TaxTMI 
TaxTMI 
2019 (9) TMI 929
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....that the Learned Advocate General may also be heard as GST is shared between the Centre and the State. Accordingly, the papers were directed to be forwarded to the Learned Advocate General as well. ISSUES CONSIDERED IN THIS JUDGMENT 3. Broadly stated, the issues to be considered by this Court is the applicability of Goods and Services Tax ("GST") and the mode of discharge of this statutory liability (where it arises) in matters where the Court Receiver is appointed by the Bombay High Court ("Court") under Order XL of the Code of Civil Procedure, 1908 ("CPC"). 4. The following principal questions arise for consideration in this Court Receiver's Report: i. Whether GST is liable to be paid on services or assistance rendered by the Court Receiver appointed by this Court under Order XL of the CPC ? ii. Whether GST is liable to be paid on 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 ? iii. Specifically, in the facts of the present Suit, where the Plaintiff alleges that the Defendant is ....
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....emblance of right to the property, cannot simply hold on to the property without payment of any compensation. Considering the overwhelming prima facie case of the Plaintiffs in the present suit and also considering the fact that the litigation under the Rent Control Act has finally been disposed of in favour of the Plaintiffs by the Small Causes Court, this is a fit case for appointment of Court Receiver, though the Receiver may not disturb the possession of the Defendant during the pendency of the present suit subject to payment of compensation by the Defendant. 7. Considering the nature of the suit premises, namely, the original suit premises in respect of which the conducting license was granted in favour of the predecessor of the Defendant, and the present condition of the premises revealed by photographs tendered before this court (the photographs indicate that the Defendant is actually using a much larger area than what originally formed part of the suit business, the area currently stated to be of about 872 sq.ft.), this court is of the view that Rs. 45,000/ per month would be an adequate adhoc royalty/compensation to be paid by the Defendant to the Court Receiver t....
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....royalty amount is paid over by the Court Receiver to the Plaintiff, the same would be treated as 'Income' of the Plaintiff falling under the category of 'Income from letting out and use of a shop/commercial premises'. The Plaintiff submits that GST will also be liable to be paid on the royalty. The Plaintiff submits that it comes within the GST net and that it is registered, having GST Registration No. 27AAATV1937B1ZO. Hence, GST will be payable on the amount finally transferred to the Plaintiff. It is the Plaintiff's case that if GST is not recovered from the Defendant from time to time, it will be very difficult to recover the same from the Defendant at the time of recovering possession. 12. The Court Receiver filed Court Receiver's Report No. 213 of 2017 dated 3rd November 2017. The Court Receiver reported that it had oral discussions with a Panel Chartered Accountant regarding the issue of GST. The Report states that: "8. The office of Court Receiver has a oral discussion with Panel chartered Accountant regarding the issue of G.S.T. His opinion is as follows: The person paying royalty (i.e. the Defendant) should pay the GST at applic....
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.... (1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State. (2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. Explanation.-The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from the date recommended by the Goods and Services Tax Council." 17. Parliament enacted the CGST Act which came into force on 1st July 2017. The CGST Act is 'An Act to make a provision for levy and collection of tax on intra-State supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto.' 18. Section 9 of the CGST Act, which is the charging provision thereunder, provides as follows: "9. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and....
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....perator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax." 19. Section 7 of the CGST Act defines "supply" and provides as follows: "7. (1) For the purposes of this Act, the expression "supply " includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1), - (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Go....
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....ven by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of in response to, or for the inducement of the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; " 21. Schedule II and Schedule III referred to in Section 7 of the CGST Act is set out below: "SCHEDULE II[See section 7] ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES 1. [...] 2. Land and Building (a) any lease, tenancy, easement, licence to occupy land is a supply of services; (b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. 3. [...] 4. [...] 5. Supply of services The following shall be trea....
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....r both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act; " "2. (105) "supplier" in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied; " "2. (107) "taxable person" means a person who is registered or liable to be registered under section 22 or section 24; " "2. (108) "taxable supply" means a supply of goods or services or both which is leviable to tax under this Act; " 22. (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees: Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceed....
