GST On Royalty Fee Kept In Abeyance Pending Supreme Court Decision: Madras HC Disposes Writ Against SCN [Read Order]

The Madras High Court has disposed of a writ petition filed against a GST SCN relating to royalty fee holding that the adjudication may proceed under the Central Goods and Service Tax Act ,2017 and the State GST Act.

However, the enforcement of the final order shall include the recovery of GST interest and penalty which shall remain in abeyance until the Supreme Court of India finally decides the issues regarding the liability to pay GST on royalty payments.

The petitioner contested a GST show cause notice issued by the State GST authorities proposing to levy GST on royalty fee paid to the State Government for the extraction of minor minerals. The petitioner argued that the demand was made without jurisdiction as the very issue of whether royalty is a taxable supply under the GST regime is pending consideration before a Nine Judge Constitution Bench of the Supreme Court.

The petitioner prayed for the quashing of the SCN on the ground that the continuance of the proceedings would cause undue hardship and multiplicity of litigation.

The petitioner relied on a previous Division Bench decision of the Madras High Court which had prescribed a uniform procedure to address GST disputes with respect to royalty. It was submitted that as per the above decision the adjudication could proceed but no recovery or coercive measures could be initiated until the Supreme Court clarified the issue.

The Revenue argued that the writ petition was premature as it only challenged an SCN and that the petitioner should cooperate in the adjudication proceedings.

The court of Justice C. Saravanan held that the question raised by the petitioner was squarely answered by the binding decision of the Division Bench of the Madras High Court. The Court refused to quash the SCN but allowed the petitioner to file objections within the stipulated time.The Court asked the GST authorities to adjudicate on the issue after giving a personal hearing.

Further,it was clearly stated that no final order will be enforced and no recovery will be initiated until the decision of the Supreme Court on the taxability of royalty.Thus, the writ petition was disposed of and all rights and contentions were reserved.

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