TaxTMI 
TaxTMI 
2021 (8) TMI 95
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..../Refund/Final/2018-19, dated 6-11-2019 July, 2017 Refund rejected Rs. 8,21,17,976/- (CGST) + Rs. 8,21,17,976/- (SGST) Total Rs. 16,42,35,952/- 2 APPL/JPR/ CGST/JP/19/ 111/2020/ ZO0812190239578, dated 24-12-2019 October, 2017 Refund rejected Rs. 7,01,22,423/- (CGST) + Rs. 7,01,22,423/- (SGST) Total Rs. 14.02,44,846/- 3 C. No. APPL/ JPR/CGST/JP/28/VI/2020/ ZQ0803200171492, dated 11-3-2020 January, 2018 Refund rejected Rs. 4,17,10,946/- (CGST) + Rs. 4,17,10,946/- (SGST) Total Rs. 8,34,21,892/- 4 C. No. APPL/ JPR/CGST/JP/62/VIII/2020/ ZY0806200005451, dated 1-6-2020 April, 2018 Refund rejected Rs. 1,18,49,147/- (CGST) + Rs. 1,18,49,147/- (SGST) Total Rs. 2,36,98,294/- 5 C. No. APPL/ JPR/CGST/JP/63/VIII/2020/ ZT0806200005406, dated 1-6-2020 March, 2018 Refund rejected Rs. 3,65,98,608/- (CGST) + Rs. 3,65,98,608/- (SGST) Total Rs. 7,31,97,216/- 2. Brief facts of the case : 2.1 The appellant having GSTIN No. 08AAACHI766P1Z5 in State of Rajasthan is engaged in the business of providing telecommunication services in India having their principal place of business at K-21, Sunny House, Malviya Marg, C-Scheme, Jai....
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....l submit the response to the show cause notice and attend the personal hearing in the week ending 13th December, 2019 and requested to grant extra time to appear for the personal hearing. 3. The Adjudicating Authority further intimated to the appellant vide Letter C. No. V(18)Div-H/Ref/BHL/21/2019, dated 16-12-2019 and stated therein "that as per your request a personal hearing has been fixed on 19-12-2019 you are requested to attend the hearing personally or send your authorized representative, along with all the documents and evidences, which you wish to produce in support of your defence and also intimated that if you or your representative does not appear for hearing, the matter will be decided ex parte on the basis of documents, facts and evidences available on the record. 4. Further, the adjudicating authority vide impugned Orders-in-Original in Form RFD-06, dated 6-11-2019, 24-12-2019, 11-3-2020, 1-6-2020, and 1-6-2020 respectively has passed the orders-in-original and rejected the refund claims for the period and amount mentioned at above in Para-1 in column No. (4) and (5) filed by the appellant. 5. Being aggrieved with the impugned orders dated 6-1....
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....ssengers. (iii) Central Government, State Government, Union territory or local authority Any business entity located in the taxable territory. • that it is submitted that due to the evolving law, the Appellant paid CGST and SGST under the category of telecommunication service falling under HSN Heading 9984 on reverse charge basis on the LF and SUC paid to the Government as a matter of abundant caution and availed input tax credit of the GST so paid. It is further submitted that the Heading 9984 pertains to provision of telecommunication services and per se does not apply to the grant of license and allocation of spectrum. • that the Appellant believes that no GST is leviable on LF and SUC charges paid to the Government and accordingly, the Appellant had filed a refund of tax paid on LF and SUC paid in the return for the month of July, 2017. The Appellant has also filed a writ before the Delhi High Court in this regard. • that the Appellant accordingly had filed a refund claim under Section 54 of the CGST Act, 2017 read with Rule 89 of Central Goods and Services Tax Rules, 2017 (hereinafter referred to as 'CGST Rules, 2017') to seek ....
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....er, 2019 to any date after 15 October, 2019. • that the Appellant did not receive any fresh notice of personal hearing and the respondent without even giving an opportunity to furnish a reply to the SCN, rejected the entire refund claims. • that in the Impugned Order, it has been observed that License Fee and Spectrum Usage Charges are supply under Section 7 of CGST Act and services provided by the Central Government to a business entity is taxable in terms of Sl. No. 5 of the Notification No. 13/2017-Central Tax (Rate), dated 28 June, 2017 GST. • that in this regard, at the outset, the Appellant humbly submits that Section 9 of the CGST Act provides that GST is leviable on supply of goods or services at the rates to be notified by the Government. Thus, for the charge to be attracted it is essential that the following conditions are cumulatively satisfied : (a) there is a supply (b) supply is of goods or service (c) supply is for consideration and in course or furtherance of business ....