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....ns who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise; (viii) Input Service Distributor, whether or not separately registered under this Act; (ix) persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52; (x) every electronic commerce operator; (xi) every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person; and (xii) such other person or class of persons as may be notified by the Government on the recommendations of the Council." 23. Section 92 provides for the levy and recovery of GST from a Court of Wards, Administrator General, Official Trustee, receiver or manager. "92. Where the estate or any portion of the estate of a taxable person owning a business in respect of which any tax, interest or penalty is payable under this Act is under the control of the Court of Wards, the Administrator General, t....
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....ED SUBMISSIONS ON BEHALF OF THE AMICUS CURIE 25. The Learned Amicus Curiae submitted as follows: i. Services provided by the Court Receiver is to be treated as 'Services by any court or Tribunal established under any law for the time being in force' within the meaning of Paragraph 2 of Schedule III to the CGST Act and is, accordingly, an activity or transaction which shall not be treated as a supply of goods or a supply of services. Therefore, GST should not be levied on amounts directed to be paid by litigants to the office of the Court Receiver for deputing its resources and completing the mandate given to it by this Court as these services are 'Services by any court or Tribunal established under any law for the time being in force'. ii. If the Court Receiver is in control of an estate or portion thereof of a taxable person owning a business in respect of which GST is payable, such tax, penalty, and interest thereon may be determined and recovered from the Court Receiver under Section 92 of the CGST Act in like manner and to the same extent as it would be determined and recovered from the taxable person as if he were conducting the business....
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.... court links the payment to the taxable supply and the requisite element of reciprocity between supply and consideration is present. vii. If the dispute is settled out of court or compromised without the defendant admitting that the alleged supply took place, the payment made by the defendant may be characterised as an agreed estimate of the true worth of the plaintiff's claim, rather than consideration for an alleged supply, and as such will be outside the scope of VAT/GST. In such cases, compensation may be considered to be repatriation or restitution in respect of loss or damage. Any compensatory payment made would not be consideration for a supply. viii. However, a payment made under a court's order or an out of court settlement will attract VAT/GST where it amounts to consideration for one or more taxable supplies effected in terms of the court or terms of settlement. ix. As an illustration, where the plaintiff grants future rights (for example rights to exploit copyrighted material in the future) any payment received for such right will be treated as consideration for a new supply and is subject to levy of tax under GST laws. However, the po....
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.... is not consideration for supply. The receipt of payment is not premised on the enforcement of reciprocal obligations between parties and cannot be linked to a supply for levying GST. Such a payment is compensatory. xv. A payment made by a judgment debtor is in satisfaction of a judgment debt created by an order of court and not for any supply made by the party in whose favour the suit is decided. Whether such payment is towards a supply or is compensation for violation of a legal right is to be seen in the facts of a given case. xvi. In the facts of the present Suit, there is no agreement or contract for supply by the Plaintiff to the Defendant. Rather, the Plaintiff's grievance is that the Defendant is a trespasser/illegal occupier of the Suit Premises. Whilst the royalty/monthly amount may be calculated in accordance with prevailing rate of market rent, the transaction itself will not constitute a supply, as the reference to prevailing rent is only a means to arrive at the amount of damages. xvii. Even the language of Paragraph 5(e) of Schedule II to the CGST Act will not result in the present activity to be a supply. Paragraph 5(e) of Schedule II ....
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....his Court. These Rules institutionalise the manner of functioning of the office of the Court Receiver, High Court, Bombay. Accordingly, services provided by the Court Receiver fall under Sr. No. 2 of Schedule III read with Section 7 of the CGST Act, namely, 'Services by any court or Tribunal established under any law for the time being in force' which transaction or activity is not to be considered a supply of goods or services under the CGST Act. iv. With respect to monies paid to the Court Receiver which are not towards the Court Receiver's fees or remuneration, but paid in the course of litigation pursuant to an order of the Court, it must be seen if the underlying relationship between the parties, or claims made in that regard fall within the ambit of the CGST Act. If they do not, the taxable event of 'supply' cannot be any alleged or notional contract between either of the parties and the Court Receiver. v. Relying on the decision of this Court in Humayun Dhanrajgir v. Ezra Aboody [2008] Bom C.R. 862, Mr. Jagtiani submitted that the true nature of the payments made by one party to another/the Court Receiver for use and occupation of proper....
