Patna High Court
M/S Buddha Uttam J.V., A Joint Venture vs The State Of Bihar on 18 April, 2025
Author: Rajeev Ranjan Prasad
Bench: Rajeev Ranjan Prasad
INDEX
S. No. Contents Page No.
1. Cause Title 3-11
2. Brief Facts of the Case 14-20
3. Submissions on behalf of the Petitioner:- 20-22
(i) Exclusion from GST - as has been 23-27
provided to Liquor Industry
(ii) Article 246A, notwithstanding the Non- 27-32
obstante clause cannot be pressed into
service to confer legislative power on the
State and the Centre to impost GST
(iii) Royalty is a hybrid of two constituents 32-36
i.e. distinction between fee for services and
compensatory fee
(iv) Taxable event - taking place prior to 36-46
coming into force of GST on Execution of
Agreement
4. Submissions on behalf of the State 46-56
5. Rejoinder on behalf of the Petitioners 56-63
6. Consideration:- 63-64
6.1 Acceptance of liability to pay GST 65
6.2 Question on which Advance Ruling sought 65-66
6.3 Order of Advance Ruling Authority 66-68
6.4 Challenge to the Order of Advance Ruling 68-71
Authority in Writ Jurisdiction
6.5 No Appeal Preferred by the Petitioner(s) 71-72
6.6 Stand of M/s BSCPL-Petitioner before the 72-76
Appellate Authority
6.7 Shift of Stand of the Petitioner 76-78
6.8 Royalty is not a Statutory Impost/Tax - 79-84
MADA Judgment
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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6.9 Royalty is to be paid only upon Exercise of 84-86
"Mineral Rights" - Incidence of Tax
6.10 Entry 50 of List II under Seventh Schedule 86-94
Article - 246A of the Constitution of India
6.11 Classification of Services - Notification No. 94-97
11/2017 -Central Tax (Rate) ; 27/2018-
Central Tax (Rate) dated 31.12.2018 and
Circular No. 164/2021 dated 06.10.2021
-discussed
6.12 Order of the Appellate Authority on 98-99
Advance Ruling- approved
6.13 Claim of Exemption Rightly Negatived by 99-100
the Appellate Authority
6.14 Transfer of Interest is Different from 100-101
Exercise of Mineral Rights - Royalty can be
used as a Measure of Tax on Royalty
6.15 Contention that Royalty comprises a 101-106
composite charge for regulatory and service
fee - Negatived
7. CWJC No. 9140 of 2023, 106-112
CWJC No. 9162 of 2023 and
CWJC No. 9947 of 2023
8. CWJC No. 11538 of 2023 112-114
9. CWJC No. 16764 of 2023 114-117
10. CWJC No. 17700 of 2023 117-120
CWJC No. 18206 of 2023
11. CWJC No. 2730 of 2024 120-124
CWJC No. 4297 of 2024
12. CWJC No. 4562 of 2024 124-128
13. CWJC No. 6389 of 2024 128-130
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.3531 of 2022
======================================================
Broad Son Commodities Private Limited A Company incorporated under the
provisions of the Companies Act, 1956 having its registered office at Dr.
Himanshu complex, Block Road, Koilwar Chouk, P.S. Koilwa, District
Bhojpur (Ara), through its Director Ashok Kumar aged about 66 years (male),
son of Ram Chandra Saw, resident of Village / Mohalla - Pareo, P.S. Bihta,
District- Patna.
... ... Petitioner
Versus
1. The Union of India Through the Commissioner, Central GST and Central
Excise, Patna, having its office at Annexe Building, Central Revenue
Building, Bir Chand Patel Marg, Patna.
2. The State of Bihar Through the Principal Secretary, Commercial Taxes
Department, Government of Bihar.
3. The Principal Secretary cum Commissioner, State Tax, Commercial Taxes
Department, Government of Bihar.
4. The Additional Commissioner, Commercial Taxes Department, Patna.
5. The Joint Commissioner of State Tax, Shahabad Circle, Ara.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 16361 of 2022
======================================================
Broad Son Commodities Private Limited a Company incorporated office at
Dr. himanshu Complex, Block Road, Koilwar Chouk, P.S. Koilwar, District
Bhojpur (Ara), through its Director Ashok Kumar aged about 67 Years
(Male), Son of Ram Chandra Saw, Resident of Village/Mohalla-Pareo, P.S.
Bihta, District-Patna.
... ... Petitioner
Versus
1. The State of Bihar through the Principal Secretary, Commercial Taxes
Department, Government of Bihar.
2. The Principal Secretary Cum Commissioner, State Tax, Commercial Taxes
Department, Government of Bihar.
3. The Joint Commissioner of State Tax, Shahabad Circle, Ara.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 17070 of 2022
======================================================
Broad Son Commodities Private Limited a Company incorporated under the
provisions of the Companies Act, 1956 having its registered office at Dr.
Himanshu Complex, Block Road, Koilwar Chouk, P.S. Koilwar, District
Bhojpur (Ara), through its Director Ashok Kumar, aged about 67 years
(male), son of Ram Chandra Saw, resident of Village/Mohalla-Pareo, P.S.
Bihta, District Patna.
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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... ... Petitioner
Versus
1. The State of Bihar through the Principal Secretary, Commercial Taxes
Department, Government of Bihar.
2. The Principal Secretary cum Commissioner, State Tax, Commercial Taxes
Department, Government of Bihar.
3. The Joint Commissioner of State Tax, Shahabad Circle, Ara.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 17077 of 2022
======================================================
Broad Son Commodities Private Limited a Company incorporated under the
provisions of the Companies Act, 1956 having its registered office at Dr.
Himanshu Complex, Block Road, Koilwar Chouk, P.S. Koilwar, District
Bhojpur (Ara), through its Director Ashok Kumar aged about 67 years (male),
son of Ram Chandra Saw, resident of Village/ Mohalla- Pareo, P.S. Bihta,
District- Patna.
... ... Petitioner
Versus
1. The State of Bihar through the Principal Secretary, Commercial Taxes
Department, Government of Bihar.
2. The Principal Secretary cum Commissioner, State Tax, Commercial Taxes
Department, Government of Bihar.
3. The Joint Commissioner of State Tax, Shahabad Circle, Ara.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 17078 of 2022
======================================================
Broad Son Commodities Private Limited a Company incorporated under the
provisions of the Companies Act, 1956 having its registered office at Dr.
Himanshu Complex, Block Road, Koilwar Chouk, P.S. Koilwar, District
Bhojpur (Ara), through its Director Ashok Kumar, aged about 67 years
(male), son of Ram Chandra Saw, resident of Village/Mohalla-Pareo, P.S.
Bihta, District Patna.
... ... Petitioner
Versus
1. The State of Bihar through the Principal Secretary, Commercial Taxes
Department, Government of Bihar.
2. The Principal Secretary cum Commissioner, State Tax, Commercial Taxes
Department, Government of Bihar.
3. The Joint Commissioner of State Tax, Shahabad Circle, Ara.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 18535 of 2022
======================================================
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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Broad Son Commodities Private Limited a Company incorporated under the
provisions of the Companies Act, 1956 having its registered office at Dr.
Himanshu Complex, Block Road, Koilwar Chouk, P.S. Koilwar, District
Bhojpur (Ara), through its Director Ashok Kumar, aged about 67 years
(male), son of Ram Chandra Saw, resident of Village/Mohalla-Pareo, P.S.
Bihta, District Patna.
... ... Petitioner
Versus
1. The State of Bihar through the Principal Secretary, Commercial Taxes
Department, Government of Bihar.
2. The Principal Secretary cum Commissioner, State Tax, Commercial Taxes
Department, Government of Bihar.
3. The Joint Commissioner of State Tax, Shahabad Circle, Ara.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 9140 of 2023
======================================================
Singh and Giri Infrastructure Pvt. Ltd. a Private Limited Company
incorporated Under the Companies Act, 1956 having its office at Narayanpur,
Bagha-845105 through its Director Shri Harendra Singh (Male, aged about 68
Yeats) Son of Late Nagina Singh residing at Ward No.5, Sukhwan Road,
Narayanpur, Bagha 02, P.S. Naryanpur, West Champaran, Bihar.
... ... Petitioner
Versus
1. State of Bihar through Commissioner of State Tax, Bihar, Patna Having its
Office at Vikas Bhawan, Patna.
2. Addl. Commissioner of State Tax (Appeal), Tirhut Division, Muzaffarpur.
3. Asst. Commissioner of State Tax, Bagaha Circle, Bagaha.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 9162 of 2023
======================================================
Singh and Giri Infrastructure Pvt. Ltd. A Private Limited Company
incorporated under the Companies Act, 1956 having its office at Narayanpur,
Bagha- 845105 through its Director Shri. Harendra Singh (Male, aged about
68 years) son of Late Nagina Singh residing at Ward No. 5, Sukhwan Road,
Narayanpur, Bagha- 02, P.S.- Naryanpur, West Champaran, Bihar.
... ... Petitioner
Versus
1. The State of Bihar through Commissioner of State Tax, Bihar, Patna having
its office at Vikas Bhawan, Patna.
2. Addl. Commissioner of State Tax (Appeal), Tirhut Division, Muzaffarpur.
3. Asst. Commissioner of State Tax, Bagaha Circle, Bagaha.
... ... Respondents
======================================================
with
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Civil Writ Jurisdiction Case No. 9947 of 2023
======================================================
Singh and Giri Infrastructure Pvt. Ltd. a Private Limited Company
incorporated under the Companies Act, 1956 having its office at Narayanpur,
Bagha-845105 through its Director Shri Harendra Singh, Male, aged about 68
years, son of Late Nagina Singh, residing at Ward No. 5, Sukhwan Road,
Narayanpur, Bagha-02, P.S. Naryanpur, West Champaran, Bihar.
... ... Petitioner/s
Versus
1. State of Bihar through Commissioner of State Tax, Bihar, Patna having its
office at Vikas Bhawan, Patna.
2. Addl. Commissioner of State Tax (Appeal), Tirhut Division, Muzaffarpur.
3. Asst. Commissioner of State Tax, Bagaha Circle, Bagaha.
... ... Respondent/s
======================================================
with
Civil Writ Jurisdiction Case No. 11538 of 2023
======================================================
M/s Umesh Kumar (a sole proprietorship firm) having it registered office -
Shekhpur, P.S. - Yehaipur, District - Muzaffarpur through its Sole Proprietor
Mr. Umesh Kumar, aged about 54 years, S/o Jiyalal Rai.
... ... Petitioner
Versus
1. The Union of India through the Secretary, Ministry of Finance, Department
of Revenue, having its office at Room No. 46, North Block, P.O. and P.S.
North Block, New Delhi - 110001.
2. The Chief Commissioner, CGST and CX, Office at - C.R Building, 1st
Floor, Bir Chand Patel Path, Patna, Bihar.
3. The State of Bihar through Commissioner, BGST, New Secretariat Patna.
4. Joint Commissioner of State Tax, Muzaffarpur East Circle, District -
Muzaffarpur, Bihar.
5. Deputy Commissioner of State Tax, Muzaffarpur East Circle, Muzaffarpur.
6. Assistant Commissioner of State Tax, Muzaffarpur East Circle, Muzaffarpur.
7. Additional Commissioner of State Tax (Appeal) Tirhut Division,
Muzaffarpur.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 16764 of 2023
======================================================
M/s Buddha Uttam J.V., a Joint Venture, having its Office at 302, Maya
Enclave, Road No.10, Patel Nagar, P.S. Shastri Nagar, Town and District
Patna through its Authorized Representative Amit Kumar, Male, Aged about
43 Years son of Sri Vinod Kumar Singh, Resident of 302, Maya Enclave,
Road No.10, Patel Nagar, P.S. Shastria Nagar, Town and District Patna.
... ... Petitioner
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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Versus
1. The State of Bihar through the Commissioner cum Principal Secretary,
Department of Commercial Taxes, Vikash Bhavan, Bailey Road, Patna.
2. The Commissioner cum Principal Secretary, Department of Commercial
Taxes, Vikash Bhavan, Bailey Road, Patna.
3. The Principal Secretary, Department of Mines and Geology, Government of
Bihar, Vikash Bhavan, Bailey Road, Patna.
4. The Additional Chief Secretary cum Mines Commissioner, Department of
Mines and Geology Government of Bihar, Vikash Bhavan, Bailey Road
Patna.
5. The Joint Commissioner, State Tax, Sahabad Circle Bhojpur at Arrah.
6. The Collector-cum-District Mining Officer, Bhojpur (Arrah).
7. The Mines Development Officer, District Mining Office, Bhojpur at Arrah.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 17700 of 2023
======================================================
M/s Mahadev Enclave Pvt. Ltd. a registered company having its registered
office at B- 37, Ayodhya Marg, Hanuman Nagar, Jaipur, Rajasthan through its
authorised signatory namely Rajendra Singh male aged about 41 years S/o
Bahadur Singh R/o Village And Post- Sawnlodha, Ladkhani, Khuribadi,
District - Sikar, Rajasthan - 332315.
... ... Petitioner
Versus
1. The State of Bihar through the Commissioner, Department of State Taxes,
Government of Bihar, Patna.
2. The Additional Chief Secretary, Department of Mines and Geology, Govt. of
Bihar, Patna.
3. The Director, Department of Mines and Geology, Govt. of Bihar, Patna.
4. The Joint Commissioner of State Taxes (Incharge), Bhagalpur Circle - 2,
Bhagalpur.
5. The Mines Development Officer, Banka.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 18206 of 2023
======================================================
M/s Maiher Developers a Partnership firm having its Place of Business at
First Floor, D-2 MIG, Harmu Housing Colony, P.O. Harmu, District-Ranchi,
Jharkhand-834002 through one of its Partners Namely Anil Kumar Singh,
Resident of Kumhar Para, Sonwadangal, Dumka, Jharkand -814101.
... ... Petitioner
Versus
1. The State of Bihar through the Commissioner, Department of State Taxes,
Government of Bihar, Patna.
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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2. The Additional Chief Secretary, Department of Mines and Geology, Govt. of
Bihar, Patna.
3. The Director, Department of Mines and Geology, Govt. of Bihar, Patna.
4. The Joint Commissioner of State Taxes (In Charge) Bhagalpur Circle-2,
Bhagalpur.
5. The Mines Development Officer, Banka.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 2730 of 2024
======================================================
M/s Sanjay Kumar, a Proprietorship Firm, Having its Office at Village and
P.O. Ekbalganj Nisarpura, P.S. Rani Talab Kampa, District Patna, through its
Partner, Sanjay Kumar, aged about 47 Years (Male), Son of Yamuna Singh
Yadav, Resident of Village and P.O. Ekbalganj Nisarpura, P.S. Rani Talab
Kampa, District- Patna
... ... Petitioner
Versus
1. The State of Bihar through the Commissioner, Department of State Taxes,
Government of Bihar, Patna.
2. The Additional Commissioner of State Taxes, Patna.
3. The Deputy Commissioner, State Taxes, Danapur Circle-1, Patna.
4. The Additional Chief Secretary, Department of Mines and Geology,
Government of Bihar, Patna.
5. The Director, Department of Mines, Bihar, Patna.
6. The District Magistrate, Patna.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 4297 of 2024
======================================================
Damas Civil Construction India Private Limited a Company incorporated
under Companies Act, having its Officer at Ward No.- 18, Near Kaimur
Astambh, Belwatia Pokhara, Kaimur, Bhabhua through its Director Mukesh
Kumar, aged about 44 years (male), son of Abhiram Sharma, Resident of
Village- Bambhai, P.S.- Karpi, District- Arwal.
... ... Petitioner
Versus
1. The State of Bihar through the Commissioner, Department of State Taxes,
Government of Bihar, Patna.
2. The Additional Commissioner of State Taxes, Patna.
3. The Joint Commissioner, State Taxes, Bhabhua Circle, Bhabhua.
4. The Director, Department of Mines and Geology, Government of Bihar,
Patna.
5. The District Magistrate cum Collector, Patna.
... ... Respondents
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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======================================================
with
Civil Writ Jurisdiction Case No. 4562 of 2024
======================================================
Rana Uday Pratap Singh son of Rana Ran Vijay Pratap Singh, Resident of
Village Bishunpur Nala, Jaiprakash Nagar, P.S. Dhanbad, District Dhanbad.
... ... Petitioner
Versus
1. The State of Bihar through the Commissioner, Department of State Taxes,
Government of Bihar, Patna.
2. The Additional Commissioner of State Taxes, Patna.
3. The Joint Commissioner State Taxes, Shahabad Circle, Ara, Bhojpur.
4. The Additional Chief Secretary, Department of Mines and Geology,
Government of Bihar, Patna.
5. The Director, Department of Mines and Geology, Government of Bihar,
Patna.
6. The District Magistrate cum Collector, Bhojpur.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 6389 of 2024
======================================================
M/s. Mona Bricks Shahjangi, Mouza Parbatti, Bhagalpur through its
proprietor Shah Afroze Hossain @ S. Afroze Hossain (Male), aged about 60
years, son of Shah Mansoor Hussain, resident of Shahjangi, Near Shahjangi
Mazar, Habibpur, P.S. Habibpur, District- Bhagalpur.
... ... Petitioner
Versus
1. The State of Bihar through the Commissioner State Tax-cum-Principal
Secretary, Commercial Taxes Department, Bihar, Patna having its office at
Vikas Bhawan, Patna.
2. The Commissioner State Tax-cum Principal Secretary, Commercial Taxes
Department, Bihar, Patna having its office at Vikas Bhawan, Patna.
