2019 (9) TMI 929 - HC - GST

Court Rules: Payments to Court Receiver for damages not liable to GST. Liability discharged by Receiver's agent.

The Court determined that services provided by the Court Receiver are exempt from GST as they fall under 'Services by any court or Tribunal.' Payments ... Jurisdiction - Levy of GST - services or assistance rendered by the Court Receiver appointed by this Court under Order XL of the CPC - HELD THAT:- The services of the Court Receiver are activities or transactions which shall be treated neither as a supply of goods nor a supply of services. Accordingly, the fees or charges paid to the Court Receiver are not liable to GST. The answer to Issue i.e. Whether GST is liable to be paid on services rendered by the Court Receiver appointed by this Court under Order XL of the CPC is answered in the negative. It is clarified that this Court has not considered this issue in the context of a private receiver who may be appointed by the Court under Order XL of the CPC - GST cannot be levied or recovered on services provided by the Court Receiver. Rule 591 of the Bombay High Court (Original Side) Rules prescribes the fees of the Court Receiver. Therefore, GST should not be levied on amounts directed to be paid by litigants to the office of the Court Receiver. Levy of GST - Estates under the control of the Court Receiver - royalty or payments under a different head paid by a defendant (or in a given case by the plaintiff or third party) to the Court Receiver in respect of properties over which a Court Receiver has been appointed - scope of 'supply of services' - payment of royalty for remaining in possession of the Suit Premises, either during the pendency of the Suit, or at the time of passing of the decree - whether payment made to the Receiver to be held in custody by it in relation to the underlying dispute between the parties attract GST? - HELD THAT:- The Learned Amicus Curiae is correct in submitting that the legislature has, in Section 92 of the CGST Act, provided that a receiver would be a convenient point for the revenue to determine and collect GST. If Section 92 of the CGST Act is applicable in a given case, GST may be determined and recovered from the Court Receiver by reason of the Court Receiver being akin to a 'representative assessee'. However, whether or not GST is applicable depends on the nature of the cause of action pleaded by the Plaintiff or the order of the Court directing payment and which sets out the terms of receivership. This is because the cause of action and finding thereon will determine the character of the payments made. All or some of these would have to be considered to determine if a 'taxable event' within the four corners of the CGST Act have taken place to attract liability for GST. The requirement of a 'supply' is essential. It is the taxable event under the CGST Act. If there is no supply, there can be no liability for payment of tax (or any interest or penalty thereon). This is clear from Article 246A of the Constitution of India which deals with the legislative competence of the Union and the States to make laws with respect to goods and services tax imposed by the Union or such State and Article 366(12A) of the Constitution of India which defines 'goods and services tax' as 'any tax on Supply of Goods or Services or both except taxes on the supply of the alcoholic liquor for human consumption'. This is also evident from the charging provision i.e. Section 9 of the CGST Act - If these requirements are met with, Section 92 of the CGST Act provides that GST may be determined and recovered from the receiver in the like manner and to the same extent as it would be determined and be recoverable from a taxable person as if the receiver were conducting the business himself. The effect of payment of royalty by the Defendant to the Court Receiver as a condition for remaining in possession of the Suit Premises - HELD THAT:- In the present case, royalty is paid towards damages or compensation or securing any future determination of compensation or damages for a prima facie violation of the Plaintiff's legal right in the Suit Premises. The prima facie finding is that the Defendant has no semblance of right to be in occupation of the Suit Premises. The permission granted to the Defendant to remain in possession subject to payment of royalty is an order to balance the equities of the case. The basis of this payment is the alleged illegal occupation or trespass by the Defendant. Such payment lacks the necessary quality of reciprocity to make it a 'supply'. Hence no GST is payable. Although the quantification of royalty towards a claim of damages involves ascertaining the market rent payable with respect to the property alleged to be illegally occupied, the compensation liable to be paid does not acquire the character of consideration so as to make the transaction a supply. Therefore, in the present case, where the Plaintiff has made out a strong prima facie case and the Defendant has not been able to demonstrate any semblance of right to occupy the Suit Premises, it cannot be said that the Defendant's occupation pursuant to an Order of the Court is a contract involving a 'supply' for consideration. In the absence of reciprocal enforceable obligations, it would not be correct to characterise the Defendant's occupation of the Suit Premises against payment of royalty as a 'supply' for 'consideration' on which GST is payable by the Court Receiver. Issues Involved1. Applicability of GST on services rendered by the Court Receiver appointed under Order XL of the CPC.2. GST liability on royalty or other payments made to the Court Receiver in respect of properties under receivership.3. Determination of 'supply' within the meaning of the CGST Act in the context of illegal occupation of suit premises.4. Mode of discharge of GST liability, if applicable, on payments made to the Court Receiver.Detailed AnalysisIssue 1: Applicability of GST on Services Rendered by the Court ReceiverThe Court concluded that services provided by the Court Receiver fall under 'Services by any court or Tribunal established under any law for the time being in force' as per Paragraph 2 of Schedule III to the CGST Act. Therefore, these services are not treated as a supply of goods or services and are exempt from GST. The Court Receiver, being an establishment of the High Court and a permanent department, implements orders of the Court and functions under its supervision and direction. Consequently, GST should not be levied on amounts directed to be paid by litigants to the office of the Court Receiver.Issue 2: GST Liability on Royalty or Other Payments Made to the Court ReceiverThe Court examined whether payments made to the Receiver in relation to the underlying dispute attract GST. Section 92 of the CGST Act provides that GST may be determined and levied from the receiver if the receiver is in control of the business of a taxable person and a taxable event of supply has taken place. The Court emphasized that the requirement of a 'supply' is essential for GST liability. Payments made as royalty towards damages or compensation for illegal occupation do not constitute a 'supply' and hence are not liable to GST.Issue 3: Determination of 'Supply' in the Context of Illegal OccupationThe Court found that in the present case, where the Plaintiff alleges that the Defendant is in illegal occupation of the Suit Premises, the payment of royalty does not constitute a 'supply' within the meaning of the CGST Act. The royalty is paid as compensation for unauthorized occupation and lacks the necessary quality of reciprocity to make it a 'supply'. Therefore, no GST is payable on such payments.Issue 4: Mode of Discharge of GST LiabilityIf GST is applicable, the liability can be discharged by the agent of the Court Receiver acting on behalf of the Receiver under Section 2(105) of the CGST Act. The Court suggested including a clause in the standard form of the agency agreement to ensure that the agent appointed by the Court Receiver must have or obtain CGST registration and make such payment on behalf of the Receiver. This approach would obviate the need for the Receiver to obtain separate GST registration for each matter.ConclusionIn the present case, no GST is payable on the royalty amount paid by the Defendant to the Court Receiver as a condition for remaining in possession of the Suit Premises. The modification made to the Order dated 12th/20th July 2017, adding 'along with GST at the applicable rate,' was reversed. The Defendant shall pay monthly royalty to the Court Receiver without GST. Any GST deposited but not paid to the authority shall be adjusted against future royalty payments.