Can Govt Levy GST On Royalty? Rajasthan High Court Asks Advocate General Amid Conflicting Views, Hearing Tomorrow

During the course of hearing, Adv. Abhay Singla appearing on behalf of the petitioner informed that a writ petition involving the same issue in M/s Shivalik Silica Versus Union of India & Others was earlier dismissed by a Division Bench of Jaipur Bench on 17.12.2021. Subsequently in Shree Basant Bhandar Int Udyog Versus Union of India, a bunch of writ petitions were entertained by the Principal Bench at Jodhpur on the same issue and notices were issued and thereby an interim order was passed on 05.07.2022.

Considering the aforesaid aspect, division bench comprising Justice Manindra Mohan Shrivastava and Justice Shubha Mehta, observed,

"Taking into consideration the aforesaid aspect, we would request the Learned Advocate General to address the Court on the issue."

On July 5, the Principal Bench at Jodhpur had granted a stay on recovery of GST on royalty paid by the petitioners on mining activity. The order was delivered in a bunch of writ petitions filed primarily involving the issue of permissibility of raising demand of GST on royalty. The petitioners in these petitions challenged the notifications whereby, royalty paid by them on mining activity is being subjected to GST and/or notices issued for alleged incriminating discrepancies in returns after scrutiny and analogous proceedings.

While reserving the right of the respondents to move for vacation of ad interim stay, the Principal Bench comprising Justice Sandeep Mehta and Justice Kuldeep Mathur had directed that in the proposed recovery of GST on royalty shall remain stayed qua all the writ petitioners. However, the court had observed that the respondents shall be at liberty to continue with the proceedings which have been initiated under the impugned notices.

The Principal Bench had ordered that the notices shall be issued to the respondents in fresh matters. In such writ petitions wherein notices have been issued, the Registry shall check for service upon the respondents and where powers have been filed, names of the respective counsels shall be reflected, the Principal Bench had added.

Earlier, on 21.04.2022, the Principal Bench in the case of Shree Basant Bhandar Int Udyog v. Union of India [2022 LiveLaw (Raj) 146], had restrained the GST department from recovering GST on royalty paid on account of the excavation of sand for brick.

Notably, on 17.12.2021, this court in M/s Shivalik Silica v. Union of India & Ors. [D.B. Civil Writ Petition No.14849/2021] examined the issue of service tax on royalty, and held that this issue is already decided against the assessee in Udaipur Chambers of Commerce & Industry Vs. Union of India [2018 (8) G.S.T.L. 170 (Rajasthan)]. Moreover, the same controversy is under consideration under the 9-judge bench of the Supreme Court in Mineral Area Development Authority etc. v. M/s. Steel Authority of India and Ors., whereby, the Supreme Court has stayed payment of service tax for grant of mining lease/royalty.

The matter is next listed on 12.07.2022 i.e. tomorrow.

Adv. Abhay Singla appeared on behalf of the petitioner.

Case Title: M/s. Shri Kalyan Marbles v. The Union Of India & others