3. The Joint Commissioner State Tax, Bhagalpur Circle- 2, Bhagalpur.
4. The Deputy Commissioner of State Tax, Bhagalpur Circle- 2, Bhagalpur.
... ... Respondents
======================================================
Appearance :
(In Civil Writ Jurisdiction Case No. 3531 of 2022)
For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate
Mr. Suraj Samdarshi, Advocate
Mr. Avinash Shekhar, Advocate
Mr. Vijay Shanker Tiwari, Advocate
Ms. Abhilasha Jha, Advocate
Ms. Simran Kumari, Advocate
For the UOI : Dr. Krishna Nandan Singh, Sr. Advocate
Mr. Anshuman Singh, Sr. SC (CGST & CX)
Mr. Shivaditya Dhari Sinha, Advocate
(In Civil Writ Jurisdiction Case No. 16361 of 2022)
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate
Mr. Suraj Samdarshi, Advocate
Mr. Avinash Shekhar, Advocate
Mr. Vijay Shanker Tiwari, Advocate
Ms. Abhilasha Jha, Advocate
Ms. Simran Kumari, Advocate
For the Respondent/s : Mr.Vikash Kumar (SC-11)
(In Civil Writ Jurisdiction Case No. 17070 of 2022)
For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate
Mr. Suraj Samdarshi, Advocate
Mr. Avinash Shekhar, Advocate
Mr. Vijay Shanker Tiwari, Advocate
Ms. Abhilasha Jha, Advocate
Ms. Simran Kumari, Advocate
For the Respondent/s : Mr.Vikash Kumar (SC-11)
(In Civil Writ Jurisdiction Case No. 17077 of 2022)
For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate
Mr. Suraj Samdarshi, Advocate
Mr. Avinash Shekhar, Advocate
Mr. Vijay Shanker Tiwari, Advocate
Ms. Abhilasha Jha, Advocate
Ms. Simran Kumari, Advocate
For the Respondent/s : Mr.Vikash Kumar ( SC-11 )
(In Civil Writ Jurisdiction Case No. 17078 of 2022)
For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate
Mr. Suraj Samdarshi, Advocate
Mr. Avinash Shekhar, Advocate
Mr. Vijay Shanker Tiwari, Advocate
Ms. Abhilasha Jha, Advocate
Ms. Simran Kumari, Advocate
For the Respondent/s : Mr.Vikash Kumar ( SC-11 )
(In Civil Writ Jurisdiction Case No. 18535 of 2022)
For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate
Mr. Suraj Samdarshi, Advocate
Mr. Avinash Shekhar, Advocate
Mr. Vijay Shanker Tiwari, Advocate
Ms. Abhilasha Jha, Advocate
Ms. Simran Kumari, Advocate
For the Respondent/s : Mr.Vikash Kumar (SC-11)
(In Civil Writ Jurisdiction Case No. 9140 of 2023)
For the Petitioner/s : Mr. D.V.Pathy, Sr. Advocate
Mr. Sadashiv Tiwari, Advocate
Mr. Hiresh Karan, Advocate
Ms. Shivani Dewalla, Advocate
Ms. Prachi Pallavi, Advocate
For the Respondent/s : Mr.Vikash Kumar (SC-11)
(In Civil Writ Jurisdiction Case No. 9162 of 2023)
For the Petitioner/s : Mr. D.V.Pathy, Sr. Advocate
Mr. Sadashiv Tiwari, Advocate
Mr. Hiresh Karan, Advocate
Ms. Shivani Dewalla, Advocate
Ms. Prachi Pallavi, Advocate
For the Respondent/s : Mr.Vikash Kumar (SC-11)
(In Civil Writ Jurisdiction Case No. 9947 of 2023)
For the Petitioner/s : Mr. D.V.Pathy, Sr. Advocate
Mr. Sadashiv Tiwari, Advocate
Mr. Hiresh Karan, Advocate
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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Ms. Shivani Dewalla, Advocate
Ms. Prachi Pallavi, Advocate
For the Respondent/s : Mr.Vikash Kumar ( SC-11 )
(In Civil Writ Jurisdiction Case No. 11538 of 2023)
For the Petitioner/s : Mr. Anurag Saurav, Advocate
Mr. Abhishek Kumar, Advocate
Ms. Prity Kumary, Advocate
Mr. Sharda Raje Singh, Advocate
Mr. Ankesh Bibhu, Advocate
Mr. Vaibhav Kumar, Advocate
For the State : Mr. Vivek Prasad, GP-7
Ms. Roona, AC to GP-7
For the UOI : Dr. Krishna Nandan Singh, Sr. Advocate
Mr. Anshuman Singh, Sr. SC (CGST & CX)
Mr. Shivaditya Dhari Sinha, Advocate
(In Civil Writ Jurisdiction Case No. 16764 of 2023)
For the Petitioner/s : Mr. Mohit Agarwal, Advocate
Mr. Lokesh Kumar, Advocate
Mr. Vikash Khanna, Advocate
For the Respondent/s : Mr. Vivek Prasad ( GP 7 )
Ms. Roona, AC to GP-7
(In Civil Writ Jurisdiction Case No. 17700 of 2023)
For the Petitioner/s : Mr.Gautam Kumar Kejriwal, Advocate
For the Respondent/s : Mr.Standing Counsel ( 11 )
(In Civil Writ Jurisdiction Case No. 18206 of 2023)
For the Petitioner/s : Mr. Gautam Kumar Kejriwal, Advocate
For the Respondent/s : Mr. Standing Counsel (11)
(In Civil Writ Jurisdiction Case No. 2730 of 2024)
For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate
Mr. Suraj Samdarshi, Advocate
Mr. Avinash Shekhar, Advocate
Mr. Vijay Shanker Tiwari, Advocate
Ms. Abhilasha Jha, Advocate
Ms. Simran Kumari, Advocate
For the Respondent/s : Mr. Standing Counsel (11)
(In Civil Writ Jurisdiction Case No. 4297 of 2024)
For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate
Mr. Suraj Samdarshi, Advocate
Mr. Avinash Shekhar, Advocate
Mr. Vijay Shanker Tiwari, Advocate
Ms. Abhilasha Jha, Advocate
Ms. Simran Kumari, Advocate
For the Respondent/s : Mr. Standing Counsel 11
(In Civil Writ Jurisdiction Case No. 4562 of 2024)
For the Petitioner/s : Mr. Sujit Ghosh, Sr. Advocate
Mr. Suraj Samdarshi, Advocate
Mr. Avinash Shekhar, Advocate
Mr. Vijay Shanker Tiwari, Advocate
Ms. Abhilasha Jha, Advocate
Ms. Simran Kumari, Advocate
For the Respondent/s : Mr. Standing Counsel (11)
(In Civil Writ Jurisdiction Case No. 6389 of 2024)
For the Petitioner/s : Mr. Abdul Mannan Khan, Advocate
Mr. Binay Kumar, Advocate
Mr. Hafiz Shahbaz Arif, Advocate
For the Respondent/s : Mr. Vivek Prasad, GP-7
Ms. Roona, AC to GP-7
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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======================================================
CORAM: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD
and
HONOURABLE MR. JUSTICE SOURENDRA PANDEY
CAV JUDGMENT
(Per: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD)
Date : 18-04-2025
In the present batch of writ applications, the petitioners
are raising a common question for consideration. On the request of
the parties, the writ applications have been tagged and heard
together on various dates. Mr. Sujit Ghosh, learned Senior
Advocate, assisted by Mr. Suraj Samdarshi, learned Advocate has
led the arguments. CWJC No. 3531 of 2022 has been taken as lead
case. This Court would, therefore, refer the prayers and pleadings
in the said writ application at first instance. The other learned
Advocates for the petitioners have also made their submissions.
The main contesting respondent is the State of Bihar. Mr. Vikas
Kumar, learned Advocate and Standing Counsel No. 11 for the
State has argued the matter at length.
2. By this common judgment, all the writ applications
are being disposed of. In the lead case being CWJC No. 3531 of
2022, the petitioner has prayed for various reliefs. This Court
would reproduce the reliefs prayed in the writ application
hereinbelow:-
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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"i) To issue an appropriate writ, order or direction in the
nature of certiorari for quashing order contained in
memo no 341 dated 10.12.2021 passed by Appellate
Authority for Advance Ruling, Bihar in Case no.
AAAR/01/2021 (Annexure 11) whereby and wherein the
appeal of the department against order dated 29.09.2020
passed by the Bihar Authority for Advance Ruling
Goods And Service Tax contained in Advance Ruling no.
BIH/13AAR/02/2020, has been rejected however the
services of the petitioner has been held to be taxable at
the rate of 18% (9% CGST+ 9% SGST) during the
period 01.07.2017 to 31.12.2018 and at the rate of 18%
18% (9% CGST + 9% SGST) post 01.01.2019, on
wholly erroneous grounds and without considering the
case of the petitioner.
ii) During the pendency of this writ application the
Respondents may be directed not to take any coercive
steps against the petitioner for recovery of the disputed
tax amount.
iii) This Hon'ble Court may further adjudicate and hold
that the services provided by the State of Bihar to the
petitioner by way of grant of mineral concession for
winning sand is not leviable with GST in light of the
specific exemption granted by Sl no. 64 of notification
no 12/2017 dated 28.06.2017 and therefore the petitioner
is not liable to pay GST under Reverse Charge
Mechanism.
iv) This Hon'ble Court may adjudicate and hold that
royalty being in the nature of statutory impost is a tax
and therefore the same cannot be exigible to further
taxation?
v) This Hon'ble Court may adjudicate and hold that the
grant of mineral concessional is merely a statutory
function/duty under provisions of law and therefore
would not be exigible to Good and Service Tax.
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vi) This Hon'ble Court may adjudicate and hold that the
grant of mineral concessional does not amount of
rendition of any service and therefore the same does not
attract the levy of Good and Service Tax.
vii) This Hon'ble Court may adjudicate and hold that the
grant of mining lease does not involve any skill based or
performance based activity and thus the same will not
attract the levy of Good and Service Tax.
viii) This Hon'ble Court may further adjudicate and hold
that the expression "assignment of "right to use" any
natural resource" would include within its ambit the
right to exploit/extract and sell the natural resource
ix) This Hon'ble Court may further adjudicate and hold
that the order of Appellate Authority for Advance
Ruling, Bihar dated 10.12.2021 is bad in law inasmuch
as the same has been passed without considering the
order contained in memо nо. 8763 dated 22.12.2020
passed by the Commissioner, Central GST and Central
Excise, Patna 1, (Annexure 13), which was an order
passed in relation to this petitioner with respect to a
proceeding initiated under service tax regime, in which
the claim of similar exemption under Sl. No. 61 of the
Notification nо. 22/2016-ST dated 13.04.2016 was
allowed and the proceeding was dropped.
x) To grant any other relief or reliefs which the Petitioner
may be found entitled to in the facts and circumstances
of the case."
Brief Facts of the Case
3. The petitioner is a company registered under the
Companies Act, 1956 (hereinafter called 'the petitioner-company'
or 'M/s BSCPL'). It is engaged in taking settlement of the sand
ghats in the auction held by the Department of Mines and Geology,
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Government of Bihar. The petitioner-company became the
successful bidder for the sand ghats of the district of Patna,
Bhojpur and Saran as one unit, Rohtas and Aurangabad as one
unit, Jamui and Lakhisarai as one unit and other district as
individual units for a period of five years i.e. from 2015 to 2019. A
copy of the tender document has been brought on record as
Annexure '3' to the writ application.
4. It is the case of the petitioner that a work order was
issued in favour of M/s BSCPL for the district of Patna, Saran and
Bhojpur. Yearly agreements were executed between the State of
Bihar and the petitioner for the district of Patna and Bhojpur. For
Saran, it is stated that the agreements were not executed, rather
only yearly work orders were issued. For all the three districts i.e.
Patna, Saran and Bhojpur, the auction amount for the year 2015
was Rs. 1,15,31,00,000/- (Rs. 115 crores and 31 lakhs only). The
petitioner has given the yearly royalty amount required to be paid
by the petitioner for the three districts which are as under:-
2015 Rs. 1,15,31,00,000/-
2016 Rs. 1,38,37,20,000/-
2017 Rs. 1,66,04,64,000/-
2018 Rs. 1,99,25,56,800/-
2019 Rs. 2,39,10,68,160/-
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5. According to the petitioner, under the Sand Policy as
contained in Notification No. 2887 dated 22.07.2014, tender
document and Letter No. 506 dated 21.10.2014, the State
Government had settled the sand ghats for a period of five years. It
was clarified that the settlement amount for the said period for five
years shall be payable in five equal yearly installments. The yearly
settlement amount for the year 2015 shall be the auction amount. It
was specified that for the subsequent years, the settlement amount
shall be 120% of that of the previous year. The first installment of
50% of the yearly installment amount was to be paid by 15th
December of the previous year, 25% was to be paid before 15th
April and rest 25% was to be paid before 15th September.
6. It is the case of the petitioner that at the time of
conferment of the right upon the petitioner i.e. 21.12.2014, Bihar
Value Added Tax Act, 2005 (hereinafter referred to as the 'Bihar
VAT Act' or the 'Act of 2005') was prevailing and according to the
Sand Policy, the petitioner was liable to pay Value Added Tax (in
short 'VAT') only at the rate of 5%. It is the case of the petitioner
that till the promulgation of the Goods and Services Tax Law
(hereinafter referred to as the 'GST'), the petitioner was
discharging its tax liability under the Bihar VAT Act. The
petitioner discharged its tax liability on the royalty paid to the
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Government under Reverse Charge Mechanism (in short 'RCM')
by paying GST at the rate of 5% (2.5% CGST and 2.5% SGST)
under the heading 9973, group 99733 and tariff code 99337
"licensing services for the right to use minerals including its
exploration and evaluation" which attracted the same rate of GST
as on supply of like goods involving transfer of title in goods.
7. It is the case of the petitioner that the aforesaid
classification of services has been accepted by the Central Board
of Indirect Taxes and Customs (In short 'CBIC') in its Circular No.
164/20/2021
and GST dated 06.10.2021 in which at paragraph
‘9.3.1’ it has been clarified that supply of service by way of
granting mineral exploration and mining rights most appropriately
fall under service code 997337. It has also been clarified that for
the period 01.07.2017 till 31.12.2018 such services shall attract tax
at the rate of 18%.
8. It is the case of the petitioner that in order to confirm
whether the petitioner was rightly discharging its tax liability on
royalty paid to the Government under ‘RCM’ at the rate of 5% by
classifying the same under residual entry of serial no. 17 of
Notification No. 11 of 2017, the petitioner filed an application for
advance ruling under Section 97 of the Central Goods and Services
Tax Act, 2017 (in short ‘CGST Act‘) and Section 97 of the Bihar
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Goods and Services Tax Act, 2017 (in short ‘BGST Act’). The
Advance Ruling Authority opined vide order as contained in
Memo No. 1517 dated 29.09.2020 that the service received by the
petitioner is covered under the Service Accounting Code (In short
‘SAC’) 997337. The Advance Ruling Authority held that the
activity undertaken by the applicant attracts 5% GST (2.5% CGST
+ 2.5% SGST) up to 31.12.2018 and is taxable at the rate of 18%
(9% CGST + 9% SGST) from 01.01.2019 onwards under the
residual increase of serial no. 17 of the Notification No. 11 of 2017
dated 28.06.2017 as amended by Notification No. 27 of 2018 dated
31.12.2018.
9. The petitioner challenged the order of the Advance
Ruling Authority before this Court in a writ application, the writ
was disposed of vide order dated 07.07.2021 with liberty to the
petitioner to prefer an appeal before the Appellate Authority for
advance ruling. Learned counsel for the petitioner has submitted
that the petitioner has not preferred any appeal against the order of
Advance Ruling Authority. The order of the Advance Ruling
Authority as contained in Memo No. 1517 dated 29.09.2020 has
been brought on record as Annexure ‘7’ to the writ application.
10. It appears that while the petitioner chose not to file
an appeal against the order of the Advance Ruling Authority, the
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respondent Joint Commissioner, State Tax Shahabad Circle, Ara
preferred an appeal on 24.01.2021 before the Appellate Authority
for advance ruling against the order as contained in Annexure ‘7’
to the writ application. It was contended on behalf of the appellant
that the service received by the petitioner is covered under SAC
999113 which attracts GST at the rate of 18% from 01.07.2017. It
was also contended that if there is any doubt then the service
should be covered by heading 9997, other service group 99979
service code 999799 on which GST is payable at the rate of 18%.
The appeal was registered as Case No. AAAR/01/2021. A memo
of appeal has been enclosed with the writ application as Annexure
‘9’.
11. It is the case of the petitioner that the petitioner
appeared before the Appellate Authority for advance ruling, Bihar
and filed its counter affidavit raising all the grounds. The petitioner
claimed exemption from levy of GST by virtue of entry at serial
no. 64 of Notification No. 12 of 2017 dated 28.06.2017. The
petitioner also placed reliance on the order contained in Memo No.
8763 dated 22.12.2020 passed by the Commissioner, Central GST
and Central Excise, Patna 1 which was an order passed in relation
to this petitioner with respect to a proceeding initiated under
service tax regime, in which the claim of similar exemption under
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Serial No. 61 of the Notification No. 22/2017-ST dated 13.04.2016
was allowed and the proceeding was dropped.
12. Learned counsel for the petitioner has further stated
that vide order contained in Memo No. 341 dated 10.12.2021, the
Appellate Authority for advance ruling allowed the appeal
preferred by the Joint Commissioner, State Taxes/Department.
However, the services of the petitioner has been held to be taxable
at the rate of 18% (9% CGST+ 9% SGST) during the period
01.07.2017 to 31.12.2018 and at the rate of 18% (9% CGST+ 9%
SGST) post 01.01.2019. The claim for exemption by the petitioner
has been rejected. A copy of the appellate order of the Appellate
Authority for advance ruling, Bihar is Annexure ’11’ to the writ
application which is under challenge in the present writ
application.
Submissions on behalf of the Petitioner
13. The contention of the petitioner is that the service of
‘renting or leasing of immovable property/sand ghats’ is rendered
by the Government of Bihar in accordance with Section 7 of the
CGST Act, it comes within the scope of “supply” as envisaged
under the said provision and it is foremost duty of the Government
of Bihar to pay the GST amount. The petitioner claims that it is not
the liability of the recipient i.e. the petitioner to make payment of
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GST on ‘RCM’ basis, otherwise it would completely defeat the
purpose of Section 7 of the CGST/BGST Act, 2017.
14. It is the contention of the petitioner that no service
tax was leviable prior to 2016 on mining royalty/dead rent as the
same were in the nature of statutory levies and services provided
by the Government in pursuance/performance of their statutory
functions. Post the amendments in 2015 and 2016, all services
provided by a Government or local authority were brought under
the ambit of service tax. By expressly providing that only those
services by way of assignment of right to use any natural resource
where such right was assigned before 01.04.2016 are exempted
from service tax, it has been impliedly provided that any services
provided by the government by way of assignment of right to use
any natural resource where such right was assigned after
01.04.2016 would be exigible to service tax. It is the case of the
petitioner that the mining royalty/dead rent was fixed and
determined way back in January 2015, therefore, the incidence of
tax has occurred much before coming into force of the GST laws.
15. Mr. Sujit Ghosh, learned Senior counsel leading the
arguments on behalf of the petitioners has formulated his
arguments under the following heads:-
“A. Assuming arguendo that the grant of mineral
concession/mining leases amounts to supply of
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is violative of Article 14 and 19(1)(g);
B. Assuming arguendo that the grant of mineral
concession/mining leases are not hit by Article 14 and
19(1)(g), the imposition of GST under Article 246A is
without jurisdiction, since the power to levy tax on
mineral rights is exclusively with the State
Government under Entry 50, List II of the Seventh
Schedule;
C. Assuming arguendo that grant of mineral
concession/mining leases entail supply of services for
a consideration, such consideration does not comprise
only of service fee. Instead, it is a composite charge
for regulatory as well as service fee and absent any
mechanism to statutorily split these two elements, a
charge of GST on the entire sum would be bad in law;
D. Assuming arguendo that the entire royalty amount
is construed as being towards service fee, then, if the
taxable event has taken place prior to coming into
force of GST, the State would have no jurisdiction to
impose GST on such cases, merely because periodic
payment of royalty is made post the commencement of
GST; and
E. Assuming arguendo that this Hon’ble Court is not
persuaded with the proposition enumerated in Para A
to D above, then the impugned decision of the
Appellate Authority of Advance Ruling is bad in law
and accordingly, the decision rendered by the Original
Advance Ruling Authority holding that the rate of
GST on services falling under SAC 997337 attracts
GST at 5% up to 31.12.2018 and 18% from 1.1.2019,
should be upheld.”
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(i) Exclusion from GST – as has been provided to
Liquor Industry
16. In order to support his submissions under (A) above,
learned Senior counsel would submit that the present dispute falls
within the principles laid down by the Hon’ble Supreme Court in
the case of State of Gujarat vs. Shri Ambica Mills Ltd. reported
in (1974) 4 SCC 656. Paragraph ’55’ has been relied upon to
submit that under the Constitution of India, equals are required to
be treated equally and unless there is an intelligible differentia
having a rational nexus with the object of the legislation,
classification amongst equals cannot be carried out so as to confer
privilege on one set of individuals and to deny such a privilege to
other set of individuals falling within the same group. Elaborating
the submissions, learned Senior counsel submits that in order to
ascertain whether the persons are similarly situated, one must look
beyond the classification and into the purpose of the law. Keeping
in mind these fundamental principles, there can be no denying that
those that are granted mining leases form part of the same class as
those that are granted license for carrying on business in alcoholic
liquor for human consumption. This is so because in both the cases
there is a conferment of permissive privilege to the licence
holder/mining lease holder to engage in their respective businesses
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and absent any conferment of such privilege thereof. If the purpose
of the law is to impose GST on services of this nature rendered by
the Government, then there can be no manner of doubt that
business holding alcohol licences and those who are the holder of
mining licences form part of the same class. Further, the fact that
they fall within the same class also stands buttressed by the
opening paragraphs of the Circular No. 121/40/2019-GST dated
11.10.2019 issued by Ministry of Finance, Department of
Revenue. Learned Senior counsel has referred paragraph ‘114’ of
the Constitution Bench judgment of the Hon’ble Supreme Court in
the case of Mineral Area Development Authority And Anr. Vs.
M/s Steel Authority of India and Anr. Etc. reported in (2024) 10
SCC 1 (hereinafter referred to as the ‘MADA Judgment’) where
while examining whether royalty is a tax or not in the context of
mining leases, the Hon’ble Supreme Court made an observation
which in the submission of the petitioner goes to establish the
contextual similarity between mining leases and licences for
carrying out business in alcohol. It is his submission that even
though these two sets of businesses form part of the same class, the
State vide Notification No. 25/2019-Central Tax (Rate) dated
30.09.2019 has declared that services by way of grant of alcoholic
liquor licence, against consideration in the form of licence fee or
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application fee or whatever name called is to be treated neither as
supply of goods nor as supply of services. The said Notification
also explains that the same has been issued to implement the
recommendations of the 26th GST Council Meeting where it was
recommended that no GST shall be leviable on licence
fee/application fee of the aforesaid nature. It is submitted that once
a transaction is treated neither as a supply of goods nor a supply of
service, the charging section viz Section 9 of the CSGT Act, 2017
would not stand attracted and therefore the authority to impose
GST stands denuded. It is pointed out that this Notification was
followed by Circular dated 11.10.2019 wherein the Ministry of
Finance has recorded that the said is a special dispensation only for
supply of services by way of grant of liquor licences by the State
Governments as an agreement between the Centre and States and
has no applicability or precedence value in relation to grant of
other licences and privileges for a fee in other situations, where
GST is applicable. It is his submission that a special
dispensation/largesse has been conferred on supply of services by
way of grant of liquor licences by the State Government and it has
expressly been admitted that such a special dispensation is not to
be extended to situations such as conferment of mining leases.
This, according to the petitioner, itself demonstrates that
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classification is being sought to be created between individuals
who fall within the same class.
17. Learned Senior counsel for the petitioner admits that
the petitioner has no locus standi to challenge the Notification No.