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..... Needless to state, in the facts of a given case if the Court deems fit, the Court may direct the Court Receiver to apply for registration for the payments relatable to a particular matter. At any rate it is preferable from an audit and administrative perspective for there to be separate GST registration for each matter, where the same is paid for by the Court Receiver. SUBMISSIONS ON BEHALF OF THE STATE OF MAHARASHTRA 27. The Learned Advocate General, on behalf of the State of Maharashtra, has submitted written submissions with respect to the issue of levy of GST on royalty paid by a litigant to the office of the Court Receiver. 28. It is submitted on behalf of the State (with reference to the provisions of the MGST Act the relevant provisions whereof are in pari materia with the CGST Act) that: i. As per the language of Section 92 of the MGST Act, the receiver will be liable to levy and collection of GST only if the taxable person whose estate is under the control of the receiver is conducting a 'business'. ii. GST may be recovered from the Court Receiver under Section 92 only if it is conducting a business of a taxable person. In the facts of ....
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....enter into contracts, a contract has come into existence whereby the Defendant is permitted to occupy the Suit Premises. The offer in this contract is the option available to the Defendant to pay royalty and remain in possession of the Suit Premises. The Defendant elected to accept the offer, and therefore the royalty amount represents the consideration paid by the Defendant to the Court Receiver (who is in possession of the Suit Premises on behalf of the Court). The Learned Advocate General relied on a judgment of the Supreme Court in Assistant Commissioner, Ernakulam v. Hindustan Urban Infrastructure Ltd. [2015] 3 SCC 745(which considers Rule 54 of the Kerala Sales Tax Rules which is in pari materia with Section 92 of the MGST Act) in this regard to contend that the act of permitting the Defendant to remain in possession of the Suit Premises is a contract and the transaction in question is a supply, even if the same is pursuant to an order of the Court. Relying on Assistant Commissioner, Ernakulam (supra) the Learned Advocate General submits that sales tax was levied on sale of properties by the Official Liquidator under Rule 54 of the Kerala Sales Tax Rules (which is in pari mat....
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....ty. It is submitted that the royalty is meant to compensate the right owner who permits or allows others to use his rights in his property. ii. To this extent, there is a clear supply of service of notionally providing premises (subject of course to the final determination of the rights of the parties to the suit). Such letting or providing of premises is clearly covered in the scope of 'supply' under Section 7 of the CGST Act as also under the definition of 'services' under Section 2(102) of the CGST Act. iii. The Plaintiff is providing, or is deemed to be providing a service. The act of supplying these services i.e. permitting the Defendant to occupy the premises in consideration of payment of royalty is clearly a business as understood under the CGST Act. The broad definition of business aids such interpretation. iv. That the Court Receiver acts as the agent of the Plaintiff who is liable to be taxed under the CGST Act and is therefore liable to make payment of GST on monies received by him as royalty on behalf of the Plaintiff under Section 92 of the CGST Act. v. Section 92 of the CGST Act gives express statutory recognition t....
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....ctions to the Court Receiver regarding the properties which were in custody of the Court Receiver till such time as the Debt Recovery Tribunal/Central Government set up an alternative office/machinery with a proper infrastructure." 18. The Court at paragraph 5 (pages 215-216) set out a brief history, status and functioning of the Office of the Court Receiver as follows: ".....prelude Before 1929, Receivership was granted to private persons. Gradually, the business in the hands of the private Receiver increased and it was thought it had grown too big to be entrusted to a single private individual. It was, therefore, decided that the work should be assigned to a salaried office on the establishment of the High Court. As a result, in 1929 the Government created the post of the Court Receiver, who took over all the pending Receiverships from the private Receiver. The system sanctioned by the Government for running the office, after it was taken over, was that the office should budget for its normal expenditure which the Government will pay in the first instance but which had to be recouped to them from the takings of the office other than the Receiver's c....
