2025 (10) TMI 243 - HC - GST

Appellate Authority must decide exemption for manpower services to educational institutions; petitioner allowed appeal under Section 107 CGST

HC held that whether clients of the petitioner fall within notifications exempting manpower services to government educational institutions must be ... Levy or exemption from GST - manpower services rendered to Government Educational Institutions - exempted from the Scope of GST in terms of Serial no. 3, Chapter 99 in N/N. 12/2017-Central Tax (Rate) dated 28th June, 2017 read with Notification No. 2/2018-Central Tax (Rate) dated 25th January, 2018 or not - HELD THAT:- In the opinion of this Court, the question as to whether the clients of the Petitioner are covered by the relied upon notifications or not would have to be examined on facts after analysing the status of each of the clients. The Appellate Authority would be the appropriate forum to determine the above raised question. Considering the fact that, (i) the Petitioner itself has not collected GST from its clients; and (ii) the question as to whether the entities to whom the Petitioner has rendered services were covered by the exemption or not would have to be looked into by the Appellate Authority; the Court is inclined to permit the Petitioner to file an appeal under Section 107 of the CGST Act. The Appellate Authority, after considering the facts, shall also determine the amount of pre-deposit to be made by the Petitioner. This order is passed in the peculiar facts of the present case. The Petitioner is accordingly permitted to avail of the appellate remedy by 10th July, 2025 along with an application seeking determination of the pre-deposit payable, which shall be considered in accordance with law by the Appellate Authority - Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the prescribed pre-deposit (10% of the tax amount) for preferring an appeal under Section 107 of the Central Goods and Services Tax Act, 2017 should be waived or varied in the facts of the petition. 2. Whether manpower/housekeeping services rendered to certain educational institutions fall outside the scope of GST by virtue of (a) Entry No. 3, Chapter 99 (pure services to government entities) in Notification No. 12/2017-Central Tax (Rate) and (b) Entry No. 66, Heading 9992 (services to educational institutions) in Notification No. 12/2017-Central Tax (Rate) read with Notification No. 2/2018-Central Tax (Rate). 3. Whether the question of exemption under the said notifications is one of law suitable for immediate determination by this Court or is a fact-specific issue to be decided by the Appellate Authority in appeal under Section 107. ISSUE-WISE DETAILED ANALYSIS Issue 1: Pre-deposit requirement under Section 107 - waiver/variation Legal framework: Section 107 of the CGST Act prescribes the appellate remedy and the statutory requirement of pre-deposit (10% of the tax amount) for preferring an appeal to the Appellate Authority, subject to judicial discretion in appropriate cases and any power of the appellate forum to determine pre-deposit. Precedent Treatment: No precedents were relied upon or considered in the judgment; the Court proceeded on statutory scheme and facts. Interpretation and reasoning: The Court noted two material facts: (i) the petitioner had not collected GST from its clients on the assumption of exemption; and (ii) the question of exemption requires fact-sensitive determination. Given these peculiar facts, the Court concluded that the petitioner should not be precluded from exercising the statutory appellate remedy. Rather than outrightly waiving the pre-deposit, the Court permitted the petitioner to institute the appeal and directed the Appellate Authority to determine the amount of pre-deposit payable after considering factual and legal aspects. Ratio vs. Obiter: Ratio - where (a) the assessee has not collected GST from clients and (b) the exemption question is fact-specific, it is appropriate to permit filing of appeal and allow the Appellate Authority to determine pre-deposit; the Court exercised supervisory jurisdiction to enable appellate remedy in such peculiar facts. Obiter - no broad rule was laid down for all cases; the order is expressly confined to the peculiar facts. Conclusions: The petitioner was permitted to file the appeal under Section 107 by a specified date and to simultaneously seek a determination of the pre-deposit; the Appellate Authority was directed to consider and determine the pre-deposit in accordance with law. The Court did not itself waive the pre-deposit but delegated that determination to the Appellate Authority in the exercise of appropriate discretion. Issue 2: Scope of exemption - whether housekeeping/manpower services to educational institutions/government entities are taxable Legal framework: Notification No. 12/2017-Central Tax (Rate) (as amended), specifically Entry No. 3, Chapter 99 (nil rate for pure services provided to Central/State/UT/local authorities or governmental authorities in relation to functions entrusted to Panchayats/Municipalities) and Entry No. 66, Heading 9992 (nil rate for certain services to educational institutions including cleaning/housekeeping for institutions up to higher secondary), read with Notification No. 2/2018-Central Tax (Rate). Precedent Treatment: The Court did not rely upon or distinguish any earlier judicial decisions; the matter was left for fact-based appraisal by the Appellate Authority. Interpretation and reasoning: The Court observed that applicability of the notifications turns on factual facts - e.g., the precise status of each client (whether a governmental entity for Entry No. 3 or an educational institution covered by Entry No. 66), whether the service constitutes 'pure services' excluding composite supplies or works contracts, and whether the educational institution falls within the proviso (limited to pre-school to higher secondary). These determinations require factual analysis and documentary scrutiny which the Appellate Authority is better placed to undertake. Consequently, the Court refrained from making any definitive legal pronouncement on coverage of the notifications on the record before it. Ratio vs. Obiter: Ratio - applicability of the exemption notifications requires fact-specific determination of the status of the recipient and the nature of the supply; such determinations are appropriate for the Appellate Authority in appeal rather than summary adjudication by the Court on the present record. Obiter - the Court's observations on factors to be examined (status of clients, pure service vs composite supply, proviso limiting Entry No. 66) serve as guidance but are not conclusive legal rulings. Conclusions: The question whether the clients of the petitioner are covered by the relied upon notifications must be examined on facts by the Appellate Authority; the Court declined to decide the exemption question on the writ record and remitted the matter to the appellate forum for full factual and legal consideration. Issue 3: Appropriateness of exercise of writ jurisdiction to pre-empt appellate determination Legal framework: Writ jurisdiction under Article 226 permits supervisory intervention where appellate or alternative remedies are insufficient or where exceptional circumstances exist; however, where a statutory appeal is available, courts generally defer to the appellate forum for fact-intensive determinations. Precedent Treatment: No specific authorities were cited; the Court applied the general principle of restraining from substituting its view for that of the appellate authority where factual enquiries are necessary. Interpretation and reasoning: The Court found the statutory appellate forum to be the appropriate forum for resolving disputed questions of exemption that are intricately fact dependent. Given the petitioner's inability to collect tax from clients and the existence of an available appellate remedy, the Court exercised its supervisory power narrowly - permitting the appeal to be filed and directing the Appellate Authority to consider pre-deposit - rather than deciding the substantive exemption issue on the writ petition. Ratio vs. Obiter: Ratio - where a statutory appeal is available and the question involves factual determination, the Court should ordinarily remit the dispute to the appellate authority, subject to directions enabling access to the appellate remedy in appropriate or peculiar circumstances. Obiter - the direction to the Appellate Authority to determine the pre-deposit is case-specific and not a general abridgement of statutory pre-deposit rules. Conclusions: The Court declined to exercise writ jurisdiction to determine the exemption question on merits and instead permitted exercise of the statutory appeal, with the Appellate Authority to decide both the substantive exemption issue and the quantum of pre-deposit in accordance with law. Operational Directions and Outcome The petitioner was permitted to avail the appellate remedy under Section 107 by a specified date and to file an application before the Appellate Authority for determination of the pre-deposit payable; the Appellate Authority was directed to consider the pre-deposit application in accordance with law after examining facts and submissions. The writ petition was disposed of accordingly, and all pending applications were also disposed of.