25 of 2019 dated 30.09.2019, nor is the notification under
challenge before this Court in this petition. Still, it is submitted
that the case of the petitioner, however, is non-consideration of
services provided by the Government to itself by way of granting
of mining rights/privileges against payment of royalty, from being
entitled to the same exclusion from GST as has been provided to
the liquor industry. The petitioner relied on the judgement of the
Hon’ble Supreme Court in the case of Ayurveda Pharmacy &
Anr. v. State of Tamil Nadu reported in (1989) 2 SCC 285 where
the Hon’ble Supreme Court had put one of the constituent
members of the same class (which were subject to higher rate of
sales tax) at par with another constituent of the same class (which
was subject to significantly lower rate of tax) and also directed the
differential and excess tax paid to be refunded. In that case, the
directions were issued by the Hon’ble Supreme Court without
disturbing the rate notification which provided lower rate of tax for
one of the constituent members. The submission is that the
Notification No. 25 of 2019 dated 30.09.2019 is effective from
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30.09.2019 and, therefore, the mining industry can be put at par
with the liquor industry only from that date. However, the
petitioner cannot claim any exclusion from GST for the period
from 01.01.2017 to 29.09.2019 on this ground alone.
(ii) Article 246A, notwithstanding the Non-obstante
clause cannot be pressed into service to confer legislative
power on the State and the Centre to impost GST.
18. As regards his submission under (B) of paragraph
’15’ hereinabove, it is submitted that in terms of Entry 50, List II
of the Seventh Schedule of the Constitution of India, the field of
legislation in respect of taxes on mineral rights has been
exclusively conferred on the States subject to any limitation
imposed by Parliament relating to mineral development. This field
of legislation relates back to Article 245 read with Article 246,
which confers the source of power for enacting legislation in
respect of the fields of legislation enumerated in the Seventh
Schedule. The legislative competence to impose GST is however,
located in Article 246A and it also contains a non-obstante clause
seeking to override the provisions of Article 246.
19. Learned Senior counsel has submitted that
conferment of mining licences is essentially an exercise of mineral
right and any tax in respect thereof, can be levied only by the State
Government and the provisions of Article 246A, notwithstanding
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the non-obstante clause contained therein, cannot be pressed into
service to confer legislative competence on the State and the
Centre to impose GST on such transaction. It is submitted that in
the MADA judgment several legal issues pertaining to the mining
industry were settled by the Hon’ble Supreme Court. Amongst
these the expression ‘taxes on mineral rights’ as found in Entry 50
of List II of the Seventh Schedule has been elaborately discussed
from paragraph ‘177’ to ‘260’ of the majority judgment. Referring
to various paragraphs of the judgment of the Hon’ble Supreme
Court in MADA case, the learned Senior counsel has submitted
that the natural meaning of the term ‘mineral rights’ will include
the entire bundle of rights that follow ownership on minerals,
including rights that can be transferred to a lessee through a
mining lease. In paragraph ‘189’, the Hon’ble Supreme Court
observed that in a situation where the minerals vest with the State
by operation of law, the right to those minerals also vests with the
State and the State can assign/transfer its mining rights by way of a
mining lease to the lessee. In paragraph ‘195’ it has been held that
the taxable event under Entry 50 of List II would relate to exercise
of mineral rights. In paragraph ‘197’, it was observed that the right
to receive royalty is an integral part of the mineral rights of the
lessor and that the taxes on mineral rights also take within their
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fold other aspects relating to the exercise of mineral rights such as
working the mines and dispatching of minerals from the leased
areas. It is submitted that in paragraph ‘198’ of the MADA
judgment, the Hon’ble Supreme Court has held that the taxable
event with respect to taxes on mineral rights shall be the exercise
of mineral rights and incidence of tax on mineral rights depends
upon who is exercising the rights and such a tax can be levied on
any person who has an interest in the minerals. It is submitted that
the power to levy tax by whatever name called on such
arrangement rests only with the State Government in terms of the
Entry 50 of List II of the Seventh Schedule. It is this very taxable
event that is also being sought be taxed under GST.
20. Learned Senior counsel points out that on a perusal
of paragraph ‘9’ of the Board Circular dated 06.10.2021, it would
appear that GST on mining leases is sought to be imposed on
services by way of grant of mineral exploration and mining rights
in exchange for which the State receives royalty. The Circular at
Para ‘9.3.1’ makes a reference to Service Code 997337 as the
appropriate classification. The said Service Code refers to
licensing service for the right to use minerals including its
exploration and evaluation. The crux of these entries inevitably
goes to demonstrate that, the lessor in exercise of its mineral rights
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(one of them being the right to receive royalty and the other being
the transfer of mineral rights) recovers such royalty, by execution
of lease agreements in exchange of receipts of such royalty. As
such therefore, the substance of the transaction (even though it
may be termed as grant of mining rights) is intrinsically exercise of
mineral right by lessor while making available such grant. It is
submitted that although the pith and substance of the two
articulations i.e. right to receive royalty and grant of mineral rights
is one and the same and consequently if the jurisdiction to levy tax
on mineral right falls exclusively within the domain of State
Legislature (Entry 50, List 11 Schedule VII) then the same cannot
be said to fall within the jurisdiction of Article 246A to impose
GST on a concurrent basis.
21. It is submitted that admittedly Article 246A contains
a non-obstante clause which expressly seeks to override the
provisions of Article 246. In keeping with this non-obstante clause,
a view may emerge that even though power to levy tax on mineral
rights may exclusively be with the State Government, however,
notwithstanding that power, in terms of Article 246A, the Centre
and the State can override such power and impose GST on the very
same taxable event i.e. transfer of mineral right, thereby,
confirming the legislative competence to impose GST. However,
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learned Senior counsel for the petitioner submits that this view is
required to be eschewed and the integrity and the exclusivity of the
State Government to levy tax on mineral rights ought not to be
diluted. Relying upon paragraph ’52’ and ’53’ of the MADA
judgment (supra), it is submitted that in these paragraphs the
jurisprudence of fiscal federalism has been set out. It is submitted
that in the case of S.R. Bommai v Union of India reported in
(1994) 3 SCC 1, it has been held that the Courts should not adopt
an approach, an interpretation, which has the effect of or tends to
have the effect of whittling down the powers reserved to the States.
22. It is submitted that if it is held by the Court that
there is no exclusivity on the power of the State to levy tax on
mineral rights, then Entry 50 of List II of Schedule VII becomes a
useless lumber and otiose. It is trite in law that an interpretation
that makes an entry/a provision of the Constitution a useless
lumber cannot be perpetuated. The Constitution Bench in Calcutta
Gas Company vs. State of West Bengal reported in AIR 1962
1044 (paragraph ‘8’) has held that it is well settled rule of
interpretation that attempt should be made at harmonising the
different entries in the Constitution and to reject the construction
which would rob one of the entries of its entire content and make it
nugatory. It is submitted that GST is not to be levied on a
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transaction involving exercise of mineral rights which is
manifested by execution of the lease deed, and the only outcome
of such a conclusion would be that such exercise of right does not
involve any rendition of service and accordingly does not fall
within the ken of Article 246A.
(iii) Royalty is a hybrid of two constituents
i.e. distinction between fee for services and
Compensatory fee
23. To support his submissions under (C) of paragraph
’15’ hereinabove, learned Senior counsel for the petitioner admits
that the argument under this head is predicated on the assumption
that there is some element of service that is entailed in a mining
lease, in respect of which royalty is paid, however, the entire
royalty is not necessarily towards any alleged service. Referring to
paragraph ‘130’ of the MADA judgment, it is submitted that their
Lordships have held that royalty is a consideration paid by the
mining lessee to the lessor for enjoyment of mineral rights and also
to compensate for loss of value of minerals suffered by the owner
of the minerals.
24. At paragraph ‘131’, their Lordships have held that
Section 9 of Mines and Minerals (Development and Regulation)
Act, 1957 (hereinafter referred to as ‘the MMDR Act‘) statutorily
regulates the right of the lessor to receive consideration in form of
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royalties from the lessee. It is, thus submitted that on perusal of
two observations of the Constitution Bench, it may be noticed that
the Hon’ble Supreme Court has not said in so many words that
royalty is a consideration for rendition of service. Instead, what
has been said is that it is a consideration for enjoyment of mineral
right, which right of the lessor to receive consideration in the form
of royalty is regulated by Section 9 of the MMDR Act.
25. It is submitted that assuming for argument sake that
the act that leads to enjoyment of mineral right is a service and that
a part of the royalty relates to such service, then the entire amount
of royalty is certainly not towards the enjoyment of this right. This
is so because according to the Hon’ble Supreme Court, royalty
comprises of another aspect i.e. a compensation for loss of values
of minerals suffered by the owner of the minerals. As such, the
quantum of royalty is a hybrid of two constituents; one, being for
the alleged services and the other being the compensation for loss.
It is submitted that the second aspect i.e. compensation for loss of
mineral is essentially in the nature of a regulatory fee, to regulate
the exploitation of mother earth and to compensate the natural
resources of the country, such that, excessive mining leading to
depletion of mother nature does not take place at the drop of the
hat, and intergenerational equity which requires ensuring fairness
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and justice in distribution of resources, opportunities and burdens
across different generations including the current and the future
ones to promote sustainable development is perpetuated. The
concept of inter-generational equity and natural resources and
public trust doctrine has been pithily summarised by the Hon’ble
Supreme Court in the MADA Judgment at paragraphs 59-66. It is
his submission that royalty comprises of two parts, one is
compensatory in nature i.e. towards the alleged supply of service
in the nature of grant of a privilege and the other being a
regulatory fee. Relying upon the Constitution Bench judgment of
the Hon’ble Supreme Court in the case of Corporation of
Calcutta & Anr. v. Liberty Cinema reported in AIR 1965 SC
1107 (paragraph ‘8’), it is submitted that in the said judgment the
Hon’ble Supreme Court has drawn a distinction between fee for
services and fee for licence and it has been held that imposition of
licence fee does not lead to a conclusion that the fee must only be
for the services rendered. Learned Senior counsel has relied upon
the decision of the Hon’ble Supreme Court in the case of State of
Tripura and Ors. vs. Sudhir Ranjan Nath reported in AIR 1997
SC 1168 (paragraph ’14’ and ’15’) and the decision in the case of
Vam Organic Chemicals Ltd. & Anr. v. State of UP and Ors.
reported in (1997) 2 SCC 715. It is submitted that in the case of
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State of Bihar and Ors. vs. Shree Baidyanath Ayurved Bhawan
(P) Ltd. & Ors. reported in (2005) 2 SCC 762 in the context of
the Bihar Excise Act, the distinction between regulatory fee and
compensatory fee was once again reiterated.
26. It is submitted that power to levy tax under Article
246A is restricted only to supply of goods and services and does
not extend to transactions involving loss of mineral, compensation
of damages, charges which are regulatory in nature. According to
him, power to levy tax is restricted only on the service element.
The portion of royalty relatable to enjoyment of mineral right may
be a service, whereas, the compensation for loss of minerals read
with Section 9 of MMDR Act is a regulatory fee and not fee for
services. It is thus submitted that for a valid imposition of tax
under Article 265, there should be clarity and certainty in respect
to the measure of tax. Relying upon the judgment of the Hon’ble
Supreme Court in the case of Govind Saran Ganga Saran v.
Commissioner of Sales Tax & Ors. reported at 1985 (Supp) SCC
205 (paragraph ‘5’) it is submitted that in the said judgment it has
been held that if the components of taxation (measure of tax,
taxable event, rate of tax and the taxable person) are not clearly
and definitely ascertainable, it is difficult to say that the levy exists
in point of law. Any uncertainty or vagueness in legislative scheme
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defining any of those components of levy will be fatal to its
validity. On the basis of the aforementioned submissions, it is the
contention of the petitioner that under the GST regime since there
is no machinery provision to dissect the portion of royalty that
pertains to supply of service and that which pertains to regulatory
fee, the State would have no jurisdiction to levy tax on the entire
amount of royalty. It is submitted that in absence of a valuation
mechanism the entire value of royalty would be outside the ken of
GST notwithstanding that an unalienable portion of such royalty
may be towards services.
(iv) Taxable event – taking place prior to coming
into force of GST on Execution of Agreement
27. In his next argument in terms of (D) of paragraph
’15’ hereinabove, learned Senior counsel submits that assuming
that the entire royalty amount is construed as being towards
service fee, then, if the taxable event has taken place prior to
coming into force of GST, the State would have no jurisdiction to
impose GST on such cases, merely because periodic payment of
royalty is made post the commencement of GST. It is submitted
that there are four components that go into taxation namely,
taxable person, measure of tax, rate of tax and the taxable event,
and if there is vagueness in respect of any of these components
then charge of tax cannot be fastened. While this principle is of
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golden vintage and was laid down in the landmark judgment of the
Supreme Court in Govind Saran (supra) it has been once again
reiterated in the MADA judgment at paragraph ‘192’ of the
majority opinion and paragraph ‘10.10’ in the minority judgment,
where paragraph ‘6’ of the decision of the Hon’ble Supreme Court
in Govind Saran (supra) has been referred to by the Hon’ble
Supreme Court. It is submitted that the importance of the fact that
taxable event must take place on or after the date when the
legislation imposing tax is in force and not prior to that date had
come for consideration before the Hon’ble Supreme Court in the
case of Collector of Central Excise, Hyderabad vs. Vazir Sultan
Tobacco Company Limited reported in 1996 (83) ELT 3 (SC) :
(1996) 3 SCC 434. Learned Senior counsel has also relied upon
Constitution Bench judgment in the case of 20th Century Finance
Corporation Limited & Anr. vs. State of Maharashtra reported
in (2000) 6 SCC 12 where the purposes of ascertaining when
transfer of right to use any goods (as contemplated under Article
365(29A)(d) takes place, it was observed in paragraph ’27’ that the
transfer of right takes place once a written contract is entered into
between the parties and the taxable event would be the execution
of contract for the right to use goods. It is submitted that in respect
of grant of mineral exploration rights which is manifested by
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right would therefore be the date on which the formal contractual
arrangement is executed transferring and vesting of such mineral
rights from the lessor to the lessee.
28. It is submitted that in the present case, on
21.10.2014, the petitioner was declared as the highest bidder in
respect of auction of sand ghats carried out for a five-year period
starting 01.01.2015 to 31.12.2019. Vide letter of even date, the
same was communicated to the petitioner directing it to pay 25%
of the auction amount of Rs. 115.31 crores within seven days for
issuance of an in-principle sanction order. The said in-principle
sanction order was issued vide letter dated 06.11.2014 for the
district of Patna which clearly mentioned that the period of
sanction duration was 2015-2019. Reference to the said sanction
order can be found at page no. 138, second paragraph of the writ
petition which is a part of the settlement deed. It may be noted that
in terms of Rule 7 of the 1972 Bihar Mineral Concession Rules, as
also Rule 16 of the 2019 Rules, the duration of mineral concession
is to be for five years. Further, the in-principle sanction order is the
first step which is followed by issuance of a work order and
thereafter execution of the settlement deed. In the 2019 Rules,
Rule 29A(1)(b) deals with issuance of an in-principle sanction
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order, sub-clause (c) thereof deals with the issuance of a work
order and Rule 29(2) makes reference to the signing of a deed for a
period of five years. It is submitted that in this case, the petitioner
made the necessary payments as directed in the letter dated
21.10.2014 and was accordingly issued appropriate work order and
thereafter executed the settlement deed on 16.09.2015 in respect of
sand ghats of Patna and at or about the same time for the other
sand ghats. The petitioner has given the precise settlement amount
that was required to be paid by the petitioner for the five calendar
years starting 2015. It is his submission that the vestiture of the
right to carry out mining activity was conferred on the petitioner as
early as in September, 2015 and even prior to that the in-principle
sanction order was issued sometime in November, 2014, all of
which took place prior to 01.07.2017 i.e. the date of
commencement of GST. While admittedly, yearly settlement deeds
were executed and there were agreements that were executed post
01.07.2017, however, those executions according to the petitioner
were a mere formality since the in-principle sanction order under
which the vesting of right took place was issued on 06.11.2014 and
even the first agreement for the calendar year 2015 also
contemplated that the settlement amounts are to be paid for the
five calendar years, thereby binding the petitioner with an
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obligation to pay the settlement amounts for those five years.
Under these circumstances, the petitioner humbly submits that (a)
Those settlement deeds which were signed prior to 01.07.2017, the
taxable event has taken place pre-commencement of GST (i.e.
01.01.2017), charge of GST on settlement payments made under
these agreements cannot be subjected to GST. (b) In respect of
those settlement agreements that may have been signed post
01.01.2017, since both the principle sanction orders and the
settlement deed for the calendar year 2015 clearly bound down the
petitioner with an obligation to pay the settlement amount for the
five calendar years clearly indicating the amounts payable for each
calendar year, the rights and obligations of the parties stood frozen
on that date, which would be in substance the date when the
petitioner acquired the right which would have given rise to
approaching the writ court for protection of such right. The
subsequent execution of the settlement agreements post
01.01.2017 was at best a mere formality since no new rights or
obligations were created between the parties. In any case,
statutorily in terms of the Rule 7 of the 1972 Rules and Rule 16 of
the 2019 Rules, settlement deeds were required for a period of five
years thereby clearly laying down the intent of the present
statutory contract. It is submitted that upon the end of the
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settlement deed for the calendar year 2019 while fresh agreements
were required to be signed, however, the State of Bihar instead of
issuing fresh agreements extended the existing agreement from
31.12.2019 to 31.10.2020, and thereafter further extensions were
granted up to 30.09.2021. It is his submission that these extensions
are not renewal or execution of a new agreement. In law, the term
‘extension’ means continuation of an existing arrangement and
therefore, if under the original agreement, the taxable event took
place prior to the commencement of GST then such extension
cannot be said to trigger a new taxable event. To demonstrate the
distinction between the word ‘extension’ and ‘renewal’, learned
Senior counsel has cited the judgment of the Hon’ble Supreme
Court in the case of Provash Chandra Dalui vs. Bisawanath
Banerjee reported in 1989 Supp (1) SCC 487 (paragraph ’14’).
29. Learned Senior counsel for the petitioner has
further advanced his submissions as formulated under (E) of
paragraph ’15’ hereinabove. It is submitted that even if this
Hon’ble Court is not persuaded with the proposition as enumerated
in paragraph ‘A’ to ‘D’ above, then the impugned decision of the
appellate authority of advance ruling is bad in law and accordingly,
the decision rendered by the original Advance Ruling Authority
holding the rate of GST on services falling under SAC 997337
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attracts GST at 5% up to 31.12.2018 and 18% from 01.01.2019,
should be upheld. It is submitted that Advance Ruling Authority
categorically held that the petitioner is liable to GST at the rate of
5% up to 31.12.2018 and at the rate of 18% with effect from
01.01.2019 in view of the amendment of the rate Notification No.
27/2018 dated 31.12.2018, w.e.f. 01.01.2019. The authority has
held in paragraph ‘12.4’ that after meticulous examination of
service accounting code, it was found that the nature of service
received by the petitioner is covered under the service accounting
code 997337 i.e. licencing services for right to use minerals,
including their exploration and evaluation.
30. It is submitted that the petitioner did not file an
appeal against the said order, the Revenue filed an appeal before
the appellate authority of advance ruling. On perusal of grounds of
appeal set out in the appeal memo, it can be seen that the only
ground of the appeal was qua the correctness of service accounting
code applicable to the petitioner which was held by the original
authority to fall under 997337. In specific terms, the Revenue in its
appeal memo had contended that the correct service accounting
code should be 999113 and if there is any doubt then the correct
classification should be 999799. Vide the impugned order dated
10.12.2021, the appellate authority upheld the classification as
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held by the original authority i.e. 997337. To that extent, such an
affirmation was against the appellant revenue’s contention.
However, in breach of the basic propriety of an appellate
authority’s jurisdiction, it travelled beyond the scope of appeal by
holding that rate of GST payable would be 18% with effect from
01.01.2017 and for that purposes reliance was placed on a circular
of the Board dated 06.10.2021 where at paragraph ‘9.3’, the Board
had clarified that the intention of the Government has always been
to tax the activity at a standard rate of 18%.
