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2024 (8) TMI 300 - HC - GSTLevy of GST - mining activity - reverse charge mechanism - HELD THAT - The main issue insofar as levy of GST on the mining activities is concerned, the final decision of the Hon'ble Supreme Court is awaited as per the recent order of the Hon'ble Supreme Court dated 24.07.2024 in the batch of cases in UDAIPUR CHAMBERS OF COMMERCE AND INDUSTRY ORS. VERSUS UNION OF INDIA ORS. 2024 (8) TMI 254 - SC ORDER . The cases are likely to be listed for hearing during the third week of August, 2024. The recovery proceedings pursuant to the impugned orders shall be kept in abeyance pending disposal of the appeal by the Hon'ble Supreme Court. The petitioner is given liberty to file a statutory appeal to keep the issue alive. However, there shall be no pre-deposit, in view of the decision of the Hon'ble Supreme Court. Petition disposed off.
Issues Involved:
1. Levy of GST on mining activity. 2. Input tax credit discrepancies. 3. Supreme Court's stay on tax recovery. 4. Guidelines issued by the Division Bench of the High Court. 5. Supreme Court's decision on the nature of royalty. Issue-Wise Detailed Analysis: 1. Levy of GST on Mining Activity: The petitioner contended that no GST is payable on mining activity and maintained that the issue was sub judice before the Supreme Court. Despite this, the respondent levied tax under the reverse charge mechanism on the mining activity carried out by the petitioner. The petitioner argued that the respondent should not have confirmed the demand for tax payable on a reverse charge basis for the mining activity. 2. Input Tax Credit Discrepancies: The petitioner also engaged in selling mines and minerals, availing input tax credit on various input supplies. Certain discrepancies in this regard were addressed. However, the petitioner emphasized that the tax demand on mining activity under the reverse charge mechanism was unwarranted. 3. Supreme Court's Stay on Tax Recovery: The Supreme Court stayed the recovery of tax on mining activity in the case of M/s. Lakhwinder Singh Vs. Union of India. This stay influenced the Division Bench of the High Court to issue guidelines in a recent order, which included keeping adjudication orders in abeyance until the Supreme Court's Nine Judge Constitution Bench decides on the nature of royalty. 4. Guidelines Issued by the Division Bench of the High Court: The Division Bench of the High Court issued several guidelines: - Petitioners should submit objections/representations within four weeks of receiving the order. - Authorities should adjudicate on merits and in accordance with the law, providing a reasonable opportunity for petitioners to be heard, but adjudication orders should be kept in abeyance until the Supreme Court decides on the nature of royalty. - No recovery of GST on royalty until the Supreme Court's decision. - Petitioners can act upon the outcome of the case pending before the Supreme Court. - All contentions are left open for petitioners to raise in appropriate proceedings post the Supreme Court's decision. 5. Supreme Court's Decision on the Nature of Royalty: The Supreme Court delivered a detailed order on the rights of the State Government to levy royalty on mining activity under the Mines and Minerals (Development and Regulation) Act, 1957. The majority view concluded that: - Royalty is not a tax but a contractual consideration paid by the mining lessee to the lessor. - The legislative power to tax mineral rights vests with State legislatures, not Parliament. - The scope of "any limitations" under Entry 50 of List II is broad, including restrictions, conditions, principles, and prohibitions. - State legislatures can tax lands comprising mines and quarries under Entry 49 of List II using mineral yield as a measure. The minority view, however, held that: - Royalty is in the nature of a tax under Section 9 of the MMDR Act. - Entry 50 - List II is subject to limitations imposed by Parliament under Entry 54 - List I. - Mineral-bearing lands cannot be taxed under Entry 49 - List II. - Sections 9, 9A, and 25 of the MMDR Act limit the scope of Entry 50 - List II. Conclusion: The High Court disposed of the writ petitions, noting that the final decision on the levy of GST on mining activities is pending before the Supreme Court. Recovery proceedings pursuant to the impugned orders are to be kept in abeyance, and the petitioner is given liberty to file a statutory appeal without pre-deposit, as per the Supreme Court's decision.
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