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....ents for an activity to qualify as supply is that the activity should be in the course and furtherance of business. To the contrary, in the present facts, the Government is not engaged in the trade or commerce or business while it grants a permission to operate as a telecom operator. • that the allocation of spectrum by the Department of Telecommunication ('DoT') is not akin to providing any goods or services and no business is carried out by the Government when it allocates spectrum so as to be subjected to levy of GST. The regulation of telecommunication service and right of use of radio frequencies/spectrum by the DoT is in discharge of its statutory functions. The Government is not engaged in activity of buying and selling in grant of license and allocation of spectrum for provision of telecommunication service. Moreover, the functions of a Government are only constitutional and statutory in nature which cannot be deemed to be a business. • that Under Section 4 of the Telegraph Act, the DoT regulates the provision of telecommunication service and grant of license and allocation of spectrum cannot be construed as any 'business' carried out by th....
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....s submitted that the view that GST is leviable on any payment in lieu of any license granted by the Government is patently inconsistent with the position that any payment made as a quid pro quo for the service received from the Government has to be regarded as a consideration for that service. • that it is respectfully submitted that the requirement for quid pro quo is not satisfied in the case of fees paid for grants of licenses or permissions where such fees are in the nature of regulatory fees. The Hon'ble Supreme Court has consistently held in its judgments over the last five decades that a license fee may either be regulatory or compensatory, and that the element of quid pro quo is not sine qua non for a fee. For instance, in the case of Secunderabad Hyderabad Hotel Owners' Assn. v. Hyderabad Municipal Corpn., AIR 1999 SC 635, the Hon'ble Supreme Court held as under : "A license fee may be either regulatory or compensatory. When a fee is charged for rendering specific services, a certain element of quid pro quo must be there between the service rendered and the fee charged so that the license fee i....
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....he classification of services starts from 2 digits level and is sub-classified up to 6 digits level. (ii) GST rate is prescribed at 4 digits level with corresponding columns prescribing the "types of services covered", "conditions, if any" and the applicable GST rate". • that it is submitted that one very important aspect which requires consideration for the purpose of determining the GST rate on supply of service(s) is that, though the sub-classification is prescribed at 6 digits level, the GST rates are prescribed at 4 digits level. As a result, under the present scheme, the GST rates for services have been prescribed only for the specific services covered under the Heading at 4 digits level and not for all the services mentioned at 6 digits level. Consequently, only if a classification of a particular service is prescribed in the description/types of services mentioned against the 4 digits Heading under the Service Rate Notification there will be a GST levy. • that there is a specific 4 digits classification for "leasing and rental services" which includes within its ambit licensing services, prescribed at 6 ....
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....o use other intellectual properly products and other resources nowhere else classified (a) Entries (i) and (ii) of Sr. No. 17 to the Service Rate Notification pertains to 'Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP)'. However, as the license per se is not an intellectual property, the same would not get covered under the purview of entries (i) and (ii) of the Sr. No. 17. Accordingly, the license cannot be subject to tax under entry (i) or (ii) of Sr. No. 17 of the Service Rate Notification. (b) Entries (iii) to (v) to Serial No. 17 specifically deal with transfer of right to use goods. However, the granting of license and allotment of spectrum by any stretch of imagination cannot be construed as goods and would not get covered under the purview of entries (iii) to (vii) of Sr. No. 17. Accordingly, the transaction in question cannot be subject to tax under (iii) to (vii) of Sr. No. 17 of the Service Rate Notification. The submission in the following paragraphs will clarify that the transactions in question were outside the scope o....
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....ense and allocation of spectrum by the Government under Section 4 of the Telegraph Act, which is in exercise of its statutory powers, does not attract GST irrespective of whether the arrangement is evaluated from the perspective of being a pure service arrangement or the one where the services are in relation to the "goods covered under the Customs Tariff Act". • that it is also a well settled principle that the prescription of chargeability is imperative consideration and merely classification of an arrangement under the scheme of law will not result in levy of tax. Merely by mentioning a particular goods or service in classification schedule, charge cannot be created. • that Refund claim is covered under Section 54 of the CGST Act. • that in the Impugned Order it has been observed that the refund claimed filed by the Company is not covered under 'Any other category'. Section 54 of the CGST Act, 2017 allows any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may any application in such form and manner as may be prescribed. Further Rule 89 of the CGST Rules, 2017, prescribe the procedur....