31. It is submitted that the appellate authority has
recorded an erroneous finding on merits as well as in law. In
paragraph ‘8.2’ of the impugned appellate order, the appellate
authority holds that the petitioner’s case does not involve any
assignment of any right to use any natural resources since the
activity of the petitioner in no way involves using the sand
extracted by it and instead parts with sand extracted. Thereafter, at
paragraph ‘8.3’ it went to hold that in the petitioner’s case what
actually transpires between the Government and the petitioner is
the grant of a licence by the Government whereunder the petitioner
is entitled to explore/extract sand and sell the sand as opposed to
using the sand and the arrangement does not involve assigning the
right to use sand. It is submitted that these findings are not only
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perverse but also in the teeth of the very classification 997337 that
it has affirmed. It is submitted that the rate of tax necessarily
would be governed by the rate notification and not by any
administrative instruction. In the realm of taxation, levy of tax
cannot be fastened through administrative circular. Reference in
this context is placed on the decision of the Hon’ble Supreme
Court in Punit Rai vs. Dinesh Chaudhary reported in (2003) 8
SCC 204 where in paragraph ’42’ it has been clearly laid out that a
circular/letter being an administrative instruction is not law within
the meaning of Article 13. In Harivansh Lal Mehra vs. State of
Maharashtra reported in (1971) 2 SCC 54 (paragraph ‘6’), it has
been clearly held that no tax can be levied through circular. It is
submitted that vide Notification No. 27/2018 dated 31.12.2018
with effect from 01.01.2019, Entry 17 of the earlier notification
stood amended and the residuary category was made subject to a
rate of tax of 9% CGST (cumulative GST being 18% comprising
of CSGT and SGST).
32. It is submitted that during the course of the hearing,
this Court had raised a query on whether the petitioner not having
filed an appeal against the original order of advance ruling and
having thus accepted the rate of 5% and 18% respectively can be
permitted to agitate at this stage that these activities are not at all
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taxable, before a writ court. In response to the pointed query, the
petitioner had submitted that the grounds on which the non-
taxability was canvassed before the Court are aspects which go to
the jurisdiction of the legislatures to levy GST and are also pure
questions of law. Reliance has been placed on the recent judgment
of Hon’ble Supreme Court in the case of Raju Ramsing Vasave
vs. Mahesh Deorao Bhivapurkar reported in (2008) 9 SCC 54
where in paragraph ’32’ the Hon’ble Supreme Court had
categorically held that the principle of res judicata though
undoubted is a salutary principle, the said principle however
amongst other has some exceptions, for example (i) when
judgment is passed is without jurisdiction, (ii) a matter involves
pure question of law or (iii) when judgment has been obtained by
committing fraud on court. The petitioner also relied upon
Constitution Bench judgment in Basheshar Nath vs.
Commissioner of Income Tax, Delhi reported in AIR 1959 SC
149 (paragraph ’15’ and ’19’). Reliance has also been placed on
the judgment of the Hon’ble Supreme Court in the case of Olga
Tellis and Ors. vs. Bombay Municipal Corporation and Ors.
reported in (1985) 3 SCC 545 where at paragraph ’28’ and ’29’ it
has been held that doctrine of acquiesce or waiver cannot apply
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where the issue involved pertains to violation of Article 14 and
Submissions on behalf of the State
33. Mr. Vikash Kumar, learned Standing Counsel-11 has
opposed the submissions of the learned Senior Counsel for the writ
petitioners. Learned counsel has adopted the stand of the State as
disclosed in the counter affidavit filed in CWJC No. 18206 of
2023, in all these writ applications. It is submitted that earlier
during ‘VAT’ there was a provision for periodic payment of
advance tax. If the settlee fails to pay ‘VAT’ in advance, he would
have been liable to be declared defaulter and ineligible for
extension of settlement agreement. In post GST era, the incidence
of settlement of sand ghat and sale of sand are taxable. Settlement
of sand ghat is supply of service where Government is supplier and
the settlee is recipient of supply. GST has been introduced across
the country. For implementing this new tax system with effect
from 1st of July, 2017, seventeen different indirect taxes of the
Centre as well as States have been subsumed and the Central and
State Governments have been empowered to levy and collect tax
on supply of goods and services simultaneously. The present is
entirely a new tax regime and for implementing this tax system,
several amendments were made in the Constitution of India itself
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through the 101st Constitutional Amendment Act, 2016. In the
Constitution itself, a very broad and comprehensive definition of
“services” was introduced under Article 306 of the Constitution of
India. Clause 26A was inserted after Clause 26 of Article 366
which defines the word “services” means anything other than
goods;
In line with the spirit of the Constitution, GST Act also
defines “services” means anything other than goods, money and
securities but includes activities relating to the use of money or its
conversion by cash or by any other mode, from one form, currency
or denomination, to another form, currency or denomination for
which a separate consideration is charged. It is submitted that on
going through the definition of services given under the
Constitution as well as the GST Act, it is very clear that the
definition of ‘Services’ is very broad. At the same time, going
through the definition of the word “consideration” under the GST
Act it would appear that any activity of awarding license for sand
mining comes under the category of service and payment of
settlement amount is the consideration against that service.
34. It is submitted that the mining lease executed is
nothing but a contract to undertake mining operations in the leased
mining area. The settlement amount paid by the settlee to the
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Government is nothing but a “consideration” to have mining
operations in the leased area on execution of a mining lease. It is a
part of agreement arrived between the parties to have lease of a
mining area for undertaking mining operations. The settlement
amount being consideration certainly places assignment of right to
use natural resources deposited in the leased area as a service as
any activity carried out by a person for another for consideration is
a service.
35. The stand of the respondent department regarding its
taxability is substantiated by the scope of supply under Section 7
of GST Act and scheme of classification of services wherein it is
clearly visible that this activity not only comes under the category
of service but is also a service taxable at 18%. Learned counsel has
referred Section 7 and the scheme of classification which is
Annexure ‘R/2’ to the counter affidavit.
36. Learned counsel submits that on the
recommendation of the GST Council, Circular No. 164/20/2021-
GST dated 6th October, 2021 has been issued. It has been clarified
that even if the rate schedule did not specifically mention the rate
of taxation on service by way of grant of mining rights, during the
period 01.07.2017 to 31.12.2018, it was taxable at 18% in view of
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principle laid down in the 14th meeting of the Council for residuary
GST rate. Post 1st January, 2019, no dispute remains.
37. It is submitted that the consideration received as
settlement amount for the right to use minerals including its
exploration and evaluation as per the Notification No.11/2017- CT
(rate) dated 28.06.2017 as amended and included in sub-heading
997337 attracts GST rate at 18% (9% CGST and 9% SGST) on
reverse charge mechanism basis as stipulated in Section 2(98) of
BGST/CGST Act, 2017.
38. It is submitted that since the supply of services by
the government to a business entity located in the taxable territory
are covered under serial no. 5 of the Notification No. 13/2017-
central tax dated 28.06.2017 the liability to pay the tax gets
transformed to the recipient of such services under Reverse Charge
Mechanism as the services for right to use minerals including
exploration and evaluation are provided by the Government of
Bihar to the business entity. It is submitted that the settlement
amount is itself a tax or not is irrelevant in this context because as
per Section 15 (2) of the CGST/SGST Act, value of taxable supply
shall include any taxes, duties, cesses, fees and charges levied
under any law the time being in force other than GST Act. The
relevant provision is sub-section (2) which states that the value of
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supply shall include any taxes, duties, cesses, fees and charges
levied under any law for the time being in force other than this
Act, the State Goods and Services Tax Act, the Union Territory
Goods and Services Tax Act and the Goods and Services Tax
(Compensation of States) Act, if charged separately by the
supplier. It is his submission that from all these provisions, it
would be established that the activity of awarding license to mine
sand by the Mines Department is not only a service but is also a
service taxable at the rate of 18% under GST. The submissions of
learned Standing Counsel-11 for the State have been summarised
in paragraph ’16’ of the counter affidavit which we quote
hereunder for a ready reference:-
“16. That from the submission made hereinabove it is clear
that-
i. The taxable event in GST is “supply” of goods or
services or both.
ii. As per the provision of Section-7 of CGST/GST Act,
2017 license, rental or lease covered within the meaning of
“supply”
iii. Scheme of Classification of services and rate of tax on
different types of services notified vide Notification
No.11/2017 CT(rate) dt. 28/06/2017
iv. As per the annexure appended with the above
notification, Leasing services have been classified under
entry no.257 under Group No.99733 and sub Heading
997337 which are as follows…
v. “Licensing services for the right to use minerals
including its exploration and evaluation.”
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vi. Settlement amount paid by the Settlee (of sand ghats) to
the government is nothing but an amount paid for getting
right to use the minerals granted to it for a specified period
as per term of lease.
vii. As per above explanation leasing /settlement of Sand
Ghats covered at Sr. no. 17of Notification no.11/2017
CT(Rate) dt. 28/06/2017.
viii. Since description of services under serial no. 17 (i) to
vii (a) does not cover such services therefore, it would fall
under the residual entry at sr. no. 17(viii).
a. Rate of tax on the services classified under entry
no.17(viii) of the Notification No.11/2017 CT(Rate) dt.
28/06/2017 is notified as 18% (9% CGST & 9% SGST)
[Substituted vide Notification No.27/2018 dt. 31/12/2018]
ix. Liability of such tax is to be discharged by the recipient
under Reverse Charge Basis (RCM) if supplier of the
service is government. (Ref. Sr.no.5 of Notification
No.13/2017 CT (Rate) dt. 28/06/2017]
x. Thus, in the light of the above provisions Settlees are
required to pay GST @ 18% on the entire settlement
amount paid to the government on Reverse Charge Basis.
xi. GST Paid on such lease rent will be eligible for ITC as
it does not covered in the list of blocked credit u/s.17(5).”
39. Learned counsel submits that the petitioner has
placed reliance on Section 9 of the MMDR Act but as per the
provision of Section 14 of MMDR Act, Section 9 is not applicable
in the case of Minor Minerals.
40. It is further submitted that before introduction of the
GST Act i.e. prior to 1st July, 2017 VAT Act was completely
independent of service tax Act. As per Section 9(3) of the
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CGST/SGST Act, the petitioner is liable to pay taxes on services
received by him.
41. It is submitted that appellate authority on advance
ruling of Bihar and Orissa clearly establish the fact that the activity
of awarding license to mine sand by the Mines Department is not
only a service but is also a service taxable at the rate of 18% under
GST. Petitioner has mentioned some of the orders of Hon’ble High
Courts wherein interim stay has been granted on the payment of
GST for grant of mining lease. However, it is pertinent to mention
that the Hon’ble Apex Court has already dismissed the various
petitions including one of M/s Lakhwinder Singh (supra). It is
submitted that the tender document itself says that the settlee have
to pay the amount of the GST as per the applicable rate. It means
that the taxpayer (petitioner), by participating in the tender, has
already accepted the applicability of GST liability on the said
transaction.
42. In course of argument, learned Standing Counsel-11
has submitted that so far as the scope of the present writ
applications are concerned, it is liable to be restricted to the issues
raised by the petitioner before the Advance Ruling Authority. The
petitioner itself admits in paragraph ’16’ of the writ application
that the petitioner under bona fide advise discharged its tax
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liability on the royalty paid to the Government under reserve
charge mechanism by paying GST at the rate of 5% (2.5% CGST
and 2.5% SGST) under the heading 9973, group 99733 and tariff
code 997337 “Licensing services for the right to use minerals
including its exploration and evaluation.” The only issue which
was raised by the petitioner before the Advance Ruling Authority
was with regard to the rate and whether the petitioner was rightly
discharging its tax liability of royalty paid to the government under
‘RCM’ at the rate of 5%.
43. It is submitted that the petitioner did not raise any
grievance before the appellate authority for advance ruling against
the order of the Advance Ruling Authority. It was the Department
who had gone to the appellate authority. It would appear from the
submissions of the writ petitioner made before the Advance Ruling
Authority recorded in the order (Annexure ‘7’) that before the
Advance Ruling Authority, the petitioner never contended that the
GST would not be payable on the royalty or that they would be
entitled for exemption under serial no. 64 of the Notification No.
12/2017 dated 28.06.2017. It is submitted that in the counter
affidavit filed before the appellate authority for advance ruling, the
petitioner has categorically stated in paragraph ‘9’ of its counter
affidavit that “since the classification of the services being
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received by the respondent is now settled, the dispute in the instant
appeal remains only regarding the rate of tax for the disputed
period i.e. from 01.07.2017 to 31.12.2018 and also from
01.01.2019 onwards.”
44. It is pointed out that before the appellate authority
for advance ruling, the petitioner did not raise any contention with
regard to the taxability of the amount paid on account of royalty,
though the petitioner contended that it would be entitled for
exemption under serial no. 64 of the Notification No. 12 of 2017
dated 28.06.2017. The submission of the petitioner before the
appellate authority that it would not be liable to pay any GST on
the royalty paid to the State of Bihar for the disputed period i.e.
from 01.07.2017 till 31.12.2018 and even thereafter is based on the
contention that the rate of GST mentioned in Circular No.
164/20/2021-GST dated 06.10.2021 for the period 01.07.2017 to
31.12.2018 shall not apply to the respondent because the
settlement for the entire five years was finalised on 21.10.2014
after issuance of the in-principle approval which is much before
01.04.2016 and the settlement amount for the entire period of five
years was decided after culmination of the auction and issuance of
the in-principle work order. It is submitted that such a contention
was not open to the petitioner by way of submissions in the
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counter affidavit on the face of the fact that the petitioner had
moved the Advance Ruling Authority only on the point of
classification and rate of tax applicable in case of the petitioner.
45. Learned counsel has further submitted that most of
the submissions of Mr. Sujit Ghosh, learned Senior counsel with
regard to the taxability under the GST regime are only the
repetitions of the submissions made before the Hon’ble Supreme
Court in MADA case. Learned counsel has taken this Court
through paragraph ‘508’ of the judgment in MADA case to submit
that the views expressed in the said paragraph is the minority view
and this is not the view of the majority. Learned counsel has taken
this Court through paragraph ‘135’ to ‘137’ and paragraph ‘365’ of
the MADA judgment. It is submitted that the judgment of the
Hon’ble Supreme Court in the case of 20th Century Finance
Corpn. Ltd (supra) has nothing to do with the grant of mining
rights. This case is related to the Finance Act. In the present case,
the only issue is the classification issue. The petitioners were
already making payment under the Bihar VAT Act and thereafter
under the GST Act. Under Bihar VAT Act, 5% was payable as
advance tax which they were paying.
46. Learned counsel submits that GST is payable on
settlement amount. It is payable with payment of every installment
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of the settlement amount and in case where royalty on extracted
quantity of sand which is more than the settlement amount, then
the settlee shall be liable to pay additional settlement amount. The
settlement amount is the consideration. Learned counsel submits
that from the order of the Advance Ruling Authority, (Annexure
‘4’) it would appear that the petitioner agreed to deposit GST
liabilities in accordance with the updated notification. The
appellate authority has also upheld the classification in the same
category i.e. 997337 but rightly relied upon the GST Council
recommendation. The GST Council has been given a constitutional
status. In this regard, learned counsel has relied upon the judgment
of this Court in case of M/s Barhonia Engicon Private Limited
and Ors. vs. The State of Bihar and Ors. (CWJC No. 4180 of
2024).
47. Learned counsel submits that the petitioner has not
argued on ‘exemption’ because the Notification No. 12 of 2017-
Central Tax dated 28.06.2017 in (Annexure ’14’), service code 64
talks of exemption on tax payable on one-time charge whereas the
petitioner is paying the settlement amount in installments.
Rejoinder on behalf of the Petitioners
48. Learned Senior counsel for the petitioner has
responded to the contention of the learned Standing Counsel-11. It
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is submitted that the contention of learned Standing Counsel-11
saying that the petitioner has accepted its liability to pay tax on the
services rendered by the State Government and that advance ruling
was sought only to the extent of a rate of tax, is only trying to
persuade this Court to reject the petitioner’s contention on the very
jurisdiction to levy GST on the transactions in question and to
foreclose it from agitating violations of Article 14 and 19(1)(g) and
other constitutional restriction that apply on State’s Jurisdiction to
levy GST. Learned counsel submits that principles of res judicata
would not apply to the present case where issues of jurisdiction
exists and also where it involves a pure question of law.
49. Learned counsel further submits that learned
Standing Counsel for the State has sought to distinguish the
argument of the petitioner qua royalty in the context of GST by
saying that it would not be applicable to the settlement amounts
which is a distinct concept. It is submitted that the MMDR Act,
1957 was enacted by the Parliament in exercise of the regulatory
power conferred on the Central Government under Entry 54 of List
I. Section 4 thereof, specifically prohibits any person from
undertaking any mining operation without appropriate mining
lease granted under the Act. It is submitted that while Section 9
contemplates payment of royalty in respect of mining leases, in
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terms of Section 14 it has been provided that, even though Section
4 applies to minor minerals, Sections 5-13 inter alia includes
Section 9 pertains to royalty would not apply to minor minerals. In
fact, Section 15 confers powers on the State Government to make
rules in respect of minor minerals. Pursuant to that power at
present Bihar Minerals (Concession, Prevention of Illegal Mining,
Transportation & Storage) Rules, 2019 (hereinafter called the
‘2019 Rules’) are in force, though earlier the 1972 Rules used to
prevail. In the said Rules, in Rule 2(xvi), the term ‘mining
concession’ has been defined to mean mining lease or settlement in
respect of minor minerals and includes quarrying permits
permitting the mining of minor minerals.
50. The term ‘mineral concession holder/ settlee/ lessee
has been defined in Rule 2(xvii) to mean a person holding a valid
mineral concession for quarrying sand and other minor minerals
from the settled/leasehold areas. Rule 2 (xxvi) defines the term
‘settlement’ to mean the mining right given on behalf of the
government to quarry, win, work and carry away sand and other
minor minerals through a competitive bidding process. Rule 11 of
the said Rules echoes the same principle as provided in Section 4
of the MMDR Act inasmuch as that no person can undertake any
mining operation except under and in accordance with the terms
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and conditions of the mining lease. Chapter V of the said 2019
Rules provides for the concept of settlement of sand and Rule 29A
provides for a mode of settlement through public auction and
thereafter issuance of an in-principle sanction order, followed by
an issuance of work order. As per Rule 29B(2), the successful
bidder is awarded the concession to mine sand for a period of five
years and the parties are required to execute a settlement deed in a
prescribed statutory format (Form B). Rule 29B(3) provides for the
mode of payment of royalty and settlement amount according to
which a settlee shall make the payment of the settlement amount in
terms of the bid and any excess mineral extracted beyond the
annual settlement amount, the lessee is required to pay an
additional royalty in respect of additional quantity as extracted in
addition to the settlement amount. Chapter XII deals with mining
revenue and as per Rule 51 thereof, once a mineral concession is
granted apart from surface rent and debt rent, royalty is required to
be charged at the rates specified in Schedule IIIA. Further, Rule
51(5) provides that notwithstanding anything contained in any
instrument of lease, the mineral concession holder shall pay
rent/royalty in respect of any minor mineral owned, extracted at
rates specified from time-to-time under Schedule II and IIIA. It is
submitted that on perusal of Schedule IIIA referred to in Rule
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51(1)(b), the rate of royalty for sand from auctioned ghats have
been prescribed as the auction amount. Under these circumstances,
according to the learned Senior counsel for the petitioner, it goes
without saying that the settlement amount is nothing but a royalty
both in substance as also in terms of specific language that can be
discerned from Rule 51 read with Rule 51(4) and other rules
alluded to in the preceding paragraphs.
51. Learned Senior counsel further contested the
submission of the State that since the royalty for each year was
increased by 20% in respect of which the State executed yearly
agreements, it cannot be said that the assignment was for 5 years.
52. As regards the submission of learned Standing
Counsel for the State that the petitioner has built its central
argument on the basis of the minority judgment in the MADA
case, it is submitted that the State are wholly in error in making
such submission. Since the petitioner has relied upon the specific
para forming part of majority view of the Court which starts from
paragraph ‘1’ and ends at paragraph ‘343’ whereas the minority
decision starts at paragraph ‘1.1’ and ends at paragraph ’44’. The
only place where the minority decision was referred to was to
assist the Court in appreciating the law laid down by the Hon’ble
Supreme Court in the case of Govind Saran (supra) in paragraph
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‘10.10’ and to that extent there is no divergence between majority
and minority view on this aspect. In fact, even at paragraph ‘184’
read with foot note 254 of the majority decision the said judgment
has also been referred thereupon.
53. Learned counsel for the petitioner submits that the
contention of the State justifying Notification No. 25/2019 dated
30.09.2019 saying that the recommendations of the GST Council
are binding and that on the recommendation of the Council the
services by way of grant of alcoholic liquor license was held to be
neither supply of goods nor supply of service is unfounded and the
same is to be rejected. It is contended that if the recommendations
of the GST council was the be-all and end-all for a particular tax
dispensation, it would mean that the GST Council, a Constitutional
body created under Article 279A, is immune to rigors of Part III of
the Constitution and thus exercises an extra-constitutional
authority sitting above the Constitution. Such a position cannot be
countenanced by any means when it is well known that no
authority howsoever high is above the rule of law.