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....s as also the commission by the Court Receiver, Banks and Financial Institutions are required to be paid the net royalty amount even during the pendency of the suit pursuant to the orders of the Court. These payments are made by the Court Receiver by cheques. Hence, the Court Receiver is required to sign cheques and payment vouchers by which net royalty amount is remitted to the parties to the suit. The Court Receiver is also required to sign daily vouchers to meet office expenses. The Court Receiver is also required to pay expenses to the officers, who visit the site by way of daily allowances. These officers are also required to go out of Bombay. The Court Receiver is also required to sign salary bills. The Court Receiver is also required to pay security guards who are appointed to protect plants, machinery and immovable properties all over India. The Court Receiver is also required to pay fees to Valuers, Architects and Chartered Accountants. In some cases, Court Receiver is also required to sign returns under the Income Tax Act. All these facts are mentioned only to indicate that in Bombay the Court Receiver, High Court, Bombay discharges a very important function. The properti....
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....ver to Debt Recovery Tribunal does not arise." 22. In Bank of Tokyo-Mitsubishi Ltd. v. M/s. Chembra Estates and others (supra), this Court (R.J. Kochar, J.) once again considered the issue of whether this Court could direct the Court Receiver to sell the suit property in proceedings that were before the Debt Recovery Tribunal. The Court discussed the aforementioned judgment in I.CI.CI Ltd. v. Patheja Brothers Forgings and Stampings Ltd. (supra). 24. Due to the conflict between the Judgments in ICICI Ltd. (supra), and Bank of Tokyo - Mitsubishi Ltd. (supra), as to whether this Court can continue to issue directions to the Court Receiver appointed by it, in bank suits transferred to the Debt Recovery Tribunal, the matter was referred to a larger bench of this Court. 25. The decision of the Division Bench (Larger Bench) (Coram: B.N. Srikrishna and S.D. Gundewar, J J.) was by an Order dated 23rd July, 2001 in The Bank of Tokyo-Mitsubishi Ltd. v. M/s. Chembra Estates and others and Court Receiver, High Court, Bombay (supra). The Division Bench (in paragraphs 14 and 15) agreed with the view taken by the Court in Bank of Tokyo - Mitsubishi Ltd. (supra). For reas....
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.... yard stick in respect of the amount to be recovered by the Court Receiver for the services rendered by him. The High Court (Original Side) Rules are framed in exercise of power conferred on the High Court under the provisions of the Civil Procedure Code. On the Original Side of the High Court it is not the case like in the other cases where private receivers are appointed as the Court Receiver and thus his remuneration of the amount charged by him for fees and commission is to be regulated by the Court. It is undoubtedly true that even under r. 591 ultimate control is vested with the Court and under the Rules a discretion is conferred on the Chamber Judge to reduce the amount chargeable by the Court Receiver. However, the issue which is to be determined is whether the case has been made out by the defendant No. 1 for reduction of charges and/or deviation from the fees prescribed under r. 591 of the Original Side Rules". 27. In Girish M. Joshi v. Jagat Manubhai Parikh (supra), this Court was considering the issue regarding appointment of the Court Receiver, High Court, Bombay by the City Civil Court and the Small Causes Court, Mumbai. This Court, after noticing the Larger/....
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....sibilities. 36. [...] The appointment, functioning and discharge of the Court Receiver is governed by Chapter XXX of the Bombay High Court (Original Side) Rules in addition to the provisions of Order XL of the CPC These rules further establish that the Office of the Court Receiver, High Court, Bombay, functions only under the supervision and control of this Court. These Rules institutionalise the manner of functioning of the Office of the Court Receiver, High Court, Bombay." (Emphasis Supplied). 34. As held in Shakti International Private Limited (supra), the status of the Court Receiver, High Court, Bombay is that of an employee or a department of the High Court, Bombay who is subject to the administrative control of the Hon'ble Chief Justice. The office of the Court Receiver is 'an establishment of the High Court' and 'a permanent department of the High Court'. 35. The judgment in ICICI Bank Ltd. v.J.K. Synthetics Ltd. 2005 Vol. 107 (2) Bom. LR 272 referred to in Shakti International Private Limited (supra), reiterates that the office of the Court Receiver is maintained by the High Court, Bombay, and its staff is employed by the High Co....
