2022 (10) TMI 43 - HC - GST

Constitutional Validity of Levy of GST on Royalty - GST on the reverse charge basis on the royalty of the mining extraction - HELD THAT - We are bound by the final orders passed by Co-ordinate Benches of this Court in the cases of Udaipur Chambers of Commerce and Industry Others Vs. The Union of India Another 2017 (10) TMI 975 - RAJASTHAN HIGH COURT , M/s Mateshwari Minerals Another Vs. Union of India Another 2021 (7) TMI 1379 - RAJASTHAN HIGH COURT , M/s Shivalik Silica Vs. Union of India Others 2022 (3) TMI 1369 - RAJASTHAN HIGH COURT and RAJASTHAN SMALL MINES (CHEJAPATTHAR) LEASE HOLDERS ASSOCIATION VERSUS STATE OF RAJASTHAN 2022 (4) TMI 1451 - RAJASTHAN HIGH COURT where it was held that The royalty being consideration certainly places assignment of right to use natural resources deposited in the leased area as a service as defined under Section 65-B(44) of the Act of 1994, according to which, any activity carried out by a person for another for consideration is a service. The prayer of the petitioners to entertain the petition on the same issue on the basis of interim order passed in the case of Shree Basant Bhandar INT Udyog Vs. Union of India 2022 (7) TMI 565 - RAJASTHAN HIGH COURT and similar interim orders passed in other cases cannot be accepted. Once we are faced with final order passed on one hand and interim orders on the other, we have to follow the final verdict of Co-ordinate Bench of this Court. Petition disposed off.

Issues Involved:
1. Legality and validity of imposition of GST on royalty.
2. Constitutionality of Sections 9, 15, 50, 73, and 74 of the CGST Act of 2017/RGST Act of 2017.
3. Taxability on the grant of mining rights under GST law.
4. GST applicability on mining royalty/dead rent and contributions to DMFT/RSMET.
5. Classification of royalty under GST notifications.

Issue-wise Detailed Analysis:

1. Legality and Validity of Imposition of GST on Royalty:
The petitioners challenged the imposition of GST on royalty, arguing that it should not be subject to GST. The respondents countered by stating that the issue had already been decided in previous cases by different Division Benches of the Rajasthan High Court, which upheld the imposition of GST on royalty. The court referred to several past decisions, including Udaipur Chambers of Commerce and Industry & Others Vs. The Union of India & Another, M/s Mateshwari Minerals & Another Vs. Union of India & Another, and M/s Shivalik Silica Vs. Union of India & Others, all of which dismissed the challenge to GST on royalty. The court concluded that it was bound by these precedents and dismissed the petitions challenging the GST on royalty.

2. Constitutionality of Sections 9, 15, 50, 73, and 74 of the CGST Act of 2017/RGST Act of 2017:
In D.B. Civil Writ Petition No. 9534/2022, the petitioners sought to declare Sections 9 and 15 of the CGST Act of 2017/RGST Act of 2017 as unconstitutional for levying GST on a reverse charge basis on the royalty of mining extraction. They also challenged Sections 50, 73, and 74 of the CGST Act of 2017/RGST Act of 2017 for imposing interest and penalties on non-payment of tax under Sections 9 and 15. The court did not specifically address the constitutionality of these sections in detail but dismissed the petitions based on the established precedent upholding the GST on royalty.

3. Taxability on the Grant of Mining Rights under GST Law:
In D.B. Civil Writ Petition No. 8109/2022 and No. 6391/2022, the petitioners challenged Circular No. 164/20/2021-GST dated 06.10.2021 and sought to read down Entry No. 5 of Notification No. 13/2017-CT(Rate) dated 28.06.2017, arguing that the grant of mineral exploration and mining rights should not be considered a supply of services under GST law. The court upheld the taxability of mining rights under GST law, referencing previous decisions that supported this interpretation.

4. GST Applicability on Mining Royalty/Dead Rent and Contributions to DMFT/RSMET:
In D.B. Civil Writ Petition No. 5199/2022, the petitioners sought a declaration that GST is not leviable on mining royalty/dead rent and contributions to DMFT/RSMET. They also challenged Circular No. 192/02/2016-Service Tax dated 13.04.2016 regarding the applicability of service tax on mining royalty/dead rent. The court dismissed the challenge to the GST on royalty but noted that the petition would survive adjudication only in respect of other reliefs sought, implying that the issue of contributions to DMFT/RSMET was not conclusively addressed in this judgment.

5. Classification of Royalty under GST Notifications:
The petitioners alternatively sought to classify royalty under Entry 17(iii) of Notification dated 28.06.2017, arguing that GST on royalty should be levied at 5%, as applicable to the supply of goods involving the transfer of goods. The court did not specifically address this classification argument but dismissed the petitions based on the established precedent upholding the GST on royalty.

Conclusion:
The court dismissed D.B. Civil Writ Petition Nos. 8109/2022, 6391/2022, and 9534/2022, upholding the imposition of GST on royalty based on consistent past decisions. D.B. Civil Writ Petition No. 5199/2022 was partially dismissed, with the challenge to the GST on royalty rejected, but the petition was allowed to proceed concerning other reliefs sought. The court emphasized that final orders from Coordinate Benches take precedence over interim orders, reaffirming the legality of GST on royalty.

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