54. As regards the submission of the State with respect
to serial no. 64 of the Notification No. 12/2017 dated 28.06.2017,
it is submitted on behalf of the petitioner that the Entry 64 read
with the proviso contained therein provided that the service
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provided by the Government by way of assignment of any right to
use natural resources where such right to use was assigned before
01.04.2016 would bear a GST of nil rate. However, the proviso
states that the exemption shall apply only to tax payable on a one
time charge payable in full upfront or in installments for
assignment of right to use in such natural resource. It is submitted
that perhaps learned counsel for the State sought to canvass that
while the petitioner is exempt from GST, in respect of assignment
that took place prior to 01.04.2016, the exemption is restricted to
only a one-time charge (whether paid upfront or in installments)
but cannot be extended to royalties paid on an intermittent basis
during the subsistence of the lease.
55. It is submitted that there is a fundamental flaw in the
State’s submission which essentially is predicated on the basis that
apparently, the exercise of jurisdiction to levy tax can be
determined by looking at delegated legislation in the form of
exemption notifications and if through a delegate legislation
exemption has not been accorded to certain aspects, the corollary
of that would be that such aspect is taxable. Such an argument of
the State is wholly bad in law for it is well known that the aspects
of jurisdiction to levy tax inheres under Article 265, other
Constitutional restrictions and embargos and also the substantive
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legalisations enacted therein. It is submitted that in the case of
Commissioner Central Excise and Customs, Kerala vs. Larsen
and Toubro reported in 2015 (35) GSTR 168 : AIR 2015 SC
3600 (paragraph ’44’), the Hon’ble Supreme Court had held that
were the levy of service tax itself has been found to be non-
existent, no question of any exemption would arise.
56. Dr. K.N. Singh, learned ASG, who is assisted by Mr.
Anshuman Singh, learned Senior Standing Counsel, appears for
the Union of India. The Union of India has endorsed the
submissions of learned SC-11.
Consideration
57. Having heard learned Senior counsel for the
petitioners and learned SC-11 for the State as also learned ASG for
the Union of India, at first instance, we find that at least six out of
eleven writ applications which are under consideration have been
filed by M/s BSCPL. M/s ‘BSCPL’ had filed an application under
Section 97 of the CGST/BGST Act, 2017 before the Advance
Ruling Authority.
58. Section 97 permits filing of an application for
obtaining advance ruling, stating the question as enumerated under
Sub-Section (2) of Section 97 on which advance ruling is sought.
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The scope and ambit of Section 97 may be appreciated on going
through the said Section which we quote hereunder:-
“97. Application for advance ruling.
(1) An applicant desirous of obtaining an advance
ruling under this Chapter may make an application
in such form and manner and accompanied by such
fee as may be prescribed, stating the question on
which the advance ruling is sought.
(2) The question on which the advance ruling is
sought under this Act, shall be in respect of,–
(a) classification of any goods or services or both;
(b) applicability of a notification issued under the
provisions of this Act;
(c) determination of time and value of supply of
goods or services or both;
(d) admissibility of input tax credit of tax paid or
deemed to have been paid;
(e) determination of the liability to pay tax on any
goods or services or both;
(f) whether applicant is required to be registered;
(g) whether any particular thing done by the
applicant with respect to any goods or services or
both amounts to or results in a supply of goods or
services or both, within the meaning of that term.
This clause provides for form, manner and fee for
filing of an application for advance ruling. This
clause also lists the nature of questions on which
advance ruling can be sought. (Notes on Clauses).”
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Acceptance of Liability to pay GST
59. In its application, the petitioners/applicants
submitted before the authority that they have a lease agreement
with the Department of Mines, Bihar Patna vide Letter No.
2961/M dated 31.10.2018 for a period of five years (2015-2019)
and vide Letter No. 3391/Mines-Patna dated 28.12.2019. It was
extended upto 31.10.2020 for mining of sand. It was contended
that the value of lease decided by the Department of Mines, Bihar,
Patna is worth Rs. 85,33,72,729/- and this value is enhanced by
50% of the lease value for the extended period. Paragraph ‘7’ of
the lease agreement dated 31.12.2018 agrees that the applicants
will pay GST applicable at the present rate and the proof of
payment shall he submitted to District Mining Office, Patna,
paragraph ‘1(ii)’ of Letter No. 3391/Mines, Patna dated 28.12.2019
agrees that the applicant shall deposit GST liability in accordance
with the updated notification.
Question on which Advance Ruling sought
60. The petitioners being applicant before the Advance
Ruling Authority submitted that they have deposited the tax
liability in Government treasury by reverse charge mechanism
(‘RCM’) at the same rate of tax as on supply of like goods
involving transfer of title in goods. The applicant sought advance
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ruling on the following question:- “(i) Whether M/s Broad Son
Commodities Pvt. Ltd. is rightly discharging the taxable liability
@ 5% through reverse charge mechanism?”
Order of the Advance Ruling Authority
61. In the aforementioned background, after hearing
learned Advocates for the parties, the concerned authority recorded
a finding in paragraph ‘12.3’, ‘12.4’ and ‘12.5’ which are relevant
to take note of hereunder for the purpose of this case:-
“12.3. The applicant has obtained Government land on
lease for mining sand. The leasing of the Government
land to the applicant is considered as supply of
services, as per subsection (1) of Section 7 of the
CGST Act, 2017.
12.4. Regarding the classification of service received
by the applicant an annexure to the Notification No.
3.-11/2017- Central Tax (Rate) dated 28.06.2017 has
been referred. The annexure attached to the
Notification No. 11/2017-Central Tax (Rate) dated
28.06.2017 has defined the Service Accounting Code
for each type of services. After meticulous observation
of the above mentioned service accounting codes, it
has been found that the nature of service received by
the application is covered under the Service
Accounting Code 9073 37- “licensing services for the
right to use minerals including its explorations and
evaluation. The Government has been providing the
service of licensing services for the right to use
minerals after its exploration and evaluation to the
applicant and the applicant has to pay a consideration
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for the same.
12.5. The applicability of GST rate for the
aforementioned service is based on the classification
of service. In the present case, the mining rights so
granted are covered under the sub-heading 9973 37
that specifies – Licensing services for the right to use
minerals including its exploration and evaluation. We
have gone through the notification no. 11/2017 dated
28-6-2017 and the amendments made there under time
to time particularly notification no 27/2018 dated 31-
12-2018. We now find that the royalty in respect of
mining lease is a part of the consideration payable for
the licensing Services for right to use minerals
including exploration and evaluation falling under the
Head 9973, which is taxable at the rate applicable on
supply of like goods involving transfer of title in
goods up to 31-12-2018 and thereafter taxable at 9%
CGST and 9% SGST from 04-01-2019, under the
residual entries of Serial No.17 of the Notification No.
11/2017 Central Tax dated 28.06.2017 as amended by
Notification No. 27/2018 Central Tax (Rate) dated 31-
12-2018.”
62. The Advance Ruling Authority answered the
question in the following words:-
“The activity undertaken by the applicant attracts 5%
GST (2.5%. CGST + 2.5% SGST) upto 31-12.2018
and taxable at the rate of 18% (9% CGST + 9%
SGST) from 01.01.2019 onwards under the residual
entries of serial no 17 of the Notification No. 11/2017
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dated 31-12-2018.”
Challenge to the Order of Advance Ruling
Authority in Writ Jurisdiction
63. At this stage, it is required to be mentioned that
being aggrieved by the order of the Advance Ruling Authority, the
petitioner preferred a writ application being CWJC No. 3286 of
2021 in which the following reliefs were prayed for:-
“i) the order dated 17.09.2020 (as contained in Annexure
-1) passed by the respondent no.1 and 2 under section 98 of
the Central Goods and Services Tax Act 2017 (hereinafter
called the CGST Act) and Bihar Goods and Services Tax
Act, 2017 (hereinafter called BGST Act) classifying
mining activity in the nature of licensing services for the
right to use minerals including its exploration and
evaluation taxable at the rate of 9% CGST and 9% BGST
with effect from 01.01.2019 under the residual entries of
serial no. 17 of the Notification No.11/2017, Central Tax
dated 28.06.2017 as amended by Notification No.27/2018
dated 31.12.2018 Central Tax (Rate) dated 31.12.2018 be
quashed.
ii) for a declaration that licensing services for the right to
use minerals including its exploration and evaluation fall
specifically under heading 9973 (licensing or rental
services with or without operator) as notified in item 17 of
Notification No.11/2017 Central Tax (Rate) dated
28.06.2017 particularly clause (iii) thereof read with the
subsequent Notification No.31/2017 Central Tax (Rate)
dated 13.10.2017, Notification No.1/2018 Central Tax
(Rate) Central Tax (Rate) dated 25.01.2018 and
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31.12.2018.
iii) for a declaration that classification of mining activity in
the nature of licensing services for the right to use minerals
including its exploration and evaluation taxable at the rate
of 9% CGST and 9% BGST with effect from 01.01.2019
under the residual entries of serial no. 17 of the
Notification No.11/2017, Central Tax dated 28.06.2017 as
amended by Notification No.27/2018 dated 31.12.2018
Central Tax (Rate) dated 31.12.2018 would only fall under
the inverted duty structure and consequently, would be
refundable and that levy of tax at higher rates on like goods
would be constitutionally imperssible.
iv) for granting any other relief (s) to which the petitioner
is otherwise found entitled to.”
64. When the writ application was taken up for
consideration, the Hon’ble Court was informed by learned
Standing Counsel for the State that the appellate authority under
the provisions of the BGST Act, 2017 stands constituted. The writ
application was disposed of in the following terms:-
“Shri Vikash Kumar, learned Standing Counsel No. 11
invites our attention to the notification dated 21st of
September, 2017 whereby the Appellate Authority under
the provisions of the Bihar Goods and Services Tax Act,
2017 stands constituted.
In this view of the matter, as prayed for by Shri D.V. Pathy,
learned counsel for the petitioner, we dispose of the present
petition in the following mutually agreeable terms:-
(a) The petitioner shall file appeal within a period of eight
weeks from today;
(b) We accept the statement of the petitioner that ten per
cent of the total amount, being condition prerequisite for
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so, the appeal shall be decided on merits. However, if the
amount is not deposited for whatever reason(s), same shall
be done before the next date;
(c) This deposit shall be without prejudice to the respective
rights and contention of the parties and subject to the order
passed by the Appellate Authority. However, if it is
ultimately found that the petitioner’s deposit is in excess,
the same shall be refunded within two months from the
date of passing of the order;
(d) We also direct for de-freezing/de-attaching of the bank
account(s) of the writ-petitioner, if attached in reference to
the proceedings, subject matter of present petition. This
shall be done immediately.
(e) The Appellate Authority shall condone the delay, if any,
in filing the appeal and decide the appeal on merits after
complying with the principles of natural justice;
(f) Opportunity of hearing shall be afforded to the parties to
place on record all essential documents and materials, if so
required and desired;
(g) During pendency of the appeal, no coercive steps shall
be taken against the petitioner.
(h) The Appellate Authority shall pass a fresh order only
after affording adequate opportunity to all concerned,
including the writ petitioner;
(i) Petitioner through learned counsel undertakes to fully
cooperate in such proceedings and not take unnecessary
adjournment;
(j) The Appellate Authority shall decide the appeal on
merits expeditiously, preferably within a period of two
months from the date of filing of the appeal;
(k) The Appellate Authority shall pass a speaking order
assigning reasons, copy whereof shall be supplied to the
parties;
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(l) Liberty reserved to the petitioner to challenge the order,
if required and desired;
(m) Equally, liberty reserved to the parties to take recourse
to such other remedies as are otherwise available in
accordance with law;
(n) We are hopeful that as and when petitioner takes
recourse to such remedies, before the appropriate forum,
the same shall be dealt with, in accordance with law, with a
reasonable dispatch;
(o) We have not expressed any opinion on merits and all
issues are left open;
(p) If possible, proceedings during the time of current
Pandemic [Covid-19] be conducted through digital mode;
The instant petition sands disposed of in the aforesaid
terms.
Interlocutory Application(s), if any, also stands disposed
of.
Learned counsel for the respondents undertakes to
communicate the order to the appropriate authority through
electronic mode”
No Appeal Preferred by the Petitioner(s)
65. It is an admitted position that the petitioners did not
approach the appellate authority for advance ruling. It was the
Department through the Joint Commissioner, State Tax who
preferred an appeal giving rise to case No. AAAR/01/2021-22. The
Department was aggrieved by the order dated 29.09.2020 passed
by the Advance Ruling Authority to the extent that the amount
received for settlement of sand ghat (bandobasti) by Mines and
Geology Department during settlement of sand ghats shall be
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chargeable to tax at the rate of 5% between the period 01.07.2017
to 31.12.2018.
Stand of M/s BSCPL-Petitioner before the
Appellate Authority
66. M/s BSCPL being respondent before the appellate
authority appeared and contested the said appeal by filing a
counter affidavit. In paragraph ‘9’ of their counter affidavit, the
respondents made the following submissions:-
“That since the classification of the services being
received by the Respondent is now settled the dispute in
the instant appeal remains only regarding the rate of tax
for the disputed period i.e. from 01.07.2017 to 31.12.2018
and also from 01.01.2019 onwards.”
67. Having said so, the respondent went on to make
further submissions in the counter affidavit. They contended that
pursuant to the Sand Policy, Notification No. 2887 dated
22.7.2014, tender document and Letter No. 506 dated 21.10.2014
the State Government had settled the sand ghats for a period of 5
years. The settlement amount for the said period of five years was
payable in five equal yearly installments. In these documents it
was stated that the yearly settlement amount for the year 2015
shall be the auction amount. In the subsequent years the settlement
amount shall be 120% of that of previous year. The schedule for
payment of the yearly installment amount was also provided for in
all the documents. The first installment of 50% of the yearly
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installment amount was to be paid by 15 th December of the
previous year, 25% was to be paid before 15th April and rest 25%
was to be paid before 15th September. The said settlement period
was extended till 31.10.2020 vide Resolution contained in Memo
No. 4948 dated 27.12.2019 with an increase of 50% of the
settlement amount. Thereafter, it was further extended till
31.12.2020 vide Resolution No. 2646 dated 14.09.2020 and then it
was extended till 31.03.2021 vide Resolution No. 3435 dated
30.12.2020. The extension was lastly granted vide Notification No.
986/M Patna dated 31.03.2021 from 01.04.2021 to 30.09.2021. It
is in this background, at this stage, in this writ application, it is
being contended that the petitioner cannot be subjected to GST
because the taxable event has taken place prior to coming into
force of the GST regime. Admittedly, this issue was not raised
before the Advance Ruling Authority in the application filed under
Section 19 of the SGST/BGST Act, 2017.
68. This Court further finds that another issue which
was in the counter affidavit by way of submission is with regard to
the exemption under serial no. 64 of the Notification No. 12 of
2017 dated 28.06.2017. The said notification has been issued by
the Government of India in the Ministry of Finance (Department
of Revenue), in exercise of power conferred by subsection (3) and
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subsection (4) of Section 9, subsection (1) of Section 11,
subsection (5) of Section 15 and Section 148 of the CGST Act,
2017. The preamble of the notification states as follows:- “…the
Central Government, on being satisfied that it is necessary in the
public interest so to do, on the recommendations of the Council,
hereby exempts the intra-State supply of services of description as
specified in column (3) of the Table below from so much of the
central tax leviable thereon under sub-section (1) of section 9 of
the said Act, as is in excess of the said tax calculated at the rate as
specified in the corresponding entry in column (4) of the said
Table, unless specified otherwise, subject to the relevant conditions
as specified in the corresponding entry in column (5) of the said
Table….”
Serial No. 64 of the Notification No. 12 of 2017 reads as
under:-
“Services provided by the Central Government, State
Government, Union territory or local authority by way of
assignment of right to use any natural resource where such
right to use was assigned by the Central Government,
State Government, Union territory or local authority
before the 1st April, 2016:
Provided that the exemption shall apply only to tax
payable on one time charge payable, in full upfront or in
installments, for assignment of right to use such natural
resource”
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69. The respondent before the appellate authority
submitted that under the GST regime, the respondent would be
covered by the exemption granted under serial no. 64 of the
Notification No. 12/2017 and is not liable to pay any GST on
‘RCM’ basis on the royalty paid to the government. It is apparent
on the record that this was not the subject matter of the discussion
falling within the scope of Section ’97’ of the CGST/BGST, Act,
2017 before the Advance Ruling Authority in the original
application.
70. We have already taken note of the fact that the
petitioners had moved this Court in the writ application and
several reliefs were prayed for therein. One of the reliefs prayed in
the writ application was to quash the order dated 17.09.2020
passed by respondent nos. 1 and 2 under Section 98 of the CGST
Act, 2017 and BGST Act, 2017 by which the mining activity of the
petitioner was classified in the nature of licensing services for the
right to use minerals including its exploration and evaluation
taxable at the rate of 9% CGST and 9% BGST with effect from
01.01.2019 under the residual entries of serial no. 17 of the
Notification No.11/2017, Central Tax dated 28.06.2017 as
amended by Notification No. 27/2018 dated 31.12.2018. It is
evident that the petitioner did not challenge the entire order dated
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17.09.2020 of the Advance Ruling Authority. Further, the
petitioner sought for a declaration that licensing services for the
right to use minerals including its exploration and evaluation fall
specifically under heading 9973 (licensing or rental services with
or without operator) as notified in item 17 of Notification
No.11/2017 Central Tax (Rate) dated 28.06.2017 particularly
clause (iii) thereof read with the subsequent Notification
No.31/2017 Central Tax (Rate) dated 13.10.2017 Notification
No.1/2018 Central Tax (Rate) Central Tax (Rate) dated 25.01.2018
and Notification No.27/2018 Central Tax (Rate) dated 31.12.2018.
Shift of Stand of the Petitioner
71. It is evident that while the petitioner did not
challenge the entire order of the Advance Ruling Authority in the
writ petition, even as they did not prefer any appeal before the
appellate authority for the advance ruling against the said order,
when it came to file a counter affidavit in the appeal preferred by
the Department, they raised two issues beyond the scope of Appeal
which we have taken note of hereinabove. The tentative kind of
approach of the respondent M/s ‘BSCPL’ may be seen from the
kind of prayer made in paragraph ’35’ of their counter affidavit
before the appellate authority. There, they prayed for setting aside
the order of the Advance Ruling Authority as it is bad in law.
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Contrary to the said prayer in the counter affidavit filed before the
appellate authority, in this Court a submission has been made in
alternative that in case this Court is not persuaded with the
proposition enumerated in paragraph ‘A’ to ‘D’, then the impugned
decision of the appellate authority of advance ruling be held bad in
law and the decision rendered by the original Advance Ruling
Authority holding that the rate of GST on services falling under
SAC 997337 attracts GST at 5% up to 31.12.2018 and 18% from
01.01.2019 should be upheld. This is a shift of stand by way of
alternative submission on behalf of the petitioner in the present
writ application.
72. It is evident from a bare reading of Section 97 of the
CGST/BGST Act that the scope for seeking advance ruling is
limited to the certain questions. Sub-Section (2) of Section 97 lays
down the questions in respect of which the advance ruling may be
sought. M/s BSPCL/respondent chose to obtain advance ruling
with regard to the question no. (a) of Sub-Section (2). They wanted
an advance ruling on the classification of the service. Within the
scope of the said question, the Advance Ruling Authority opined
that the activity undertaken by the applicant would be covered
under the sub-heading 9973 37 that specifies that “licensing
services for the right to use minerals including its exploration and
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evaluation”. M/s BSCPL/respondent neither preferred any appeal
even while opposing the appeal preferred by the Department,
despite there being an opportunity granted by the Hon’ble Division
Bench of this Court in CWJC No. 3286 of 2021.
73. It is a matter of record that in the writ filed before
this Court, the respondent-M/s BSCPL was rather looking for a
declaration that licensing services for the right to use minerals
including its exploration and evaluation fall specifically under
heading 9973 (leasing or rental services, with or without operator)
as notified in Item No. 17 of Notification No. 11/2017 Central Tax
(Rate) dated 28.06.2017 particularly clause (iii) thereof read with
the subsequent Notification No. 31/2017 Central Tax (Rate) dated
13.10.2017, Notification No. 1/2018 Central Tax (Rate) Central
Tax (Rate) dated 25.01.2018 and Notification No. 27/2018 Central
Tax (Rate) dated 31.12.2018. Thus, in no way, the submissions
which are being advanced by learned Senior Counsel for the
petitioner under ‘A’ to ‘D’ of paragraph ’37’ hereinabove were ever
raised at any stage of the proceeding. We are, therefore, of the
considered opinion that the law being very clear on the subject, the
present petitioners well understood the law and never raised any
issue of taxability under head 9973.
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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Royalty is not a Statutory Impost/Tax —
MADA Judgment
74. We further find that when the present writ
application was filed, the petitioner prayed for various reliefs.