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....d in such form as the Court directs, or (b) fails to pay the amount due from him as the Court directs, or (c) occasions loss to the property by his wilful default or gross negligence, the Court may direct his property to be attached and may sell such property, and may apply the proceeds to make good any amount found to be due from him or any loss occasioned by him, and shall pay the balance (if any) to the receiver. 5. When Collector may be appointed receiver Where the property is land paying revenue to the Government, or land of which the revenue has been assigned or redeemed, and the Court considers that the interests of those concerned will be promoted by the management of the Collector, the Court may, with the consent of the Collector, appoint him to be receiver of such property." 37. Order XL Rule 1 of the CPC contemplates that a Court may, inter alia, confer upon the receiver all such powers, as to bringing and defending suits and for the realization, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execut....
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....ding his salary and this he shall do so with due regard to the fees charged by him under rule 591 and to the value to each suit, estate or matter and the labour and trouble involved in its management." 38. Mr. Jagtiani rightly points out that there is a clear distinction between charges or fees/remuneration of the Receiver (charged as per Rules 591 - 592 of the Bombay High Court (Original Side) Rules, 1980) and moneys which may be paid to or deposited with the Court Receiver by a litigant/third person during the course of a litigation pursuant to interim orders of protection passed by the Court. This is evident from the schedule under Rule 591 of the Bombay High Court (Original Side) Rules, 1980. The services, being charged by a permanent department of the Court, pursuant to orders passed by the Court from time to time, are naturally to be considered as 'Services by any court or Tribunal established under any law for the time being in force' which is Item No. 2 of Schedule III to the CGST Act. 39. I am unable to accept the submission made on behalf of the State of Maharashtra that the meaning of the word 'Court' as per the provisions of the Court Fees Act, 187....
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....-judicial functions. Vide Shell Company of Australia v. Federal Commissioner of Taxation [(1931) AC 275, 296], K. v. London County Council[(1931) 2 KB 215], Cooper v. Wilson [(1937) 2 KB 309], Huddart Parker and Co. v. Moorehead [(1908) 8 CLR 330] and Rola Co. v. Commonwealth [(1944) 69 CLR 185]. In this Court, the question was considered in some fullness in Bharat Bank Ltd. v. Employees of Bharat Bank Ltd. [(1950) SCR 459]. It is unnecessary to traverse the same ground once again. It may be stated broadly that what distinguishes a Court from a quasi-judicial tribunal is that it is charged with a duty to decide disputes in a judicial manner and declare the rights of parties in a definitive judgment. To decide in a judicial manner involves that the parties are entitled as a matter of right to be heard in support of their claim and to adduce evidence in proof of it. And it also imports an obligation on the part of the authority to decide the matter on a consideration of the evidence adduced and in accordance with law. When a question therefore arises as to whether an authority created by an Act is a Court as distinguished from a quasi-judicial tribunal, what has to be decided is whet....
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....(Original Side) Rules as noted in Shakti International Private Limited (supra). This is also apparent from the different context in which the meaning of 'court' was considered. 43. I am also inclined to accept the Learned Amicus Curiae's submission that fees of the Court Receiver fall under Item 2 of Schedule III to the CGST Act as it is for a service provided by an officer of the Court. Accordingly, this service is not treated as a supply of goods or services within the meaning of the CGST Act. The Court Receiver implements orders of the Court and functions under the supervision and direction of the Court. 44. It is thus clear that 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 No. (i) 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 u....
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....icus 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. 49. On a reading of Section 92 of the CGST Act it is clear that GST may be determined and levied from the receiver if: a. The receiver is in control of the business of a taxable person b. A taxable event of supply has taken place with respect to such business on account of which the estate of t....
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....of lease or license which can be said to come into existence between a party to litigation and a department of the Court. 55. 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. 56. I am in agreement with the submissions of the Learned Amicus Curiae that where a dispute concerns price/payment for a taxable supply, any amount paid under a court's order/decree is taxable if, and to the extent that, it is consideration for the said supply or a payment that partakes that character. In such cases, the happening of the taxable event of 'supply' is not dispu....
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....been done or ought to have been paid under contract. The law recognizes and awards damages between persons who do not have privity, if there is a violation of a legal right resulting in a civil wrong which must be remedied. 61. I am unable to accept the submission put forth by the State of Maharashtra that in the present case, a binding contract under the authority or with the imprimatur of the court has come into existence. I am also unable to accept the submission that the order dated 12th/20th July 2017 permitting the Defendant to remain in possession of the Suit Premises subject to payment of royalty is a contract, and that the royalty is 'consideration' for this 'supply' of premises to the Defendant pursuant to an order of Court. I am similarly unable to accept the Union of India's submission that notionally there is a supply of services by the Court Receiver, as agent of the Plaintiff, to the Defendant. The reliance on the decision in Assistant Commissioner, Ernakulam (supra) in this regard is also misplaced. 62. In Assistant Commissioner, Ernakulam (supra) the Supreme Court had occasion to consider the following question: 1. [...] Whether a....
