2023 (12) TMI 556 - HC - GST

Tax Assessment Overturned: Solid Waste Management Services Granted Potential Exemption Under Notification 12/2017

HC allowed writ petition challenging tax assessment for solid waste management services. Court set aside assessment orders and directed reassessment, ... Exemption from GST - solid waste disposal work - Validity of assessment order - works contract - stay of recovery on payment of 20 per cent of the amounts disputed which remains to be paid - HELD THAT:- There is no supply of goods in the solid waste management disposal work awarded to the petitioner. In the above circumstances, the activity of the petitioner regulated by the work order produced as Annexure-5 and the consideration received for the same would be exempt from the BGST Act. It is also crystal clear that on similar circumstances, by Annexure-6 order, the Appellate Authority had allowed the appeal in the case of a different assessee, who had been carrying on the very same work of solid waste disposal in the very same Municipality. The assessment orders produced as Annexure-3 series, the demand notices and Annexur-4 series orders in appeal are set aside. The assessee petitioner is directed to produce the details of the tax deduction at source made by the Municipality under the Income Tax Act and provide the evidence, of the consideration made by the Municipality on which the tax deductions were effected under the Income Tax Act, being one for solid waste disposal work. The assessee shall appear before the Assessing Officer within a month from the date of receipt of the certified copy of this judgment and produce materials in substantiation. The writ petition is allowed. Issues involved:The judgment deals with the challenge to an assessment order under the Bihar Goods and Services Tax Act, 2017, the applicability of tax levy on solid waste management activities, and the interpretation of works contract under the BGST Act.Issue 1: Challenge to assessment order and deprivation of consideration in second appealThe petitioner challenges an assessment order confirmed by the first Appellate Authority under the BGST Act, citing deprivation of consideration in the second appeal due to the non-constitution of the Tribunal. The petitioner contends that the levy is not sustainable as the activity of solid waste removal is exempted under a specific notification, and does not qualify as a works contract under the BGST Act.Issue 2: Tax levy based on deductions under Income Tax ActThe petitioner, a Cooperative Society, received a notice quantifying tax and penalty for the Assessment Year 2019-20, based on deductions made by the Nagar Parishad under the Income Tax Act. The petitioner argues that the mere deduction of direct tax does not warrant a levy under the BGST Act, which is an indirect tax.Issue 3: Exemption under Notification No. 12/2017 and legality of jurisdiction under Section 74The petitioner filed an appeal citing Notification No. 12/2017 which grants exemption from tax payment in relation to functions entrusted to a Municipality. The petitioner contests the jurisdiction under Section 74 as illegal and improper, especially considering a similar appeal by another assessee was allowed by the Appellate Authority.Issue 4: Interpretation of works contract and exemption under BGST ActThe Government Advocate argues that the petitioner's work of solid waste collection and disposal constitutes a works contract under the BGST Act. However, the petitioner asserts that the activity does not involve a transfer of goods as required by the definition of works contract. Reference is made to exemptions granted by the Central Board of Indirect Taxes and Customs.Conclusion:The High Court set aside the assessment orders and directed the petitioner to provide details of tax deductions at source made by the Municipality under the Income Tax Act. The Assessing Officer is instructed to consider the evidence provided by the petitioner regarding the non-exigibility of tax on solid waste management activities, and pass orders accordingly. The writ petition was allowed with these directions, emphasizing the exemption of the petitioner's activities from the BGST Act.