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 ... Services by any court or Tribunal - supply - consideration - business - Levy and recovery of GST from receiver under Section 92 of the CGST Act - reverse charge mechanism - representative assesseeServices by any court or Tribunal - Exemption from supply - Whether GST is leviable on services rendered by the Court Receiver appointed under Order XL CPC - HELD THAT: - The office of the Court Receiver, High Court, Bombay, is an establishment and permanent department of the High Court, functioning under its supervision and control and governed by Chapter XXX of the Original Side Rules and Order XL CPC. Fees and charges of the Court Receiver, being payments for services rendered by an officer/department of the Court, fall within Paragraph 2 of Schedule III to the CGST Act as 'services by any court or Tribunal established under any law for the time being in force' and therefore are not to be treated as a supply of goods or services. Consequently the receiver's fees prescribed by Rule 591/592 are exempt from GST. The Court's conclusion does not extend to private receivers appointed under Order XL. [Paras 31, 33, 38, 43, 44]Fees or charges paid to the Court Receiver for services of the Court Receiver are not liable to GST.Levy and recovery of GST from receiver under Section 92 of the CGST Act - supply - representative assessee - Whether GST may be levied and recovered from the Court Receiver in respect of an estate or business under its control - HELD THAT: - Section 92 contemplates that where the estate or any portion of the estate of a taxable person owning a business is under the control of a receiver/manager appointed by a court, tax, interest or penalty may be levied upon and recovered from such receiver in the same manner and to the same extent as from the taxable person as if the receiver were conducting the business himself. The applicability of Section 92 requires (a) that the receiver be in control of the business of a taxable person, and (b) that a taxable event of 'supply' in relation to that business has occurred. If those conditions are met, the receiver is a convenient statutory point for determination and collection of GST and may need registration and compliance accordingly. [Paras 47, 48, 49, 51]GST may be determined and recovered from the Court Receiver under Section 92 where the receiver is in control of a taxable person's business and a 'supply' has occurred.Supply - consideration - rent/mesne profits/damages - Whether the royalty ordered in the present suit (payment by a defendant to remain in possession) constitutes a 'supply' chargeable to GST - HELD THAT: - The taxable event under the CGST Act is a 'supply' which requires enforceable reciprocal obligations and consideration in the course or furtherance of business (or falling within Schedule I/II as appropriate). Payments that are compensatory in nature-damages, mesne profits or compensation for illegal occupation-lack the requisite reciprocity to constitute a supply. Although the quantum of such compensation may be assessed by reference to market rent, the method of computation does not change the qualitative character of the payment. In the facts of this case the royalty is paid as compensation for prima facie illegal occupation (trespass) and is intended to balance equities; no notional contract of lease/license creating reciprocal obligations arose between the Court/Receiver and the defendant. Therefore the royalty does not constitute 'consideration' for a taxable supply in this suit. [Paras 56, 72, 73, 76, 88]In the present facts the royalty ordered to be paid by the defendant is not a 'supply' for consideration liable to GST.Levy and recovery of GST from receiver under Section 92 of the CGST Act - agent as supplier - registration and discharge of liability - If GST is payable in a receivership matter, how is the statutory liability to be discharged? - HELD THAT: - Where Section 92 applies and GST is exigible in respect of payments received in receivership, the tax may be determined and recovered from the receiver as representative assessee. Practically, the receiver's liability may be discharged by an agent appointed by the receiver acting as 'supplier' on his behalf under Section 2(105), provided the agent obtains requisite GST registration and makes the payment; the Court Receiver may include an agency-clause obliging the agent to obtain registration, pay GST and indemnify the Receiver. If no agent is appointed or statutory authorities do not accept payment via an agent, the Court Receiver should obtain CGST/MGST registration for that matter (preferably separate registration per matter for accounting/audit), and comply with tax obligations. The Court also directed adjustment of any GST deposited but not paid to authorities against future royalty. [Paras 90, 91, 92, 93, 94]Where GST is payable the liability may be recovered from the Court Receiver under Section 92; practically it may be discharged by the receiver's agent (after registration) or, failing that, by the Court Receiver obtaining registration for the matter and paying the tax.Final Conclusion: The Court held that fees charged by the Court Receiver as a department/office of the High Court fall within Paragraph 2 of Schedule III and are not supplies liable to GST; Section 92 permits recovery of GST from a receiver only where the receiver controls a taxable person's business and a taxable 'supply' has occurred; in the present suit the monthly royalty ordered is compensatory for alleged illegal occupation and does not constitute a 'supply' liable to GST; if GST does become payable in any receivership matter it may be recovered from the receiver under Section 92, and administratively may be discharged by the receiver's agent (with registration) or by the receiver obtaining matter-specific GST registration. 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.