taxes Department, Bagha found that there was a difference between the amount paid by the petitioner to the Mining Department, Bettiah and the taxable amount shown by them in their GSTR-3B. The petitioner was served with a notice to pay the ascertained amount of tax along with applicable interest under Section 50 of the CGST Act, 207. 109. From Annexure '2' to the writ application, it would appear that the petitioner failed to pay the tax ascertained along with applicable interest whereupon a show cause notice was issued to the petitioner as to why he should not pay the amount of tax along with interest payable thereon under Section 20 and penalty leviable under the provisions of the CGST/BGST Act, 2017. Sufficient opportunity of hearing has been given but the petitioner did not pay the amount. In these c....
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....n end. 113. It is submitted that the levy of GST under BGST/CGST Act, 2017 is on the supply of goods or services. The term "supply" is defined under Section 7 of the BGST/CGST Act, 2017 in an inclusive manner and it includes all activities undertaken for consideration unless expressly exluded under Schedule III to the BGST/CGST Act. It is submitted that assignment of right to use mineral rights by the Government is a supply of service and the payment of royalty by the petitioner is a consideration thereof. 114. The answering respondents have explained the relevant provisions of the BGST/CGST Act, 2017 wherein the Central Government, on recommendation of the GST Council, has issued Notification No. 13/2017-Central Tax (Rate), dated 28.06.2017. As per serial no. 5 of the abovementioned notification, the services supplied by the Central Government, State Government, Union Territory or Local Authority to a business entity in respect of leasing work by way of assignment of right to use natural resources is liable to tax on RCM basis. The answering respondents have stated that the petitioner suppressed the amount of royalty paid by him to the Mines Department of the State Governmen....
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....f M/s BSCPL (CWJC No. 3531 of 2022. There is no point in repeating the same and one thing once again. We are of the considered opinion that no ground has been made out by the petitioners in these writ applications to interfere with the impugned judgment. 118. Further, we find that in the case of Rakesh Ranjan (supra), the learned Co-ordinate Bench has held that a mere omission to put a signature cannot lead to invalidation of the assessment proceeding. CWJC No. 11538 of 2023 119. In this writ application, the petitioner has prayed for the following reliefs:- "(i) For issuance of appropriate writ/order/direction for setting aside order dated 28.01.2023 passed by Additional Commissioner (Appeal), Tirhut Division, Muzaffarpur in Appeal Case bearing Appeal Case No. AD10052200653U for the financial year 2017-18 whereby and whereunder the Appellate Authority upheld the order bearing Order No. ZD100121010344K dated 12.01.2021 passed by Respondent no. 5 and directed to issue APL-04 to the petitioner. (ii) For setting aside order dated 04.12.2020 passed by Deputy Commissioner of State Tax Jurisdiction, Muzaffarpur East Circle, Muzaffarpur whereby and whereunder th....
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.... the letter No. 4579 dated 04.11.2023 issued by the Respondent Mines Development Officer, District Mining Office, Bhojpur, Ara to the extent by which the Petitioner has been called upon to deposit the GST on Mining royalty with respect to the premiums to be paid for Sand settlement of two Sand Ghats, namely, Bhoj-Son-33 and Bhoj-Son 37, as the dispute with regard to whether the component of Royalty charged on mines or minerals is a consideration or an impost in itself is pending adjudication before the Hon'ble Supreme Court; (iii) For direction upon the Respondents to accept the first instalment of the sand settlement from the petitioner with respect to two sand ghats, namely, BHOJ-SON-33 and BHOJ-SON 37, without insisting the Petitioner to pay GST on the Mines Royalty; (iv) For a declaration that as the issue as to whether the Mines Royalty is to be considered as consideration for settlement of Ghats or is an impost in itself is pending adjudication before the Hon'ble Supreme Court in the case of Udaipur Chamber of Commerce & Industy & Ors. Vs. Union of India & Ors. Bearing Special Leave to Appeal (Civil) No. 37326 of 2017 and as an interim order of stay for levy....
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.... the nature of certiorari for quashing of the demand notice issued vide letter number 1654/M dated 30.11.2023 by respondent number 5 with reference to the letter number 154/M dated 25.11.2023 issued by the respondent number 4 whereby the petitioner has been called upon to pay GST at the rate of 18% on royalty paid to the Department of Mines And Geology, Government of Bihar against grant of alleged licensing services rendered by the Government of Bihar permitting mining activities by the petitioner in block number 07, River Chanan, Mauza-Goudiya, Circle Banka, District Banka; (b) For the issuance of a writ in the nature of certiorari for quashing of the letter number 154 dated 25.11.2023 issued by the respondent number 4 whereby the respondent 5 -mines development officer, Banka has been requested to recover GST at the rate of 18% on royalty/settlement amount paid/payable by the mining lease holders which included the petitioner also on grounds of the same being illegal and wholly without jurisdiction; (c) For further restraining the respondents from initiating any process or action against the petitioner and its directors and other/or stakeholders in connection wi....