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.... 6. Personal hearing in virtual mode through video conference was held on 18-12-2020. Shri Chirag Bhatia, Shri Punit Bhardwaj, Chartered Accountants appeared on behalf of the appellant and explained the case. They explained each and every points of grounds of appeal filed to this office. Further, Shri Bhardwaj requested for additional submission through Email after conducting personal hearing. In view of the above grounds of appeal they have requested to decide the case at the earliest. 7. I have gone through the facts of the case and the oral as well as written submissions made by the appellant in their Appeal memo and also additional submission at the time of personal hearing and accordingly I proceed for deciding the appeal. Discussion and findings : 8. On going through the case records and written as well as oral submissions of the appellant, I find that the issues involved in the present case for consideration are as under : (a) whether payment, in the form of License Fee (LF) for issuance of License and Spectrum Usage Charges (SUC) for use of spectrum, as a percentage of the 'Adjusted Gross Revenue' (AGR) to 'Departmen....
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.... of allowing a business entity to operate as a telecom service provider or use radiofrequency spectrum on payment of licence fee or spectrum user charges, as the case may be, was taxable. Further, with regard to taxability of "assignment of spectrum" C.B.I. & C. has issued a Circular No. 192/02/2016-Service Tax, dated 13-4-2016 wherein at S. No. 9 of the table it was clarified that 'any periodic payment required to be made by the assignee, such as Spectrum User Charges, license fee in respect of spectrum, shall be taxable.' As per Cambridge dictionary the term 'license' has been defined as : "to give someone official permission to do something" As per para A4 of the appeal "The Government merely grants/delegates permission of carrying out the establishing, maintaining and working telegraphs under Section 4 of the Telegraph Act". Granting permission for carry out the establishing, maintaining and working telegraphs and allocation of spectrum is a service which falls under HSN Head 9973....
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....exed with their revenue. As per Section 4 of the Telegraph Act "The Government merely grants/delegates permission of carrying out the establishing, maintaining and working telegraphs". Granting permission for carry out the establishing, maintaining and working telegraphs and allocation of spectrum is a service which falls under HSN head 9973 38 which specifically defines "Licensing services for right to use other natural resources including telecommunication spectrum". If no GST is leviable on grant of license then why a service categories at HSN head 9973 38 as "Licensing services for right to use other natural resources including telecommunication spectrum". Else all tax liability would be null, which is wrong interpretation of the aforesaid verdict. (b) In respect of issue at S. No. (c) I find that : As per clause (31) of Section 2 of CGST Act, defines consideration, which reads as under :- (31) - consideration in relation to the supply of goods or services or both includes - (a) any payment made or to be made, whether in money or otherwi....
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....s liberalised under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee. To provide relief from the steep fixed license fee, the Government in 1999 gave an option to the licensees to migrate to the revenue sharing fee model. Under this, mobile telephone operators were required to share a percentage of their AGR with the Government as annual License Fee (LF) and Spectrum Usage Charges (SUC). License agreements between the Department of Telecommunications (DoT) and the telecom companies define the gross revenues of the latter. AGR is then computed after allowing for certain deductions spelt out in these license agreements. The LF and SUC were set at 8 per cent and between 3-5 per cent of AGR respectively, based on the agreement. LF & SUC has also been defined in Para 18.2 & 18.3 respectively of the Unified License Agreement as : "18.2 License Fee : 18.2.1 In addition to the Entry Fee, an annual License fee as a percentage of Adjusted Gross Revenue (AGR) shall be paid by the Licensee service-area wise, for each authorized service fro....
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....sideration in the form of LF and SUC paid by the appellant to the Government is 'consideration' as per clause (31) of Section 2 of CGST Act which cover all the elements specified under ibid section of the Act. There are service provider as well as service recipient and the element of consideration is also involved in the instant case. Hence, the taxability is fasten on these payments as per GST Act. (c) In respect of issue at S. No. (d) I find that : With regard to the contention of the adjudication authority that the refund in the instant case is not covered under the 'any other category', refund of unutilized input tax credit is prescribed as per Section 54(3) of the CGST Act, 2017, which allows refund of accumulated input tax credit on 'input' only. In Act and as well as Rules, there is no provision for refund of input tax credit accumulated on input services. Hence, the category specified by the appellant during filing of refund is improper and there is no legal backing in this regard. (d) In respect of issue at S. No. (e) I find that : &nbs....
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.... person in the course or furtherance of business;" "7. 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;" The term 'licence' is specifically covered under both aforesaid sections of the CGST Act, 2017. Hence, there is no ambiguity that it is a 'Supply'. As per Entry No. 62 of Notification No. 25/2012-S.T., dated 20-6-2012 (as amended) w.e.f. 1-4-2016 services, provided by Government by way of allowing a business entity to operate as a telecom service provider or use radio frequency spectrum on payment of licence fee or spectrum user charges, as the case may be, was taxable. As per Cambridge dictionary the term 'license' has been defined as : "to give someone official permission to do something" GST i....