Supreme Court issues opinion on plea challenging 18% GST on mining operations



The petitions insist that the contested circular has far-reaching repercussions that every mining company has been required to pay goods and services tax on the amount of royalty paid for mining operations to the extent where the royalty paid by these companies is already a kind of tax paid to the government and, more importantly, what matter, i.e. the royalty being a tax, is pending before a bench of nine Supreme Court justices.

The petitioners are also asking for the suspension of the disputed circular of October 6 and the directives to the effect that GST cannot be collected on mining royalties.

The notifications and circulars in question are the notification of 06.28.2017 issued by the Union of India notifying the central tax rate on the provision of intra-state services, the notification of 06.29.2017 relating to the provision of services State of Madhya Pradesh, Intra-State Provision of Services Notification issued by the State of the UP and their respective modifications and Circular of 06.10.2021 issued by the Ministry of Finance, Department of Income (Tax Research Unit) providing clarification on applicable GST rates.

Applicants are required to pay GST on mining royalties paid to the state government in accordance with the respective mining leases.

It is suggested that this issue is pending before the Supreme Court in a batch of cases the main case of which is entitled Udaipur Chambers of Commerce and Industry v. Union of India SLP (Civil) n ° 37326 of 2017 see Ordinance of 11.01.2018 in which the suspension was granted for the payment of the service tax on the mining royalty until further notice and similarly in various tagged issues, the suspension was granted to the mining companies for the payment of the service tax on the mining royalty.

An excerpt from the petition reads as follows:

“This order of the Honorable Court of 15.01.2020 observed the following:

“The issue involved in these issues concerns the payment of the service tax on the royalty paid to the state government. List the questions after eight weeks. In Udaipur Chambers (supra) the same question of whether the service tax is levied on royalties paid to the state government in respect of mining operations is pending a decision before this Hon’ble Short. While admitting the said petition, see the order dt. 11.01.2018, this Hon’ble Court suspended the order of Hon’ble Rajasthan High Court, which confirmed the levy of the service tax. Hence the present petition, since the petitioners are located in the same way as the petitioner in the chambers of Udaipur (supra) and related petitions. Since this Hon’ble Court is already ruling on the same issue, the Applicants also request the freedom to assist this Hon’ble Court in its judgment.
It is argued that under reverse charge, companies must pay a service tax on the amount of mining royalties paid to the government. All mining companies engaged in mining are required to pay huge royalties (which is itself a tax) to the government for the exploitation of the quarries despite the fact that the royalty is the price of extracting the minerals of the land and represents the state’s share in these minerals and there is no element of state service provision in this regard, which is why the GST levy is clearly ultra vires the Act .

The applicants, while contesting said notifications and circulars as indicated in the preceding paragraphs, request the issuance of a writ in the nature of a Certiorari or any other appropriate writ, order or instruction rescinding said notices and circulars to the effect that no GST can be collected on dead royalties / rents paid by a mining lease holder who has obtained a mining lease by the state, and declare that the goods and services tax on dead royalties / rents payable in under a mining concession granted by the state is illegal, unjust, unconstitutional and without any rule of law. In addition to this, the Petitioners seek, through this Petition, reimbursement of the full amount of GST paid by the Petitioners out of the amount of royalties paid for mining to the Government.

“It is interesting to mention that a bench of seven judges from the Hon’ble Supreme Court in the India Cements and Ors case. vs. State of Tamil Nadu and Ors. (1990) 1 SCC 12 has already ruled that the mining royalty is a tax. The only thesis of the Applicants is that there can be no imposition of a tax on the tax, the mining royalty being here already a tax regularly paid by the Applicants. Moreover, the question of knowing whether the mining royalty is a tax or not is pending before a bench of nine judges of the Hon’ble Supreme Court in the case of Mineral Area Development Authority & Ors. vs. Steel Authority of India & Ors. (2011) 4 SCC 450. The mining royalty is a tax. The tax on services cannot be paid on another tax “, it is advanced.
Furthermore, it is argued that the provision of a “service” and the existence of a service provider and service recipient relationship between two parties is a sine qua non for the payment of the service tax. . However, there is no such relationship between the applicants and the State in the present case. It is further stated that a number of government notifications also reiterate this position that a mandatory levy is in the nature of a tax and that a service tax can no longer be imposed on such payments.
The Petitioners, through this Petition, seek reimbursement of the total amount paid by the Petitioners in respect of the GST on the dead rents / royalties to the state government and the rescission of the Notices and Circulars which led to the collection of GST on mining royalties and, in addition, cancel any and any notice of demand or justification notice following or in accordance with the name of the state government for the payment of GST on mining royalties in connection with ‘a reverse charge mechanism.

The written motions were drafted by Ms. Shriya Gilhotra, lawyer and filed via M / S. Chambers of Kartik Seth, AOR.

Case title: Ms. Associated Commerce v. Union Of India And Ors, WP (c) 1309 of 2021.; Minerals And Gold Kalash. v. Union of India and the Golds | WP (c) 1323 from 2021.

Click here to read / download the order

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