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....s of the Hon'ble Supreme Court in the matter of India Cement (supra) has already held that royalty is a tax. The petitioners have also submitted that the views taken by the Hon'ble Supreme Court on this issue has been referred to a Constitution Bench of Nine Hon'ble Judges in the matter of MADA which is still pending. We have dealt with all these issues in the earlier part of our judgment in case of M/s BSCPL (CWJC No. 3531 of 2022). The majority judgment of the Hon'ble Nine Judges Bench of the Hon'ble Supreme Court in MADA case has already held that royalty is not in the nature of a tax. In our opinion, the issues raised by the petitioners in these two writ applications are duly discussed in the judgment rendered by this Court in the case of M/s BSCPL hereinabove. 132. These writ applications have no merit, hence, both the applications are dismissed. CWJC No. 2730 of 2024 and CWJC No. 4297 of 2024 133. In these two writ applications, the petitioners have made the following prayer:- "i) To issue an appropriate writ, order or direction in the nature of Certiorari for quashing the communication dated 22.1.2024 under reference no. 94, issued by the respondent no. 3, ....
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....lement. The petitioners have been informed by the Mining Authority that as per Notification No. 13 of 2017-Central Tax (Rate) dated 28.06.2017 and Notification No. 11 of 2017-Central Tax (Rate) dated 28.06.2017 issued by the Ministry of Finance (Department of Revenue), Government of India, New Delhi, the petitioner was required to make payment of 18% GST. 135. The submission of the petitioner is that the very basis of issuance of communication is bad, the same is without jurisdiction and the respondent no. 3 has failed to appreciate the judgment of the Hon'ble Supreme Court in the case of India Cement (supra). Since the said principle has been doubted in the case of West Bengal versus Kesoram and Others reported in (2004) 10 SCC 201, the latter has been referred to the larger Bench in the case of Mineral Area Development and Others versus Steel Authority of India Limited and others reported in (2011) 4 SCC 450. It is submitted in the writ petition that royalty is collected by the Government on the basis of determination and fixation, keeping in view the parameters relevant for the purpose, it can never be said to be a consideration paid against grant of mining rights to the leas....
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....t of mineral concession is merely a statutory function/duty under the provisions of law and does not amount to rendition of any service, so as to attract goods and service tax. vi) For a further direction to the respondent authorities not to precipitate the matter in view of pendency of similar issue in the matter of Udaipur Chamber of Commerce & Industry and others Vs. The Union of India and others, wherein the Hon'ble Apex Court has restrained the authorities from recovering service tax on royalty. vii) For a direction to the respondent authorities to await the verdict of the Hon'ble Apex Court on the issue as to whether royalty paid by the petitioner is a tax or a consideration against grant of mining rights, in the case of Mineral Area Development Authority and others Vs. Steel Authority of India and others. viii) To grant any other relief or reliefs for which the petitioner may be found entitled to in the facts and circumstances of the case." 140. The reliefs prayed in the writ application is based on the understanding of the petitioner that with the coming into force of the GST Laws, the petitioner was asked to deposit 5 % of the instalme....
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.... Deputy Commissioner State Tax (DCST)/respondent no. 4 by which he has directed the petitioner to pay Rs. 45,936/- by way of GST with interest and penalty under Section 73(9) of the BGST/CGST Act, 2017 for the period 2017-18 (July 2017 to March 2018). 146. It is the case of the petitioner that being a proprietor firm it is engaged in manufacturing of bricks. The petitioner has obtained permit for mining of soil for manufacturing of bricks from his own land bearing Mauza Parbatti, Khata No. 82, Khesra No. 170 and 171. Every year a separate permit is issued by the Mining Department, Government of Bihar for mining of soil on payment of royalty. The petitioner has paid a sum of Rs. 70,875/- for grant of permit under Bihar Mining and Mineral Rules. 147. It is submitted that after manufacturing bricks, the petitioner used to sell bricks to different customers and the GST is being charged on the sale of bricks which the petitioner has been regularly paying to the State Exchequer. It is submitted that despite this compliance by the petitioner, the respondent no. 4 has served a show cause notice dated 29.09.2023 (Annexure '4' to the writ application) upon the petitioner calling upon h....