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....r of the court. 49. In Hari Prasad Jayantilal & Co. v. ITO [AIR 1966 SC1481], this Court held that the liquidator is merely an agent of the company to administer its property for the purposes prescribed by the 1956 Act. The Court held that while distributing the assets, including accumulated profits, the liquidator acts merely as an agent or administrator for and on behalf of the company. The Court observed as follows: (AIR p. 1483, para 5) "5. ... The property of the company does not vest in the liquidator; it continues to remain vested in the company. On the appointment of a liquidator, all the powers of the Board of Directors and of the managing or whole-time directors, managing agents, secretaries and treasurers cease (Section 491), and the liquidator may exercise the powers mentioned in Section 512, including the power to do such things as may be necessary for winding up the affairs of the company and distributing its assets. The liquidator appointed in a members' winding up is merely an agent of the company to administer the property of the company for purposes prescribed by the statute. In distributing the assets including accumulated profits the liquid....
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.... the liquidation: that is to say, in the administration of the insolvent estate. The fact that in the event there may be nothing available for the unsecured creditors does not, in my view, mean that the realisation was not a step taken in the interests of all who have claims against the company. Those claims must necessarily be met out of the available assets in due order of priority. Superior claims may baulk inferior ones, but the liquidators duty is to realise the assets for the benefit of all in accordance with their rights. If in consequence of the realisation, the company incurs a liability, the discharge of such liability must, in my judgment, constitute a charge or expense incurred in the winding up within Section 267 of the Companies Act, 1948 and must also, in my view, fall within Rule 195." 52. Further, the House of Lords in Ay erst (Inspector of Taxes) v. C&K (Construction) Ltd. [1976 AC 167: (1975) 3 WLR 16: (1975) 2 All ER 537 (HL)], held that a company, pursuant to a winding-up order, ceases to have the custody and control of its assets which are thereafter administered exclusively for the benefit of those persons who are entitled to share in the proceeds of....
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....rson will be equivalent to the liability which would be levied upon the dealer if he were conducting such business. Further that under Rule 233 of the 1959 Rules, for the purposes of acquiring and retaining possession of the property of the company in liquidation, the Official Liquidator would be in the same position as a receiver. 59. The observation of the Court of Appeals in Mesco Properties case [Mesco Properties Ltd., In re, (1980) 1 WLR 96 : (1980) 1 All ER 117 (CA)], would appear to be squarely applicable to the present factual matrix, that is, during winding-up proceedings, if tax requires to be collected from the company in liquidation, the liquidator would be the proper officer to pay the same. 60. This Court has noticed hereinabove that the Company in liquidation is a "dealer" with regard to the sale of its assets by way of an auction under a winding-up order. Further, we have noticed the settled law that an Official Liquidator steps into the shoes of the Director of the company in liquidation and performs his statutory functions in accordance with the directives of the court. Furthermore, Rule 54 of the 1963 Rules contemplates a situation where a busin....
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....t looking to the circumstances of the case and material on record. 67. Mr. Singh submits on the other hand that the said decision is an authority for the proposition that royalty is, in substance, a rent which is 'consideration' for 'supply' of the Suit Premises to the Defendant. 68. In Humqyun Dhanrajgir v. Ezra Aboody (supra) this Court held as follows: "CONCEPTS OF ROYALTY: 17. In the case of (Kamakshya Narain v. IT. Commissioner)2 A.I.R. 1943 P.C. 153, the Privy Council observed that the royalty is "in substance a rent; it is the compensation which the occupier pays the landlord for that species of occupation which the contract between them allows." Thus, royalty in substance is rent. It appears that the concept of royalty is to compensate a right owner of the property who permits or allows others to use his rights from his property. This concept is also understood as 'Mesne profit' in legal parlance. Strictly speaking during the tenure of contractual tenancy what is paid by the tenant to his landlord is the contractual rent. After quit notice from the date of termination of tenancy, the characteristics of the subject matter is ch....