They went on to seek declaration that royalty being in the nature of
statutory impost is a tax and, therefore, the same cannot be
exigible to further taxation (paragraph no. 1 (iv)). The petitioner
further sought a declaration that the grant of mineral concession is
merely a statutory function/ duty under provisions of law, it does
not amount to rendition of any service, therefore, the same does
not attract the levy of GST. We have taken note of the arguments
formulated by learned Senior Counsel under paragraph ’15’ of our
judgment. We are of the opinion that most of the arguments which
have been convassed by learned Senior Counsel for the petitioners
were already discussed and have been answered by the Hon’ble
Supreme Court in MADA judgement. While dealing with the
issues as to whether royalty is in the nature of a tax?, in paragraph
‘130’, their lordship held as under:-
“130. On first principles, royalty is a consideration paid by
a mining lessee to the lessor for enjoyment of mineral
rights and to compensate for the loss of value of minerals
suffered by the owner of the minerals. The marginal note
to Section 9 states that royalties are “in respect of mining
leases.” The liability to pay royalty arises out of the
contractual conditions of the mining lease.170
170. [See Mineral Concession Rules, 1960, Rules 27 and 45]
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
80/130A failure of the lessee to pay royalty is considered
to be a breach of the terms of the contract, allowing
the lessor to determine the lease and initiate
proceedings for recovery against the lessee.”
75. In paragraph ‘133’ of the judgment, their lordships
have held as under:-
“133. There are major conceptual differences
between royalty and a tax:
(i) the proprietor charges royalty as a consideration
for parting with the right to win minerals, while a
tax is an imposition of a sovereign;
(ii) royalty is paid in consideration of doing a
particular action, that is, extracting minerals from
the soil, while tax is generally levied with respect
to a taxable event determined by law;171 and
(iii) royalty generally flows from the lease deed as
compared to tax which is imposed by authority of
law.”
76. In the same judgment, the Hon’ble Supreme Court
has held that Under the MMDR Act, the Central Government fixes
the rates of royalty, but it is still paid to the proprietor by virtue of
a mining lease. In case the minerals vest in the government, the
mining lease is signed between the State Government (as lessor)
and the lessee in pursuance of Article 299 of the Constitution.
171. [Goodyear (India) Ltd. v. State of Haryana, (1990) 2 SCC 71, para 27]
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Through the mining lease, the government parts with its exclusive
privilege over mineral rights. A consideration paid under a
contract to the State Government for acquiring exclusive privileges
cannot be termed as an impost. Since royalty is a consideration
paid by the lessee to the lessor under a mining lease, it cannot be
termed as an “impost”.
77. The Hon’ble Supreme Court in MADA judgment
specifically held in paragraph ‘129’ and ‘130’ that the principles
applicable to royalty apply to dead rent because: (i) dead rent is
imposed in the exercise of the proprietary right (and not a
sovereign right) by the lessor to ensure that the lessee works the
mine, and does not keep it idle, and in a situation where the lessee
keeps the mine idle, it ensures a constant flow of income to the
proprietor; (ii) the liability to pay dead rent flows from the terms
of the mining lease; (iii) dead rent is an alternate to royalty; if the
rates of royalty are higher than dead rent, the lessee is required to
pay the former and not the latter; and (iv) the Central Government
prescribes the dead rent not in the exercise of its sovereign right,
but as a regulatory measure to ensure uniformity of rates. It has
been clearly held that both royalty and dead rent do not fulfil the
characteristic of tax or impost.
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78. As regards the transfer of mineral rights to the
lessee, the Hon’ble Supreme Court has held in paragraphs ‘340’,
‘341’, ‘342’, ‘343’ and ‘344’ as under:-
“340. A mining lease contemplated under the
MMDR Act relates to the mining rights and
mineral rights. It does not grant surface rights to
the mining lessee. However, surface rights are
essential to begin any mining operations. In fact,
obtaining of the surface rights by a mining lessee
over the area where mining operations will be
conducted is a prerequisite condition for grant of
both a prospecting licence as well as a mining
lease. The lessee requires access to the surface
rights to effectively exercise their mining rights
and privileges enumerated under Part II of Form
K. Moreover, as held in Burrakur Coal346, the
mining lessee requires enjoyment of surface rights
to effectively carry out the mining operations.
There cannot be any severance between the two
during the continuance of the mining operations.
341. The more important question is when do the
mineral rights transfer to the lessee? Since
Independence, State legislatures have enacted a
spate of land reform laws vesting the right to
mines and minerals in the State Government. 348
Through the instrument of a mining lease, the
State Government transfers its rights in the sub-
soil minerals to the lessee for the period of the
lease. The nature of the leasehold rights accruing
to the lessee can be determined on the basis of the
Transfer of Property Act.
346. [Burrakur Coal Co. Ltd. v. Union of India, 1961 SCC OnLine SC 23 : AIR
1961 SC 954]
348.[Gujarat Land Revenue Code, 1879, Section 69-A; Madhya Pradesh Land
Revenue Code, 1959, Section 247; Chhatisgarh Land Revenue Code, 1959, Section
247; Goa, Daman and Diu Land Revenue Code, 1968, Section 36.]
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
83/130A right to carry on mining operations in land to
extract a specified mineral and to remove and
appropriate that mineral is a “right to enjoy
immoveable property” within the meaning of
Section 105 of the Transfer of Property Act.118 In
case of a mining lease, the property can be
enjoyed by working the mine as indicated in
Section 108 of the Transfer of Property Act.
342. Section 110 of the Transfer of Property Act
deals with the exclusion of the day on which the
term of the ease commences. It provides that
where the time limited by a lease of immoveable
property is expressed as commencing from a
particular day, in computing that time such day
shall be excluded. It further provides that in
situations where the lease does not mention the
day of commencement, the time limited by the
lease commences from the day of the making of
the lease. The model mining lease under Form K
specifies the day from which the mineral rights
are granted and demised unto the lessee. Thus, the
transfer of right to enjoy the property under a
mining lease commences from the specified day
of commencement. Resultantly, the rights and
interests in the minerals specified in the mining
lease are transferred from the State Government to
the lessee on the specified day of the
commencement of the lease deed.
343. Once the interest in the minerals is
transferred under a mining lease, the lessee
acquires the right to work the mine and win the
minerals. It is through this process of working the
mine and winning of minerals that minerals are
extracted or obtained from the earth irrespective
of whether such activity is carried out on the
surface or in the bowels of the earth. 349 Although
the title to minerals vests in the State Government,
the mining lease transfers the interest in the
mineral from the State Government to the mining
lessee.
118. [Tarkeshwar Sio Thakur Jiu v. Dar Dass Dey & Co., (1979) 3 SCC 106, para 37]
349. [Tarkeshwar Sio Thakur Jiu Case, (1979) 3 SCC 106, para 15]
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
84/130During the whole process, the minerals continue
to remain embedded in the earth, either over or
above. Thus, there is no decoupling of minerals
from land. It is well established that tax on land
can also be imposed on an occupier. When a
mining lease is granted, the lease holder
necessarily has to occupy the surface rights of the
area specified in the lease. Resultantly, the
leaseholder has rights to both the minerals and
surface during the subsistence of the mining lease.
344. We do not agree with the respondent’s
submission that the mineral rights are transferred
from the State to the mining lessee only upon the
extraction of minerals. Once the lease deed is
signed, the interest in the minerals is transferred
from the State Government (in case the minerals
vest in the State Government) to the lessee. The
interest of the lessee in the minerals continues
until the determination of the lease deed. It is only
upon the exercise of mineral rights by the lessee,
that is removal or consumption of minerals, that
the lessee is required to pay royalty. Thus, the
transfer of interest in the minerals is distinct from
the exercise of the mineral rights. In view of the
above discussion, it is clear that minerals are
“decoupled” from land only upon the exercise of
mineral rights by the lessee.”
Royalty is to be paid only upon Exercise of “Mineral
Rights” – Incidence of Tax
79. From the discussions made in the above-mentioned
paragraphs of the MADA judgment, it is crystal clear that while
the transfer of right to enjoy the property under a mining lease
commences from the specified day of commencement and the
rights and interest in the minerals specified in the mining lease are
transferred from the State Government to the lessee on the
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specified day of the commencement of the lease deed, the lessee is
required to pay royalty only upon exercise of minerals right, that is
removal or consumption of minerals. This gains importance as it
resolves the issues raised by learned Senior Counsel for the
petitioner in his submissions in terms ‘D’ of paragraph ’15’.
Learned Senior Counsel for the petitioner has argued that merely
because periodic payment of royalty is made post the
commencement of GST, the State would have no jurisdiction to
impose GST because the taxable event has taken place prior to
coming into force of GST. It is his submission that the petitioner
was declared the highest bidder on 21.10.2014 in respect of
auction of sand ghats for a period of five years advancing from
01.01.2015 to 31.12.2019. The submission in this regard have been
taken note of hereinabove in paragraph ’50’ of the jugdment.
According to him, the the vestitute of the right to carry out mining
activity was conferred upon the petitioner as early as in September,
2015 and even prior to that the in-principle sanction order was
issued sometime in November, 2014, all of which took place prior
to 01.07.2017 i.e. the date of commencement of GST. While
learned Senior Counsel admits that yearly settlement deeds were
executed and there were agreements that were executed post
01.07.2017, however, those executions according to the petitioner
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were a mere formality. We find no merit in this submission.
Learned Senior Counsel for the State has rightly submitted that the
GST is payable on the payment of every installment of the
settlement amount and in case where royalty on extracted quantity
of sand is more than the settlement amount, then the settlee shall
be liable to pay additional settlement amount. In view of the
judgment of the Hon’ble Supreme Court, there is no iota of doubt
that the transfer of interest in minerals is distinct from the exercise
of minerals rights and the royalty is required to be paid only upon
exercise of the mineral rights by the lessee.
Entry 50 of List II under Seventh Schedule,
Article- 246A of the Constitution of India
80. We further find that while discussing the measure to
determine the tax, the Hon’ble Supreme Court has discussed Entry
49 and 50 of List II under Seventh Schedule of the Constitution of
India. It has been held that both the Entries operate in different
fields without any overlap. The nature of tax under both the Entries
i.e. Entry 49 and 50 of List II are distinct. In paragraph ‘364’ of the
MADA judgment, the Hon’ble Supreme Court has held as under:-
“364. In view of the above discussion, we conclude
that mineral value or mineral produce could be used
as a measure of the tax on land under List II Entry
49. The fact that List II Entry 50 pertains to taxes
on mineral rights would not preclude the State
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
87/130legislature to use the measure of mineral value or
mineral produce under List II Entry 49. The State
legislature has legislative discretion to determine
the appropriate measure for the purposes of
quantifying taxes, so long as there is a reasonable
nexus between the measure and the nature of the
tax. The measure does not determine the nature of
the tax. The words “lands” under List II Entry 49
includes mineral-bearing land. The mineral produce
is the yield from a mineral-bearing land. Since
royalty is determined on the basis of the mineral
produce, royalty can also be used as a measure to
determine the tax on royalty. The fact that the State
legislature uses mineral produce or royalty as a
measure does not overlap with List II Entry 50.”
(underline is mine)
81. The conclusions reached by the Hon’ble Supreme
Court in MADA judgment may be found in paragraph ‘365’ of the
judgment which we reproduce hereunder for a ready reference:-
“365. In view of the above discussion, we answer the
questions formulated in the reference in terms of the
following conclusions:
365.1. Royalty is not a tax. Royalty is a contractual
consideration paid by the mining lessee to the lessor
for enjoyment of mineral rights. The liability to pay
royalty arises out of the contractual conditions of the
mining lease. The payments made to the Government
cannot be deemed to be a tax merely because the
statute provides for their recovery as arrears;
365.2. List II Entry 50 does not constitute an
exception to the position of law laid down in M P V
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
88/130Sundararamier6. The legislative power to tax mineral
rights vests with the State legislatures. Parliament
does not have legislative competence to tax mineral
rights under List I Entry 54, it being a general entry.
Since the power to tax mineral rights is enumerated
in List II Entry 50, Parliament cannot use its
residuary powers with respect to that subject-matter;
365.3. List II Entry 50 envisages that Parliament can
impose “any limitations” on the legislative field
created by that entry under a law relating to mineral
development. The MMDR Act as it stands has not
imposed any limitations as envisaged in List II Entry
50;
365.4. The scope of the expression “any limitations”
under List II Entry 50 is wide enough to include the
imposition of restrictions, conditions, principles, as
well as a prohibition;
365.5. The State legislatures have legislative
competence under Article 246 read with List II Entry
49 to tax lands which comprise of mines and
quarries. Mineral-bearing land falls within the
description of “lands” under List II Entry 49;
365.6. The yield of mineral-bearing land, in terms of
the quantity of mineral produced or the royalty, can
be used as a measure to tax the land under List II
Entry 49. The decision in Goodricke 7 is clarified to
this extent;
6. [M.P.V. Sundararamier & Co. v. State of A.P., 1958 SCC OnLine SC 22 : AIR 1958
SC 468 : 1958 SCR 1422]
7. [Goodricke Group Ltd. v. State of W.B., 1995 Supp (1) SCC 707]
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
89/130365.7. List II Entries 49 and 50 deal with distinct
subject-matters and operate in different fields.
Mineral value or mineral produce can be used as
a measure to impose a tax on lands under List II
Entry 49;
365.8. The “limitations” imposed by Parliament
in a law relating to mineral development with
respect to List II Entry 50 do not operate on List
II Entry 49 because there is no specific stipulation
under the Constitution to that effect; and
365.9. The decisions in India Cement1 (India
Cement Ltd. v. State of T.N., (1990) 1 SCC 12),
Orissa Cement163, Federation of Mining
Associations of Rajasthan338, Mahalaxmi Fabric
Mills165 , Saurashtra Cement164, Mahanadi
Coalfields251, and P Kannadasan261 are overruled
to the extent of the observations made in the
present case.”
82. Now, coming to the GST Laws, the Constituion
(101st Amendment) Act, 2016. Section 9 inserted Article 269A in
the Constitution of India. Article 269A is as under:-
163. Orissa Cement Ltd. v. State of Orrisa, 1991 Supp (1) SCC 430, para 36
338. Federation of Mining Associations of Rajasthan v. State of Rajasthan, 1992
Supp (2) SCC 239
165. State of M.P. v. Mahalaxmi Fabric Mills Ltd., 1995 Supp (1) SCC 642
164. Saurashtra Cement & Chemical Industries v. Union of India, (2001) 1 SCC
91
251. State of Orissa v. Mahanadi Coalfieds Ltd., 1995 Supp (2) SCC 686
261. P. Kannadasan v. State of T.N., (1996) 5 SCC 670
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
90/130“269-A. Levy and collection of goods and services
tax in course of inter- tate trade or commerce.– (1)
Goods and services tax on supplies in the course of
inter-State trade or commerce shall be levied and
collected by the Government of India and such tax
shall be apportioned between the Union and the
States in the manner as may be provided by
Parliament by law on the recommendations of the
Goods and Services Tax Council.
Explanation.–For the purposes of this clause,
supply of goods, or of services, or both in the
course of import into the territory of India shall be
deemed to be supply of goods, or of services, or
both in the course of inter- State trade or
commerce.
(2) The amount apportioned to a State under clause
(1) shall not form part of the Consolidated Fund of
India.
(3) Where an amount collected as tax levied under
clause (1) has been used for payment of the tax
levied by a State under Article 246-A, such amount
shall not form part of the Consolidated Fund of
India.
(4) Where an amount collected as tax levied by a
State under Article 246-A has been used for
payment of the tax levied under clause (1), such
amount shall not form part of the Consolidated
Fund of the State.
(5) Parliament may, by law, formulate the principles
for determining the place of supply, and when a
supply of goods, or of services, or both takes place
in the course of inter-State trade or commerce.”
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
91/130
83. At the same time, Article 246-A has also been
inserted which is quoted hereunder:-
“246-A. Special provision with respect to goods and
services tax.–(1) Notwithstanding anything
contained in articles 246 and 254, Parliament, and,
subject to clause (2), the Legislature of every State,
have power to make laws with respect to goods and
services tax imposed by the Union or by such State.
(2) Parliament has exclusive power to make laws
with respect to goods and services tax where the
supply of goods, or of services, or both takes place
in the course of inter-State trade or commerce.
Explanation.–The provisions of this article, shall,
in respect of goods and services tax referred to in
clause (5) of article 279-A, take effect from the date
recommended by the Goods and Services Tax
Council.”
84. In the above background, the Parliament enacted the
Central Goods and Services Tax Act, 2017. The preamble of the
Act reads as under:-
“An Act to make a provision for levy and
collection of tax on intra-State supply of goods or
services or both by the Central Government and
for matters connected therewith or incidental
thereto.
BE it enacted by Parliament in the Sixty-eighth
Year of the Republic of India as follows: — ”
85. The contention of learned Senior Counsel for the
petitioners that conferment of mining licenses is essentially an
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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exercise of mineral right, therfore, any tax may be levied only by
State Government and the provision of Article 246A
notwithstanding the non-obstante clause contained therein cannot
be pressed into service to confer legilative competence on State
and Centre to impose GST, is liable to be rejected. Artcle 246A of
the Constitution of India is a special provision with respect to
goods and services tax. The power of State to make laws on the
subject under List II, Entry 50 of Seventh Schedule and power
under special provisions may be well harmonised.
86. Similarly, the Legislature of the State of Bihar
enacted BGST Act, 2017 which makes provision for levy and
collection of tax on intra-State supply of goods or services or both
by the State Government and for matters connected therewith or
incidental thereto. Various provisions of the CGST Act were
notified on different dates. The Central Government appointed the
22nd Day of June 2017 as the date on which the provisions of
Sections 1, 2, 3, 4, 5, 10, 22, 23, 24, 25, 26, 27, 28, 29, 30, 139,
146 and 164 of the said Act shall come into force (Notification No.
1/2017-Central Tax, dated 19.06.2017 w.e.f. 22.06.2017). Again
vide Notification No. 9/2017-Central Tax, dated 28.06.2017, the
Central Government appointed the First day of July, 2017 as the
date on which the provisions of Sections 6 to 9, 11 to 21, 31 to 41,
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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42 except the proviso to sub-section (9) of section 42, 43 except
the proviso to sub-section (9) of sections 43, 44 to 50, 53 to 138,
140 to 145, 147 to 163, 165 to 174 of the said Act to come into
force.
87. For the purpsoe of the present case, we take note of
the definition of the word “services” as provided under Section 2,
clause (102) — “services” means anything other than goods, money
and securities but includes activities relating to the use of money
or its conversion by cash or by any other mode, from one form,
currency or denomination, to another form, currency or
denomination for which a separate consideration is charged;
1[Explanation.–For the removal of doubts, it is hereby clarified
that the expression “services” includes facilitating or arranging
transactions in securities;]
88. The word “State Tax” has been defined under
Section 2 clause (104) which means the tax levied under any State
Goods and Services Tax Act.
89. Section 7 of the CGST/BGST Act, 2017 talks of
scope of “supply”. Clause (a) of Sub-Section (1) of Section 7
includes all forms of supply of goods or services including licence,
rental and lease for consideration within the expression “supply”.
It is, therefore, evident that leasing of mines and grant of mineral
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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rights to a lessee for consideration comes within the meaning of
supply of services.
90. Before the Appellate Authority for advance ruling,
one of the arguments raised on behalf of the petitioner was with
regard to his claim for exemption under Serial No. ’64’ of the
Exemption Notification No. 12/2017. While arguing the writ
application, learned Senior Counsel has not specifically argued this
point.
Classification of Services – Notification No.
11/2017-Central Tax (Rate); 27/2018- Central Tax
(Rate) dated 31.12.2018 and Circular No.
164/2021 dated 06.10.2021-discussed
91. Now, we would firstly deal with Notification No.
11/2017-Central Tax (Rate) dated 28.06.2017 which has been
issued by the Central Government on recommendations of the
Council, in exercise of its power conferred in Sub-Section (1) of
Section 9, Sub-Section (1) of Section 11, Sub-Section (5) of
Section 15 and Sub-Section (1) of Section 16 of the CGST Act,
2017. The Notification specifically states that “the Central
Government, on the recommedations of the Council, and on being
specified that it is necessary in the public interest so to do hereby
notify that the Central Tax, on the Intra-State supply of services of
description as specified in Column (3) of the table below, falling
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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under Chapter, Section or Heading of scheme of classification of
services as specified in Column (2) shall be levied at the rate as
specified in the corresponding Entry in Column (4) subject to the
conditions as specified in the corresponding Entry in Column (5)
of the said table which is as under:-
Sl No. Chapter, Section or Description of Service Rate (per Condition
Heading cent.)
(1) (2) (3) (4) (5)
92. The scheme of the classification of services is also
provided with the Notification No. 11/2017 by way of annexure.
