2024 (12) TMI 918 - HC - GST

GST assessments set aside due to failure to examine exemption notification for services between government entities

Zirconium Complex, Represented by its General Manager, M. Periasamy Versus The Assistant Commissioner (ST), Tuticorin

Madras HC set aside GST assessments for tax years 2017-18 through 2022-23 after finding merit in petitioner's challenge regarding services rendered to ... Levy of tax on the alleged services rendered to Nuclear Fuel Complex, Hyderabad - challenge is primarily on the premise that the activity of the petitioner would fall under Entry 3 of Schedule-II of the Central Goods and Services Act, 2017 Act or in any view would be covered by Serial No.8 of Notification No.9 of 2017, dated 28.06.2017 and thus any levy of tax on the petitioner would fall foul of Article 265 of the Constitution of India - HELD THAT:- This Court is of the view that there is merit in the submission of the learned Counsel for the petitioner that notification No.9 of 2017, dated 28.06.2017 would get attracted once an assessee or a taxable person is able to demonstrate that it is a service rendered by Central Government to another Central Government or a State Government. The material which has now been placed before this Court is relevant to determine if the petitioner is a unit of NFC complex / which in turn is a part of the Department of Atomic Energy coming under the Central Government. The above aspect would in turn have relevance in determining the applicability of Notification No.9 of 2017, dated 28.06.2017. The Assessing Authority ought to have examined the applicability of Notification No.9 of 2017, dated 28.06.2017 before making the assessments, which it failed to. When this was pointed out, the learned counsel for the respondent would submit that they would redo the assessments. This Court is inclined to set aside the impugned orders in GSTIN No.33AAALZ0205G1ZE for the assessment years 2017-18; 2018-19; 2019-2020; 2020-21; 2021-22 and 2022-23, dated 20.07.2023 and to direct the Assessing Authority to re-do the assessments - the writ petitions stand disposed of. Issues Involved:1. Applicability of GST on services rendered by a processing plant of Nuclear Fuel Complex.2. Classification of the petitioner's activities under the CGST Act and relevant notifications.3. Consideration of exemptions under Notification No.9 of 2017.4. Determination of whether the petitioner and Nuclear Fuel Complex are distinct persons under the CGST Act.Detailed Analysis:1. Applicability of GST on services rendered by a processing plant of Nuclear Fuel Complex:The petitioner challenged the imposition of GST on services rendered to the Nuclear Fuel Complex, Hyderabad, arguing that the activity falls under Entry 3 of Schedule-II of the CGST Act or is covered by Serial No.8 of Notification No.9 of 2017. The petitioner contended that the Zirconium Complex is an extension of the Department of Atomic Energy and does not have an independent existence. The processing of Zirconium Sponge at the petitioner's facility is part of a larger process involving nuclear fuel production, which is a specialized activity performed by the Nuclear Fuel Complex, Hyderabad.2. Classification of the petitioner's activities under the CGST Act and relevant notifications:The petitioner argued that the activities performed do not constitute a supply under the GST Act, as both the petitioner and Nuclear Fuel Complex are units of the Department of Atomic Energy. The petitioner relied on Entry 3 of Schedule II of the CGST Act, which treats any treatment or process applied to another person's goods as a supply of services. However, since both entities are part of the same department, the petitioner claimed that the activity does not fall within the purview of the GST Act.3. Consideration of exemptions under Notification No.9 of 2017:The petitioner further argued that even if the activities are considered taxable, they would be exempt under Notification No.9 of 2017, which provides exemption for services provided by one government entity to another. The petitioner asserted that the services rendered by the Zirconium Complex to the Nuclear Fuel Complex fall within this exemption, as both are extensions of the Central Government.4. Determination of whether the petitioner and Nuclear Fuel Complex are distinct persons under the CGST Act:The respondent contended that the petitioner and Nuclear Fuel Complex are distinct persons in terms of Section 25(5) of the CGST Act, and thus the activities constitute a supply. The petitioner countered this by emphasizing that tax proceedings are not adversarial and that the Assessing Authority should have considered the applicability of Notification No.9 of 2017, even if the petitioner did not explicitly claim it during the assessment.Conclusion:The court found merit in the petitioner's argument regarding the applicability of Notification No.9 of 2017. It noted that the Assessing Authority failed to examine the relevance of this notification and directed the authority to redo the assessments. The petitioner was instructed to submit replies within two weeks, treating the impugned orders as show cause notices. If the replies are filed within the stipulated time, they shall be considered in accordance with the law, providing the petitioner a reasonable opportunity of hearing. If not, the impugned orders will be restored. The writ petitions were disposed of with no order as to costs.