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....on of the person is the very essence for the claim for mesne profits". (Emphasis supplied herein) 69. The judgment in Humqyun Dhanrajgir v. Ezra Aboody (supra) clearly states that the true colour of the payment depends on the facts and circumstances of the case. For example, it acknowledges that on termination of contractual occupation, the right holder is entitled to damages if the occupant continues to remain in what is now an unauthorised or illegal occupation of the property. In fact, in Paragraph 19, the Court says that the term 'Mesne Profits' is 'used for damages for trespass, a wrongful act relating to immovable property and the said wrongful act forms one of the torts affecting realty i.e. immovable property. The enlarged scope of this term is meant to claim profit from one whose possession did not originate in trespass but is nevertheless wrongs as for example when the tenant or occupier of a property is dispossessed legally and decree of possession has been passed in favour of the landlord still the tenant/occupier holds over the property for a specified period before handing over the possession to the rightful owner. Though the tenant had a right....
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....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. 74. I am also unable to accept the State of Maharashtra's submission that the Defendant's occupation of the Suit Premises is a 'supply' since it falls within the definition of 'renting in relation to immovable property' i.e. Item No. 5(a) of Schedule II to the CGST Act. The State of Maharashtra has relied upon the definition of 'renting in relation to immovable property' found in Clause 2(zz) of Notification No. 12/2017-State Tax (Rate) Mumbai, dated 29th June 2017 in support of this submission. Clause 2(zz) provides that: "(zz) "renting in relation to immovable property" means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of property and includes letting, leasing, licensing or other similar arrangements in respect of immovable propert....
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....endant's occupation of the Suit Premises against payment of royalty as a 'supply' for 'consideration' on which GST is payable by the Court Receiver. 77. The width of the inclusive definitions of 'business' and 'supply' do not further the submission of the State of Maharashtra or the Union of India. The definition of 'business' includes, inter alia, any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit. This is irrespective of whether or not there is volume, frequency, continuity or regularity of such transaction. "Business" also includes the admission, for a consideration, of persons to any premises. But as discussed above, no positive act of admission into premises for a consideration can be said to have taken place where the plaintiff's allegation is that of illegal occupation. 78. Even the broad and inclusive definition of 'supply' does not assist the State and the Union. 'Supply' as defined in Section 7 of the CGST Act, includes, inter alia: i. A supply of goods or services (including a licence) or both; ....
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....e me that the supply in this case falls under Section 7(c) of the CGST Act read with Schedule I. 82. As regards Section 7(d) of the CGST Act read with Schedule II, I have already considered and rejected the submission that the transaction in the present case amounts to 'renting of immovable property' under Item No. 5(a) of Schedule II to the CGST Act. 83. Insofar as other cases are concerned, Rule 1(d) of Order XL contemplates that a Court may confer upon a receiver all such powers, as to bringing and defending suits and for the realization, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has, or such of those powers as the Court thinks fit. Undoubtedly, there may be instances where a taxable supply has taken place by the Court Receiver in exercising the aforesaid powers. Section 92 of the CGST Act specifically provides for the taxation of the estate of a taxable person under the control of the receiver. 84. There may be instances where payments received by the Court Receiver may attract G....
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....the CGST Act? Whether 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, falls within the definition of 'consideration' for a 'supply' chargeable to payment of GST under Section 9 of the CGST Act is answered in the negative. 89. As regards the final issue i.e. Issue No. (iv), namely If in any circumstance GST is payable or applicable to payments made to the Court Receiver, how is that statutory liability to be discharged? Is it to be paid by the Defendant/party in occupation directly, or by the Court Receiver? 90 . It was submitted by Mr. Jagtiani for the Court Receiver and the Learned Amicus Curiae that where Section 92 of the concerned GST Act may apply, the agent of the Court Receiver, wherever one is appointed, may be directed to pay GST after obtaining registration on behalf of the Court Receiver or (if permissible) under a pre-existing registration. In such a situation, such payment will be made on behalf of the Receiver and would discharge the Receiver's statutory obligations under Section 92 of the Act. Mr. Jagtiani submits that this is in line with S....