No coercive action for GST Recovery when SC stayed Demand on grant of mining lease: HC

The Allahabad High Court in the matter of M/S Shri Uma Shankar Singh Vs. Commissioner (Appeal) Customs Central Goods and Services Tax and Central Excise Cgst ordered that No coercive action for GST Recovery when SC stayed Demand on grant of mining lease.

The Official Judgment Stated:

Learned counsel for the petitioner submits that identical issue is engaging the attention of this Court in Writ Tax No. 699 of 2022 in which this Court on 11.5.2023 has passed the following order:

“1. Heard Sri Vishnu Kesarwani, learned counsel for the petitioner; Sri Parv Agarwal, learned counsel appearing for respondent no.3 and Sri Jagdish Mishra, learned Standing Counsel for the State-respondents.

2. Present writ petition has been filed to assail the appeal order. Since the Tribunal has yet not been constituted, the present writ petition is being entertained. Challenge has been raised to the First Appeal Order dated 02.07.2021 arising from the earlier order dated 18.06.2018 passed under Section 73 of the U.P. GST Act, 2017. Second, challenge has been raised to the ex parte order dated 23.06.2021 passed by the State GST authority pursuant to a notice dated 15.03.2021. Both proceedings are stated to be for the same tax period being Financial Year 2017-18.

3. On merits, it has been submitted, no liability of GST may arise on payment of royalty to conduct mining activity. Reliance has been placed on a an interim order dated 15.11.2021 of this Court passed by a division bench in Writ Tax No. 475 of 2021 (M/s A.D. Agro Foods Pvt. Ltd. Vs. Union of India) wherein it has been observed as under:

“Upon the matter being taken up, learned counsel for the petitioner has vehemently urged that the royalty payment is tax and not consideration in the context of the privilege parted by the State allowing the petitioner and others to mine sand. That being the nature of the payment made by the petitioner, the same is not amenable to GST as it is not consideration either for sale of goods or service provided.

Further reliance has been placed on a Constitution Bench decision of the Supreme Court in India Cement Ltd. and Others vs. State of Tamil Nadu and Others (1990) 1 SCC 12, wherein, nature of royalty payment was considered and it was opined to be in the nature of tax, (in paragraph 34 of the report).

Also, it has been shown that a similar controversy is engaging the attention of the Supreme Court in M/s Lakhwinder Singh vs. Union of India andOrs. in Writ Petition (Civil) No. 1076 of 2021. On 04.10.2021, the Supreme Court has passed the below quoted order:

“Issue notice.

Tag with SLP(C) No 37326 of 2017.

Until further orders, payment of GST for grant of mining lease/royalty by the petitioner shall remain stayed.”

4. It has been stated that the Supreme Court has disposed of Writ Petition (Civil) No. 1076 of 2021 on the ground of alternative remedy.

5. Matter requires consideration, both on the issue of liability to pay GST and royalty as also as to jurisdictional error in the second proceeding for the same tax period.

6. Learned Standing Counsel prays for and is granted six weeks’ time to file counter affidavit. Petitioner shall have two weeks’ thereafter to file rejoinder affidavit.

7. List on 07.09.2022.

8. Until further order of this Court, demand of GST and payment of royalty pursuant to the orders dated 02.07.2021 and 23.06.2021 as also proceedings pursuant to the notice dated 15.03.2021 shall remain stayed.”

Learned counsel for the petitioner further placed reliance of the judgements of Division Bench of this Court in Writ Tax No. 1080 of 2023 (M/s Bhole Bhandari Stone Vs. Union of India) dated 18.9.2023 and Writ Tax No. 1160 of 2023 (Ms. Sai Baba Stone Works Vs. Union of India) dated 11.10.2023 and submits that as the issue involved in the present writ petition is similar, the benefit of the said orders may also be accorded to the petitioner.

In view of above, learned Standing Counsel prays for and is granted six weeks’ time to file counter affidavit. Petitioner shall have two weeks’ thereafter to file rejoinder affidavit.

List thereafter.

Until further order of this Court, no coercive action shall be taken against the petitioner in pursuance of impugned orders dated 31.7.2023 and 25.3.2023 and same shall be kept in abeyance.

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