The Madurai Bench of the Madras High Court has intervened in a dispute concerning the levy of service tax/GST on mining activity and royalty, directing that the impugned demand be kept in abeyance in view of the issue pending before the Supreme Court. 

The bench of Justice C. Saravanan granted the petitioner liberty to pursue a statutory appeal without making any further pre-deposit, noting that the Supreme Court had stayed recovery of GST on mining lease royalty.

The case arose from proceedings concerning the levy of service tax on the petitioner in relation to mining activity. The petitioner approached the High Court seeking a writ of certiorari to quash the order passed by the first respondent on December 22, 2023.

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When the matter came before the Court, it was noted that the underlying legal issue concerning the nature and taxability of royalty was already pending before the Supreme Court. This issue had resulted in directions from the High Court’s Division Bench, following an order of the Supreme Court in Writ Petition.

The Supreme Court-related proceedings assumed significance because the question whether royalty constitutes the relevant legal category for taxation purposes was awaiting consideration by a Nine-Judge Constitution Bench.

The Madras High Court referred to directions issued by its Division Bench on January 8, 2024. Those directions contemplated that taxpayers challenging show-cause notices relating to the issue would submit their objections or representations within four weeks.

After receiving such objections, the concerned authorities were directed to proceed with adjudication on merits and in accordance with law, while keeping the adjudication orders in abeyance until the Nine-Judge Constitution Bench decided the issue concerning the nature of royalty.

Importantly, the earlier directions also provided that there would be no recovery of GST on royalty until the Nine-Judge Constitution Bench rendered its decision. The affected parties were left free to pursue appropriate remedies, including statutory appeals, after the outcome of the Supreme Court proceedings.

The Madurai Bench observed that the impugned order confirmed the levy of service tax on the petitioner in connection with its mining activity.

Considering the pending Supreme Court proceedings and the existing directions regarding recovery of GST on royalty, the High Court held that the impugned order should be kept in abeyance.

Rather than finally deciding the taxability issue at this stage, the Court provided the petitioner an opportunity to pursue the statutory appellate remedy.

The High Court disposed of the writ petition by granting the petitioner 30 days from the date of receipt of a copy of the order to file a statutory appeal before the Appellate Commissioner.

The Court further clarified that the petitioner would not be required to make any further pre-deposit for pursuing the appeal. The reason was the Supreme Court’s stay on recovery of GST relating to mining lease royalty.

The Appellate Commissioner was directed to dispose of the appeal, but the decision would remain subject to the final outcome of the proceedings before the Supreme Court.

The High Court’s order effectively preserves the parties’ positions until the Supreme Court settles the larger legal question concerning royalty and its tax treatment.

The Court did not conclusively determine the taxability of the mining activity or royalty in the petitioner’s case. Instead, it ensured that the disputed demand would not be acted upon while the controlling issue remains pending before the Supreme Court.

The direction that the appellate proceedings would be subject to the final outcome of the Supreme Court case also ensures that the eventual determination of the larger constitutional issue can be given effect in the petitioner’s individual dispute.

The Madurai Bench allowed the writ petition and directed that the petitioner could file the statutory appeal within 30 days. No further pre-deposit was required, and the Appellate Commissioner was required to decide the appeal subject to the Supreme Court’s final decision. The Court also ordered that there would be no costs and closed the connected miscellaneous petition.

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Read More: JURISHOUR | TAX LAW DAILY BULLETIN : 26 AUGUST, 2026