The relevant classification of group 99733 is as under:-
250 Group Licensing services for the right to use intellectual property and
99733 similar products
251 997331 Licensing services for the right to use computer software and
databases
252 997332 Licensing services for the right to broadcast and show original films,
sound recordings, radio and television programme and the like
253 997333 Licensing services for the right to reproduce original art works
254 997334 Licensing services for the right to reprint and copy manuscripts,
books, journals and periodicals
255 997335 Licensing services for the right to use research and development
products
256 997336 Licensing services for the right to use trademarks and franchises
257 997337 Licensing services for the right to use minerals including its
exploration and evaluation
258 997338 Licensing services for right to use other natural resources including
telecommunication spectrum
259 997339 Licensing services for the right to use other intellectual property
products and other resources nowhere else classified
(underline is mine)
93. Vide Notification No. 27/2018-Central Tax (Rate),
dated 31.12.2018 the Central Government brought further
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amendments in the notification of the Government of India, in the
Ministry of Finance (Department of Revenue) No. 11/2017-
Central Tax (Rate) dated 28th June, 2017. One of the amendments
were brought against Serial No. 17 for Item No. VIII in Column
(3) and the entries relating thereto in Column ‘3’, ‘4’ and ‘5’. The
following were substituted:-
“(e) against serial number 17, for item (viii) in column (3) and the entries relating thereto in
columns (3), (4) and (5), the following shall be substituted, namely ;-
(3) (4) (5)
"(viia) Leasing or renting of Same rate of central tax as -
goods applicable on supply of like
goods involving transfer of title
in goods
(viii) Leasing or rental services, 9 -
with or without operator, other
than (i), (ii),(iii), (iv), (v), (vi),
(vii), and (viia) above
94. In view of the aforementioned notifications, the
Advance Ruling Authority held in the original order that the
activity undertaken by the applicant attracts 5% GST (2.5% CGST
+ 2.5% SGST) up to 31.12.2018 and taxable at the rate of 18%
(9% CGST + 9% SGST) from 01.01.2019 onwards under the
residual Entries of serial no. 17 of Notification No. 11/2017 dated
28.06.2017 as amended vide Notification No. 27/2018 dated
31.12.2018.
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95. The Department, however, brought to the notice of
the Appellate Authority the Circular No. 164 of 2021 dated
06.10.2021 which was issued on the recommendation of the GST
Council in its 45th meeting. The relevant portion of the said
circular has been quoted in paragraph ‘7.3’ of the appellate order
and we reproduce the same hereunder:-
“7.3 While considering the issue of rate of tax
applicable to the said service the Council took note
of the following facts:-
“(a) GST Council in its 4th meeting held on 3rd & 4th
November, 2016 had decided that supply of services
shall be generally taxed at the rate of 18%;
(b) More importantly, the GST Council in its 14 th
meeting held on 18th & 19th May, 2019, while
recommending the rate schedules of services (5%,
12%, 18% and 28%) specifically recommeded that
all the residuary services would attract GST at the
rate of 18%.
(c) The rate applicable on the service of grant of
mineral exploration license and mining lease under
Service Tax was also the standard rate of 15.5%.
Services under this category have been standard
rated in GST at 18%;
(d) Therefore, the intention has always been to tax
this activity/supply at standard rate of 18%.”
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Order of the Appellate Authority on
Advance Ruling — Approved
96. In paragraph ‘7.4’ of the appellate order, the
Appellate Authority has quoted the relevant part of the circular
which states that “as recommended by the Council, it is clarified
that even if the rate schedule did not specifically mention the
service by way of grant of mining rights, during the period
01.07.2017 to 31.12.2018, it was taxable at 18% in view of
principle laid down in the 14th meeting of the Council for
residuary GST rate. Post 1st January, 2019, no dispute remains as
stated above”.
97. We find from the above-mentioned notifications that
the Notification No. 11 of 2017 under serial no. 17 made the
leasing or rental services, with or without operator other than (i),
(ii), (iii) and (iv) above taxable at the same rate of central tax as
applicable on supply of like goods involving transfer of title in
goods. The GST Council has been established as an Constitutional
Body and the said GST Council in its 4 th meeting held on 3rd and
4th November, 2016 had decided that supply of services shall be
generally taxed at the rate of 18%. In its 18 th and 19th May, 2019
meeting, the GST Council while recommeding the rate schedule
for services (5%, 12%, 18% and 28%) specifically recommeded
that all the residuary services would attract GST at the rate of
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18%. In these circumstances, in our opinion, the Appellate
Authority on advance ruling has not committed any error taking a
view with regard to the rate of tax for the period 01.07.2017 to
31.12.2018 at the rate of 18% (9% CGST + 9% SGST).
Claim of Exemption Rightly Negatived by
the Appellate Authority
98. As regards the exemption claimed under serial no. 64
of the Notification No. 12 of 2017, the Appellate Authority for
advance ruling has rightly taken a view that the said exemption
would not be available to M/S BSCPL. Paragraph ‘9.1’ of the
impugned appellate order provides the reason which we quote
underunder for a ready reference:-
“9.1 Before, parting with the issue it is also being
clarified that the expression “… where such right to
use was assigned by the Central Government, State
Government, Union Territory or local authority
before the 1st April, 2016:… “occurring in the said
serial number 64 of the impugned notification
number 12/2017 (supra) also does not come to the
rescue of the Respondent on factual grounds alone.
A perusal of the agreement and other document
submitted by the Respondent before this Court as
also before the Authority for Advance Ruling
reveals that the separate yearly agreement and
work orders were issued by the Authorities of the
Mining Department, Government of Bihar in
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Respondent himself has stated in para 16 of this
reply that:-
“Separate yearly work orders were issued in favor
of the Respondent for the district of Patna, Saran
and Bhojpur. Consequent thereto, separate yearly
agreements were executed by the District
Magistrate of Patna and Bhojpur.”
99. We have already reproduced Serial No. 64 of the
Notification No. 12 of 2017 in paragraph ’68’ hereinabove.
100. Perhaps for the aforesaid reason, learned Senior
Counsel for the M/S BSCPL/petitioner in the writ application has
not raised this issue of exemption under any of his formulations of
arguments which have been noted in paragraphs ‘A’ to ‘D’ of the
written notes of submissions which we have reproduced in
paragraph ’15’ hereinabove.
Transfer of Interest is Different from Exercise
of Mineral Rights – Royalty can be used as a
Measure of Tax on Royalty
101. From the entire discussions made hereinabove, to
this Court it is crystal clear that the submissions advance by
learned Senior Counsel for the petitioner under paragraphs A to E
of paragraph ’15’ have no basis to stand. The judgment of the
Hon’ble Supreme Court in MADA case has made it very clear that
royalty is not a tax. It is a contractual consideration paid by the
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mining lessee to the lessor for enjoyment of minerals rights.
Royalty becomes payable only upon exercise of minerals rights by
the lessee that is removal or consumption of minerals. The
transffer of interest in minerals is distinct from the exercise of the
mineral rights and further it is evident that since royalty is
determined on the basis of the mineral produce, royalty can also
be used as a measure to determine the tax on royalty.
Contention that Royalty Comprises a
Composite Charge for Regulatory and
Service Fee- Negatived
102. The contention of learned Senior Counsel for the
petitioner that grant of mineral concession/ mining leases entail
supply of services for consideration and such consideration
comprises a composite charge for regulatory as well as service fee
is in the teeth of the judgment of the Hon’ble Supreme Court in
MADA case. The judgment makes it very clear that royalty is a
consideration paid by a mining lessee to the lessor for enjoyment
of mineral rights and to compensate for the loss of value of
minerals suffered by the owner of the minerals. It arises out of the
contractual condition of the mining lease.
103. One of the submissions made by learned Senior
Counsel for the petitioner is that there is a discrimination on the
part of Government in the matter of levy of tax on royalty in case
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of exercise of mineral rights. It is submitted that the liquor
licenses are not treated as supply of goods and services. It would
appear that Notification No. 25/2019 – Central Tax (Rate) dated
30.09.2019 declares that services by way of grant of alcoholic
liquor license, against consideration in the form of licence fee or
application fee or whatever name called is to be treated neither as
supply of goods nor as supply of services. The notification
explains that the same has been issued to implement the
recommendations of the 26th GST Council meeting where it has
been recommeded that no GST shall be leviable on licence
fee/application fee of the aforesaid nature. In his submissions, Mr.
Ghosh, learned Senior Counsel has taken a plea that this is in the
nature of special dispensation only for supply of the services by
way of grant of liquor licences by the State Government and this
conferment of special dispensation is not based on a reasonable
classification. According to him, the mining industry can be put at
par with the liquor industry at least w.e.f. the date of the
Notification No. 25/2017 w.e.f. 30.09.2019. This Court is of the
opinion that the argument has to be taken note of, only for purpose
of rejection. This Court has already discussed the scope and ambit
of an application under Section 97 of the CGST/BGST Act, 2017.
This Court has also noticed how some of the issues which were
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never raised earlier have been taken up and argued in this Court.
Learned Senior Counsel for the petitioner, in his attempt to
challenge the impugned order of the Appellat Authority on
advance ruling, has gone to the extent of saying that the liquor
industry and the mining industry should be treated at par. The
fallacy in the argument of learned Senior Counsel may be found
apparent on the face of it. Once the GST Council being a
Constitutional body has taken a view that the grant of licence to a
liquor industry is not sale of goods or supply of services and for
that reason no GST would be chargeable on the license
fee/application fee, it cannot be allowed to be contended that the
grant of license for sale of liquor is in the nature of a supply of
‘services’ for consideration. Grant of mineral rights under a lease
deed is not the same as a license for sale of liquor. The contention
of learned Senior Consel on this score is liable to be rejected. In
Liberty Cinema (supra), the Hon’ble Supreme Court has
considered the distinction between fee for services and fee for
licenses. Imposition of license fee does not lead to a conclusion
that the fee is for the services rendered, paragraphs ‘7’, ’14’ and
’17’ of the judgment is being reproduced hereinafter:-
“7. Now, on the first question, that is, whether the
levy is in return for services, it is said that it is so
because. s. 548 uses the word “fee”. But, surely,
nothing turns on words used. The word ‘fee’ cannot
be said to have acquired a rigid technical meaning in
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for services. No authority for such a meaning of the
word was cited. However that may be, it is conceded
by the respondent that the Act uses the word ‘fee’
indiscriminately. It is admitted that some of the levies
authorised are taxes though called fees. Thus, for
example, as Mitter J. pointed out, the levies
authorised by Ss. 218, 222 and 229 are really taxes
though called fees, for no services are required to be
rendered in respect of them. This Act, therefore, did
not intend to use the word fee as referring only to a
levy in return for services.
14. The nature of services to be rendered in return for
a levy so as to make it a fee has been considered by
this Court in several cases and in all of them it has
been said that the services must confer some benefit
on the person paying the fee. The earliest case on the
subject appears to be Commissioner, Hindu Religious
Endowments, Madras v. Sri Lakshmindra Thirtha
Swamiar of Sri Shirur Mutt, 1954 SCR 1005 : (AIR
1954 SC 282) where it was said at page 1042 (of
SCR) : (at p. 295 of AIR) “a fee is a payment for a
special benefit or privilege. Public interest seems to
be at the basis of all impositions, but in a fee it is
some special benefit which the individual receives”. It
was again said at p. 1043 (of SCR) : (at p. 296 of
AIR) that in the case of fees for services “the
Government does some positive work for the benefit
of persons and the money is taken as the return for the
work done or services rendered.” This case was
concerned with a statute which imposed a levy on
religious institutions expressly said to be in return for
services. The services mentioned in the statute
consisted among others in the Government
supervising the management of the institutions,
auditing their accounts and seeing that their income
was duly appropriated to the purposes for which they
were founded. Though it did not expressly say so. this
Court was presumably of the view that these were
services to the institutions making the levy a fee, for
it declared the levy invalid on the ground it was not
correlated to the costs of those services and therefore
was a tax which was beyond the competence of the
Madras Legislature which had enacted the statute. It
would appear that the services here considered were
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which secured to them their funds and the proper
application of them. The statute might have involved
a check on the conduct of the Mathadipatis who
managed the institutions but that control also was for
the benefit of the institutions. It has to be
remembered, as was said in another case to which we
shall presently refer, that the Mathadipatis were in the
position of trustees of the institutions. It would follow
that control of their wrongful activities must result in
special benefits to the institutions for their funds
would not then be frittered away.
17. The other case to which we wish to refer in this
connection is Hingir Rampur Coal Co. Ltd. v. State of
Orissa, (1961) 2 SCR 537 : (AIR 1961 SC 459).
There the imposition by a certain statute of a levy on
lessees of coal mines in a certain area and the creation
of a fund with it, was called in question. It was held
that the levy was a fee in return for services and was
valid. It was there said at p. 549 (of SCR) : (at p. 466
of AIR). “If the special rendered is distinctly and
primarily meant for the benefit of a specified class or
area, the fact that in benefitting the specified class or
area the State as a whole may ultimately and
indirectly be benefitted would not detract from the
character of the levy as a fee.” It may be mentioned
that the levy there went to meet expenditure necessary
or expedient for providing amenities like
communication, water supply and electricity for the
better development of the mining area and to meet the
welfare of the labour employed and other persons
residing or working in the area of the mines. Here
again there is no element of control but the services
resulted in real benefit specially accruing to the
persons on whom the levy was imposed. These
decisions of this Court clearly establish that in order
to make a levy a fee for services rendered the levy
must confer special benefit on the persons on whom it
is imposed. No case has been brought to our notice in
which it has been held that a mere control exercised
on the activities of the persons on whom the levy is
imposed so as to make these activities more onerous
is service rendered to them making the levy a fee.”
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104. Notification No. 12 of 2017 imposes tax on the
services covered under Head 99733. In the garb of a challenge to
the order of Appellate Authority for Advance Ruling, this Court
would not allow the petitioners to contend that imposition of tax
under head 99733 in the Notification No. 12 of 2017 is
discriminatory for the reason that the licence to alcohol industry
has been kept out of the purview of scope of supply of services.
The contention is not well founded.
105. In result, we find no merit in any of the contentions
of the learned Senior Counsel for the petitioner. The writ
applications are disposed of.
CWJC No. 9140 of 2023, CWJC No. 9162 of 2023 and
CWJC No. 9947 of 2023
106. In these writ applications, the petitioner has
challenged the order dated 23.01.2023 (Annexure ‘3’) passed by
respondent no. 2 dismissing the appeal of the petitioner for the
period 2017-18 : 2018-19 and 2019-20 respectively.
107. It appears that the petitioner entered into an
agreement with the Government of Bihar for mining of sand (as
minor mineral) in accordance with the New Sand Policy of Bihar
Minor Mineral Concession Rules, 1972 (as amended by Bihar
Minor Mineral Concession (Amendment) Rule 2014) and
notifications issued thereunder. The copy of agreement dated
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28.05.2019 entered into with the Mining Department, State
Government of Bihar for mining of sand has been annexed as
Annexure ‘1’.
108. The petitioner has been served with a notice under
Section 73 of the CGST Act, 2017 on the grounds inter alia that he
had not paid the tax due. The authority of the State Taxes
Department, Bagha found that there was a difference between the
amount paid by the petitioner to the Mining Department, Bettiah
and the taxable amount shown by them in their GSTR-3B. The
petitioner was served with a notice to pay the ascertained amount
of tax along with applicable interest under Section 50 of the CGST
Act, 207.
109. From Annexure ‘2’ to the writ application, it would
appear that the petitioner failed to pay the tax ascertained along
with applicable interest whereupon a show cause notice was
issued to the petitioner as to why he should not pay the amount of
tax along with interest payable thereon under Section 20 and
penalty leviable under the provisions of the CGST/BGST Act,
2017. Sufficient opportunity of hearing has been given but the
petitioner did not pay the amount. In these circumstances, the
order as contained in Annexure ‘2’ has been passed.
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110. The petitioner preferred an appeal against the said
order (Annexure ‘3’). In his appeal, he contended that
classification of service as “renting on immovable property” is not
correct and that in view of the judgment of Seven Judges’ Bench
of the Hon’ble Supreme Court of India in the case of India
Cements Limited versus State of Tamil Nadu reported in (1990)
1 SCC 12 and other judgments of the Hon’ble Supreme Court the
classification of service is illegal and without jurisdiction.
111. In the writ application, the petitioner has raised
issue as to whether royalty determined under Section 9/15 (3) of
the MMDR Act, 1957 is in the nature of Tax? The other issues
raised by the petitioner is as to what is true nature of royalty/ dead
rent payable on minerals produced/ mined/ extracted from mines.
Scope of expression “Taxes” on mineral rights in List II of Entry
50 of the Seventh Schedule to the Constitution and other related
issues have been raised. One of the issues raised in the writ
application is that the order of the respondent no. 2 as also
respondent no. 3 is without the digital signature which is contrary
to Rule 26(3) of the Rules, therefore, it would be void ab-initio.
112. A counter affidavit has been filed on behalf of
respondent no. 2 and 3. It is stated that the royalty is paid to the
lessor by way of a consideration for providing right to lease to
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exploit sand from river land. Hence, in terms of Section 15 of the
BGST/CGST Act, 2017, royalty paid to the lessor is the value
(consideration) of supply of services to the lessee and is taxable at
the rate of 18% (9% CGST + 9% SGST). It is stated that exercise
of power conferred under Entry 97 of List I of the Seventh
Schedule of the Constitution of India was pleased to introduce
service tax vide Chapter VII of the Finance Act, 1994. The term
‘service’ was defined in clause (44) of Section 65B of the
aforesaid Act. Under the provisions of the Finance Act, 1994 of
the taxable services as on 01.05.2011 were listed in Appendix-1.
According to which mining was also a taxable service and lease
holders for mining used to pay service tax. It is submitted that the
service tax has been subsumed in the CGST Act and BGST Act
and with the enforcement of this Act w.e.f. 01.07.2017, the
independent existence of service tax has come to an end.
113. It is submitted that the levy of GST under
BGST/CGST Act, 2017 is on the supply of goods or services. The
term “supply” is defined under Section 7 of the BGST/CGST Act,
2017 in an inclusive manner and it includes all activities undertaken
for consideration unless expressly exluded under Schedule III to the
BGST/CGST Act. It is submitted that assignment of right to use
mineral rights by the Government is a supply of service and the
payment of royalty by the petitioner is a consideration thereof.
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114. The answering respondents have explained the
relevant provisions of the BGST/CGST Act, 2017 wherein the
Central Government, on recommendation of the GST Council, has
issued Notification No. 13/2017-Central Tax (Rate), dated
28.06.2017. As per serial no. 5 of the abovementioned notification,
the services supplied by the Central Government, State Government,
Union Territory or Local Authority to a business entity in respect of
leasing work by way of assignment of right to use natural resources
is liable to tax on RCM basis. The answering respondents have
stated that the petitioner suppressed the amount of royalty paid by
him to the Mines Department of the State Government in the
turnover as reflected in the returns and as a result thereof a lesser tax
amount has been paid to the Government. In these circumstances, the
case of suppression of turnover requiring a proceeding under Section
73(1) of the BGST/CGST Act, 2017 was made out. In this
background, show cause notice along with summary of the show
cause notice in form of GST DRC-01 was served upon the petitioner
by uploading it on GSTBO portal but no response to the said show-
cause was filed by the petitioner. In these circumstances, an order
dated 02.02.2021 levying tax, interest and penalty under Section
73(9) of the BGST/CGST Act has been passed against the petiioner.
115. Learned counsel for the respondents submits that in
MADA case, it has already been held by nine judges’ Bench decision
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of 8:1 that Royalty is not in the nature of a tax. It is submitted that
validity of levy of GST on royalty of lease of mines was challenged
in the Hon’ble Supreme Court in Writ Petition (Civil) bearing No.
1076 of 2021 M/s Lakhwinder Singh versus Union of India and
Others. The said writ petition has already been dismissed vide order
dated 04.01.2022. In SLP (C) No. 3726 of 2017 i.e. Udaipur
Chambers of Commerce and Industry & Others versus Union of
India and Others has passed the following order:-
“i. We are not inclined to entertain the petitions
under Article 32 of the Constituion in the first
instance before this Court. The petitioners have an
alternate and efficacious remedy of moving the
concerned High Courts under Article 226 of the
Constitution.
ii. The petitioners are accordingly dismissed,
leaving it open to the petitioners to pursue their
remedy in accordance with law.
iii. Pending applications, if any, stand disposed
of.”
116. As regards the plea of the petitioner that Annexures
‘2’ and ‘3’ do not bear digital signature, learned counsel submits
that in Rakesh Ranjan versus the State of Bihar and Others
(CWJC No. 1200 of 2023), this Court vide its judgment dated
05.05.2023 has already held that a mere omission to put the
signature cannot lead to invalidation of the assessment
proceeding. Learned counsel has also enclosed a copy of the
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judgment passed by learned Co-ordinate Bench of this Court in
the case of Rakesh Ranjan (supra) as Annexure ‘E’ to the counter
affidavit.
117. We have already discussed the law on the subject in
the case of M/s BSCPL (CWJC No. 3531 of 2022. There is no
point in repeating the same and one thing once again. We are of
the considered opinion that no ground has been made out by the
petitioners in these writ applications to interfere with the
impugned judgment.
