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2024 (2) TMI 488 - MADRAS HIGH COURTLevy of Goods and Service Tax (GST) on Mining Lease / Royalty - Constitutional validity of Entry 17 (viii) of G.O.Ms.No.72 dated 29.06.2017 as amended by para 1 (e) of G.O.Ms.No.170 dated 31.12.2018 - validity of Circular No.164/20/2021-GST, CBIC – 190354/207/2021 – TO (TRU-II) – CEBEC dated 06.10.2021. The primary ground for the levy of Goods and Service Tax on royalty / seigniorage fee is that Royalty is a 'tax' and does not represent 'services'. HELD THAT:- Levy of tax on royalty has been the subject of controversy even under the Finance Act, 1994. The authorities levied Service Tax on royalty which was upheld by the Rajasthan High Court. The matters were carried in appeal(s) to the Apex Court and an order of interim stay was granted by the Hon'ble Supreme Court in Udaipur Chamber of Commerce and Industry Vs. Union of India [2018 (8) TMI 287 - SC ORDER] vide order dated 11th January, 2018 on a challenge to the judgment of the High Court of Rajasthan. Subsequent thereto, with the introduction of GST, tax was levied on royalty. The same was challenged before the Apex Court. The Hon'ble Supreme Court has granted an interim order with regard to levy of Goods and Service Tax on royalty in Lakhwinder Singh Vs. Union of India & Ors. [2021 (11) TMI 336 - SC ORDER]. Following directions have been issued: (i) In the cases, where the challenge is made to the show cause notices, the writ petitioners shall submit their objections / representations within a period of four weeks from the date of receipt of a copy of this order. (ii) Upon receipt of the objections / representations from the writ petitioners, the authority concerned shall proceed with the adjudication, on merits and in accordance with law, after affording reasonable opportunity of being heard to the petitioners. However, the orders of adjudication shall be kept in abeyance until the Nine Judge Constitution Bench decides the issue as to the nature of royalty. (iii) It is made clear that there shall be no recovery of GST on royalty until the Nine Judge Constitution Bench takes a decision. (iv) Needless to state that on the matters being decided, the writ petitioners if still aggrieved, shall redress their grievance(s), if any, before the appropriate forum, including by filing appeal(s). (v) Insofar as the challenge to the notification as well as the circular, it is open to the writ petitioners to act upon, after the outcome of the case pending before the Nine Judge Constitution Bench. (vi) It is also made clear that all the contentions are left open for the writ petitioners to raise in appropriate proceedings, after the outcome of the decision of the Nine Judge Constitution Bench. This batch of writ petitions are disposed of.
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