118. Further, we find that in the case of Rakesh Ranjan
(supra), the learned Co-ordinate Bench has held that a mere
omission to put a signature cannot lead to invalidation of the
assessment proceeding.
CWJC No. 11538 of 2023
119. In this writ application, the petitioner has prayed for
the following reliefs:-
“(i) For issuance of appropriate writ/order/direction
for setting aside order dated 28.01.2023 passed by
Additional Commissioner (Appeal), Tirhut
Division, Muzaffarpur in Appeal Case bearing
Appeal Case No. AD10052200653U for the
financial year 2017-18 whereby and whereunder
the Appellate Authority upheld the order bearing
Order No. ZD100121010344K dated 12.01.2021
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APL-04 to the petitioner.
(ii) For setting aside order dated 04.12.2020 passed
by Deputy Commissioner of State Tax Jurisdiction,
Muzaffarpur East Circle, Muzaffarpur whereby and
whereunder the respondent Deputy Commissioner
has imposed tax on the petitioner against the
royalty paid by the petitioner in the financial year
2017-18 and imposed tax, penalty and interest of
an amount of Rs.13,86,433/-, 1,38,643/- and
Rs.7,07,081/- respectively under Section 73(1) of
BGST Act and a direction of GST DRC 07.
(iii) For setting aside the demand notice bearing
reference no. ZD100121010344K dated 12.01.2021
issued in the Form of DRC 07 and a demand of Rs.
44,64,314/- has been raised against the petitioner.
(iv) For restraining the respondent authorities for
issuance of DRC-13 and initiating recovery
proceeding for recovery of the tax amount through
the Bank Account Attachement.
(v) For issuance of an appropriate Writ(s), order(s),
and/or directions(s), as Your Lordships may deem
fit and proper in the facts and circumstances of this
case in the interest of justice.”
120. The petitioner has raised a question as to whether
the royalty is in the nature of tax? According to the petitioner,
royalty cannot be considered as consideration and, therefore, GST
is not leviable on said royalty. It has also been stated in the writ
petition that the issue is sub-judiced before Nine-Judges’ Bench of
the Hon’ble Supreme Court in MADA case.
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121. This Court finds that the issue which has been
raised by the petitioner has already been answered in the MADA
judgment of the Hon’ble Supreme Court. We have already dealt
with those issues in the case of M/s BSCPL. No other issue has
been raised by learned counsel for the petitioner.
122. We, therefore, do not find any reason to interfer
with the impugned orders and the demand notice. The petitioner
may, if so advised, avail statutory remedy, if any, available to him
in accordance with law.
123. This writ application is dismissed.
CWJC No. 16764 of 2023
124. The petitioner in the present writ application has
prayed for the following reliefs:-
“(i) For quashing the Letter No. 247 dated
18.10.2023 issued under the signature of the
Respondent Joint Commissioner, State Tax,
Sahabad Anchal, Arrah communicated to the
Petitioner along with the Letter No. 4579 dated
04.11.2023 whereby it has been communicated that
after payment of GST on Royalty, the successful
Tenderer could be granted permission for mining
with respect to the Sand Ghats settled in its favour;
(ii) For quashing of the letter No. 4579 dated
04.11.2023 issued by the Respondent Mines
Development Officer, District Mining Office,
Bhojpur, Ara to the extent by which the Petitioner
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royalty with respect to the premiums to be paid for
Sand settlement of two Sand Ghats, namely, Bhoj-
Son-33 and Bhoj-Son 37, as the dispute with regard
to whether the component of Royalty charged on
mines or minerals is a consideration or an impost in
itself is pending adjudication before the Hon’ble
Supreme Court;
(iii) For direction upon the Respondents to accept
the first instalment of the sand settlement from the
petitioner with respect to two sand ghats, namely,
BHOJ-SON-33 and BHOJ-SON 37, without
insisting the Petitioner to pay GST on the Mines
Royalty;
(iv) For a declaration that as the issue as to whether
the Mines Royalty is to be considered as
consideration for settlement of Ghats or is an
impost in itself is pending adjudication before the
Hon’ble Supreme Court in the case of Udaipur
Chamber of Commerce & Industy & Ors. Vs.
Union of India & Ors. Bearing Special Leave to
Appeal (Civil) No. 37326 of 2017 and as an interim
order of stay for levy of Service Tax on Royalty
has also been granted by the Hon’ble Supreme
Court, the impugned letter no. 4579 dated
04.11.2023 issued by the Respondent Mines
Development Officer, Mines Development Office,
Bhojpur at Arrah is liable to be quashed or kept in
abeyance to that extent until finalization of the
aforesaid case by the Hon’ble Supreme Court;
and/or for any other appropriate
writ(s)/order(s)/direction(s) as Your Lordships may
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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deem fit and proper in the facts and circumstances
of the case.”
125. According to the petitioner, he had participated in
the tender for two sand ghats, namely, BHOJ-SON-33 and BHOJ-
SON 37. The petitioner was found the highest bidder and he was
communicated about the acceptance of his tender. In para ‘2’ of
letter of acceptance (LoA) dated 18.01.2023, the schedule of
payment of settlement amount has been provided. In para ‘3’ of
the ‘LoA’, it is stated that GST is to be paid as per the prevailing
rate to the respondent Commercial Taxes Department and that the
petitioner will have to submit the proof of payment of GST along
with each installment.
126. The bone of contention in the present writ
application is the taxablity on the amount of royalty/settlement
amount. The petitioner has questioned the communication made
by the Mining Authorities wherein it has been specifically stated
that GST @ 18 % shall be levied on royalty with respect to the
sand and permission for mining would only be granted after
payment of GST on the royalties on sand by the petitioner. The
communication of the Mininy Authority, it is stated, is based on
the order dated 10.12.2021 passed in CASe No. AAAR/01/2021
by the Appellate Authority for advance ruling, Bihar.
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127. It appears on going through the writ application that
the petitioner has yet not entered into any agreement with the
State Government. The issues raised in the writ application are
identical to the issues raised in the leading case of M/s BSCPL
(CWJC No. 3531 of 2022) in which the order dated 10.12.2021
passed by the Appellate Authority for Advance Ruling, Bihar has
been challenged, we find that the case is covered by our judgment
hereinabove in the case of M/s BSCPL.
128. This writ application is dismissed.
CWJC No. 17700 of 2023 and CWJC No. 18206 of 2023
129. In both the writ applications, the following reliefs
have been prayed for :-
“(a) For issuance of a writ in the nature of
certiorari for quashing of the demand notice issued
vide letter number 1654/M dated 30.11.2023 by
respondent number 5 with reference to the letter
number 154/M dated 25.11.2023 issued by the
respondent number 4 whereby the petitioner has
been called upon to pay GST at the rate of 18% on
royalty paid to the Department of Mines And
Geology, Government of Bihar against grant of
alleged licensing services rendered by the
Government of Bihar permitting mining activities
by the petitioner in block number 07, River
Chanan, Mauza-Goudiya, Circle Banka, District
Banka;
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(b) For the issuance of a writ in the nature of
certiorari for quashing of the letter number 154
dated 25.11.2023 issued by the respondent number
4 whereby the respondent 5 -mines development
officer, Banka has been requested to recover GST
at the rate of 18% on royalty/settlement amount
paid/payable by the mining lease holders which
included the petitioner also on grounds of the same
being illegal and wholly without jurisdiction;
(c) For further restraining the respondents from
initiating any process or action against the
petitioner and its directors and other/or
stakeholders in connection with imposition,
demand and recovery of GST allegedly chargeable
against the licensing services rendered by the
Department of Mines and Geology, Government of
Bihar in the shape of grant of mining rights to the
petitioner;
(d) For holding and a declaration that the royalty
paid by the petitioner to the Department of Mines
and Geology, Government of Bihar is payable in
terms of the grant of right to carry out mining of
sand and stone in the state of Bihar is not a
consideration paid against any licensing service
rendered by the said government department and
therefore no GST is leviable against the same;
(e) For further holding and a declaration that the
issue that no service tax is payable on the royalty
paid against the grant of mining rights is sub-
judice before the Honourable apex court in the
matter of Udaipur Chamber of Commerce and
Industry and Others Versus The Union of India and
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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others. (Special Leave To Appeal Number- 37326
of 2017) wherein an interim order dated
11.01.2018 restraining the recovery of service tax
on royalty has been passed by the Honourable
apex court;
(f) For further holding and a declaration that the
respondents ought to await the verdict of the
Honourable apex court on the issue of the true
nature of royalty paid by the petitioner being a tax
or a consideration against grant of mining rights by
the state government which is pending in
consideration before the Constitution bench of 9
Honourable Judges in the matter of Mineral Area
Development Authority And Others Versus Steel
Authority Of India And Others (Civil Appeal
Number 4056 – 64 Of 1999 And Other Analogous
Cases);
(g) For grant of any other relief or reliefs to which
the petitioner is found entitled to in the facts and
circumstances of the case.”
130. The only difference in the prayer of the two writ
petitioners is with respect to the letter number by which demand
notice has been issued to the petitioners.
131. We find on reading of the statement made in the
writ application that the petitioners have raised a common
question as to whether the royalty paid by the petitioners in
terms of Section 9 read with Section 15(3) of the MMDR Act,
1957 is a tax or a consideration paid against the grant of mining
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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rights by the State Government. The petitioners made a
statement in the writ petition that the Constitution Bench of
Seven Hon’ble Judges of the Hon’ble Supreme Court in the
matter of India Cement (supra) has already held that royalty is
a tax. The petitioners have also submitted that the views taken
by the Hon’ble Supreme Court on this issue has been referred to
a Constitution Bench of Nine Hon’ble Judges in the matter of
MADA which is still pending. We have dealt with all these
issues in the earlier part of our judgment in case of M/s BSCPL
(CWJC No. 3531 of 2022). The majority judgment of the
Hon’ble Nine Judges Bench of the Hon’ble Supreme Court in
MADA case has already held that royalty is not in the nature of
a tax. In our opinion, the issues raised by the petitioners in these
two writ applications are duly discussed in the judgment
rendered by this Court in the case of M/s BSCPL hereinabove.
132. These writ applications have no merit, hence,
both the applications are dismissed.
CWJC No. 2730 of 2024 and CWJC No. 4297 of
2024
133. In these two writ applications, the petitioners
have made the following prayer:-
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
121/130“i) To issue an appropriate writ, order or direction
in the nature of Certiorari for quashing the
communication dated 22.1.2024 under reference
no. 94, issued by the respondent no. 3, whereby
and whereunder the petitioner has been asked to
pay GST at the rate of 18% on the royalty paid to
the Department of Mines & Geology, Government
of Bihar against settlement of Sand Block for Sone
Cluster-10, Paliganj in the District of Patna, over
river Sone.
ii) For restraining the respondents from taking any
coercive step against the petitioner by initiation of
any proceeding for imposition of demand or
recovery thereof, purported to be the GST against
the licensing services rendered by the State, in the
nature of grant of mining rights to the petitioner.
iii) This Hon’ble Court may further adjudicate and
hold that the services provided by the State of
Bihar to the petitioner by way of grant of mineral
concession for winning sand is not liable for GST,
as it is not a consideration paid against any
licensing services.
iv) This Hon’ble Court may further adjudicate and
hold that the royalty being in the nature of statutory
impost, is a tax and therefore the same cannot be
exigible to further taxation.
v) This Hon’ble Court may adjudicate and hold that
grant of mineral concession is merely a statutory
function/duty under the provisions of law and does
not amount to rendition of any service, so as to
attract goods and service tax.
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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vi) For a further direction to the respondent
authorities not to precipitate the matter in view of
pendency of similar issue in the matter of Udaipur
Chamber of Commerce & Industry and others Vs.
The Union of India and others, wherein the Hon’ble
Apex Court has restrained the authorities from
recovering service tax on royalty.
vii) For a direction to the respondent authorities to
await the verdict of the Hon’ble Apex Court on the
issue as to whether royalty paid by the petitioner is
a tax or a consideration against grant of mining
rights, in the case of Mineral Area Development
Authority and others Vs. Steel Authority of India
and others.
viii) To grant any other relief or reliefs for which
the petitioner may be found entitled to in the facts
and circumstances of the case.”
134. On perusal of the writ applications, it appears that
the petitioners are questioning the communications by which
they have been asked to deposit GST at the rate of 18% i.e. 9%
CGST and 9% SGST on the settlement amount that is royalty
paid by the petitioner against settlement. The petitioners have
been informed by the Mining Authority that as per Notification
No. 13 of 2017-Central Tax (Rate) dated 28.06.2017 and
Notification No. 11 of 2017- Central Tax (Rate) dated
28.06.2017 issued by the Ministry of Finance (Department of
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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Revenue), Government of India, New Delhi, the petitioner was
required to make payment of 18% GST.
135. The submission of the petitioner is that the very
basis of issuance of communication is bad, the same is without
jurisdiction and the respondent no. 3 has failed to appreciate the
judgment of the Hon’ble Supreme Court in the case of India
Cement (supra). Since the said principle has been doubted in
the case of West Bengal versus Kesoram and Others reported
in (2004) 10 SCC 201, the latter has been referred to the larger
Bench in the case of Mineral Area Development and Others
versus Steel Authority of India Limited and others reported in
(2011) 4 SCC 450. It is submitted in the writ petition that
royalty is collected by the Government on the basis of
determination and fixation, keeping in view the parameters
relevant for the purpose, it can never be said to be a
consideration paid against grant of mining rights to the lease
holder. The petitioner while filing the writ application
contended that the royalty is in the nature of tax collected by the
Government in exercise of a statutory powers under the MMDR
Act, 1957 and the Rules framed thereunder. At this stage,
however, this plea has not been taken by the petitioner.
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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136. In the opinion of this Court, the plea taken by the
petitioner in the writ application did not find favour in the
judgment of the Hon’ble Supreme Court in MADA case. In
MADA case, the Hon’ble Supreme Court did not approve the
judgment in the case of India Cement (supra). The Hon’ble
Nine-Judges’ Bench of the Supreme Court has held and
declared that royalty is not in the nature of tax and tax may be
imposed on royalty. We have already discussed all these issues
in our judgment in the case of M/s BSCPL, hereinabove.
137. No other issue has been raised before us.
138. In the circumstances, we find no merit in the writ
applications. Both the writ applications are hereby dismissed.
CWJC No. 4562 of 2024
139. In this writ application, the petitioner has prayed
for the following reliefs:-
“i) To issue an appropriate writ, order or direction
in the nature of mandamus commanding the
Respondents to refund the amount of Rs.
1,48,22,500/- paid by the petitioner, under
compulsion as Goods and Service Tax at the rate of
18% on the royalty of Rs. 8,23,50,000/- paid to the
Department of Mines & Geology, Government of
Bihar, as first installment for settlement of Sand
Block for Sone Cluster 16 in the District of
Bhojpur, over river Sone.
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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ii) To issue an appropriate writ, order or direction in
the nature of mandamus commanding the
Respondents not to levy and claim GST on the
second and third installment of royalty for
settlement of Sand Block for Sone Cluster 16 in the
District of Bhojpur, over river Sone.
iii) This Hon’ble Court may further adjudicate and
hold that the services provided by the State of Bihar
to the petitioner by way of grant of mineral
concession for winning sand is not liable for GST,
as it is not a consideration paid against any
licensing services.
iv) This Hon’ble Court may further adjudicate and
hold that the royalty being in the nature of statutory
impost, is a tax and therefore the same cannot be
exigible to further taxation.
v) This Hon’ble Court may adjudicate and hold that
grant of mineral concession is merely a statutory
function/duty under the provisions of law and does
not amount to rendition of any service, so as to
attract goods and service tax.
vi) For a further direction to the respondent
authorities not to precipitate the matter in view of
pendency of similar issue in the matter of Udaipur
Chamber of Commerce & Industry and others Vs.
The Union of India and others, wherein the Hon’ble
Apex Court has restrained the authorities from
recovering service tax on royalty.
vii) For a direction to the respondent authorities to
await the verdict of the Hon’ble Apex Court on the
issue as to whether royalty paid by the petitioner is
a tax or a consideration against grant of mining
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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rights, in the case of Mineral Area Development
Authority and others Vs. Steel Authority of India
and others.
viii) To grant any other relief or reliefs for which
the petitioner may be found entitled to in the facts
and circumstances of the case.”
140. The reliefs prayed in the writ application is based
on the understanding of the petitioner that with the coming into
force of the GST Laws, the petitioner was asked to deposit 5 %
of the instalment payable on the settlement amount which he
deposited and requested the respondent to execute the lease
deed but the respondent did not execute the lease deed and
directed the petitioner to deposit the GST at the rate of 18 %
(i.e. 9% CGST and 9% SGST) on the settlement amount i.e. the
royalty paid by the petitioner against the settlement. It is his
submission that under compulsion, he deposited an additional
amount of Rs.1,07,05,500/- as GST on 11.12.2023 which would
be evident from Annexure ‘P/4’ to the writ application.
Thereafter, the lease deed (Annexure ‘P/5’) dated 12.12.2023
was executed between the petitioner and the Department of
Mines and Geology, Government of Bihar.
141. The grievance of the petitioner is that once the
royalty is collected by the Government on the basis of
determination and fixation keeping in view the parameters
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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relevant for the purpose, it can only be said to be consideration
paid against the grant of mining right to lease holder. This
petitioner has also contended in the writ petition that the royalty
is in the nature of a tax collected by the Government in exercise
of Statutory powers under the MMDR Act, 1957 and Rules of
2019 and as such there cannot be any tax on royalty. In the writ
petition, he contended that imposition of GST upon royalty paid
by the petitioner is violative of Article 265 of the Constitution
of India, as the respondent authority have no jurisdiction and
authority under the law to impose royalty of GST.
142. At the time of filing of the writ petition, the
petitioner pointed out the judgment of the Hon’ble Supreme
Court in case of India Cement (supra) which was doubted in
the case of Kesoram (supra) and the issue has been referred to
a larger Bench in MADA case. Learned counsel for the
petitioner is now aware of the judgment of the Hon’ble
Supreme Court in ‘MADA’ case. Royalty is not in the nature of
tax and tax may be impose on royalty.
143. From the contents of the writ application, it is
crystal clear that it is raising the same issues which we have
already discussed in the case of M/s BSCPL hereinabove. It
would be covered by the reasoning and rationale provided by
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
128/130
this Court in the case of M/s BSCPL (CWJC No. 3531 of
2022).
144. This writ application is dismissed.
CWJC No. 6389 of 2024
145. In this writ application, the petitioner has
challenged the order dated 16.12.2023 passed by Deputy
Commissioner State Tax (DCST)/respondent no. 4 by which he
has directed the petitioner to pay Rs.45,936/- by way of GST
with interest and penalty under Section 73(9) of the
BGST/CGST Act, 2017 for the period 2017-18 (July 2017 to
March 2018).
146. It is the case of the petitioner that being a
proprietor firm it is engaged in manufacturing of bricks. The
petitioner has obtained permit for mining of soil for
manufacturing of bricks from his own land bearing Mauza
Parbatti, Khata No. 82, Khesra No. 170 and 171. Every year a
separate permit is issued by the Mining Department,
Government of Bihar for mining of soil on payment of royalty.
The petitioner has paid a sum of Rs.70,875/- for grant of permit
under Bihar Mining and Mineral Rules.
147. It is submitted that after manufacturing bricks, the
petitioner used to sell bricks to different customers and the GST
Patna High Court CWJC No.3531 of 2022 dt.18-04-2025
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is being charged on the sale of bricks which the petitioner has
been regularly paying to the State Exchequer. It is submitted
that despite this compliance by the petitioner, the respondent no.
4 has served a show cause notice dated 29.09.2023 (Annexure
‘4’ to the writ application) upon the petitioner calling upon him
to pay Rs.45,438/- as per deatils furnished in the notice under
Section 73(1) of the BGST/CGST Act, 2017.
148. Learned counsel for the petitioner submits that
the petitioner filed a reply to the show cause notice but the
notice has been rejected on the ground that the matter relating to
realisation of GST of royalty is pending before the various High
Court and the Hon’ble Supreme Court, hence, the petitioner
would be liable for payment of GST on amount of royalty with
interest and penalty.
149. In the writ petition, it is the contention of the
petitioner that the amount of royalty paid to the Mining
Department is tax and not consideration either for sale of goods
or service provided. The petitioner submits that the respondent
authority is not justified in demanding GST (Tax, Interest and
Penalty) on the royalty paid to the Mining Department for
mining of soil for manufacturing of bricks.
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150. The issues raised by the petitioner have already
been answered in the judgment of the Hon’ble Supreme Court
in MADA case. We have discussed the various aspects of the
matter in our judgment in case of M/s BSCPL. The case of the
petitioner would be covered by this Court’s judgment
hereinabove.
151. This writ application has no merit. It is dismissed
accordingly.
(Rajeev Ranjan Prasad, J)
(Sourendra Pandey, J)
Rishi/-
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