TaxTMI 
TaxTMI 
2021 (8) TMI 230
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....III/20/ ZW0812190255490, dated 27-12-2019 October, 2017 Refund rejected Rs. 6,89,31,725 /- 2 APPL/JPR/CGST/JP/56/ VIII/20/ ZX0803200127603, dated 9-3-2020 January, 2018 Refund rejected Rs. 6,74.23,604/- 2. Brief facts of the case : 2.1 The appellant having GSTIN No. 08AAACB2100P1ZX is engaged in providing telecommunication services all across India with its offices in different States has filed refund claims under Section 54 of CGST Act, 2017 in respect of tax paid inadvertently to the government exchequer. 2.2 On examination of refund claims filed by the appellant the adjudicating authority observed and has issued a show cause notices in Form GST-RFD-08, dated 10-12-2019 and 20-2-2020 respectively wherein following reasons have been mentioned in remark. Further, directed to the appellant to furnish a reply to the notice within fifteen days from the date of service of the notice. "GST is not exempted on leasing and renting services with or without operator as per Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017. Thus the refund is inadmissible". In response to show cause notices, the appellant vide their letter....
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....er the CGST Act/RGST Act would be mentioned as being under the "GST Act and the tax paid under CGST Act/RGST Act/IGST Act will be referred as GST. • that the Appellant prior to merger was registered under GST Act and was having registration No. 08AAACS4457Q1ZQ (GSTIN). After merger, the said GST Number remain inactive and merged with the GST No. of the merged company having registration No. 08AAACB2100P1ZX (Present GSTIN). • that as a telecom operator, the Appellant has entered into an agreement with Department of Telecommunication (DoT), Ministry of Communications, Government of India, and pays License Fee (LF) & Spectrum Usage Charges (SUC) as per the agreement. Such fees and charges are paid quarterly and collectively such payments are being referred as "regulatory payments" or "regulatory fees". • that such regulatory payments for the period July, 2017 to September, 2017 became due in October, 2017 and the Appellant has paid Rs. 38,29,54,029/- to DoT towards regulatory payments. For GST Act, such payments were considered as payment made for Government service and accordingly GST liability was discharged under reverse charge mechanism on 17....
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.... (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; and (c) the activities specified in Schedule I, made or agreed to be made without a consideration. • that it may be noted that clause (d) that included the activities to be treated as supply of goods or supply of services as referred to in Schedule 11 as part of supply has been omitted w.e.f. 1-7-2017 and Section 7(1A) has been introduced which reads as under : "where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated cither as supply of goods or supply of services as referred to in Schedule II" • that from a reading of Section 7 it emerges that GST is leviable on supply of goods and services for con....
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....t. • that the regulatory fees by the Government because of allocation of spectrum by DoT to the appellant under Telegraph Act cannot be considered as an activity under GST Act. It is well settled law that such activity for distribution of a natural resource undertaken by the Government as a custodian of the natural resource and payment received by the Government against the same cannot be treated as consideration. • that from a reading of the above definition of 'supply', it emerges that GST is leviable inter alia on supply of services for consideration in furtherance of business. Business is defined in Section 2(17) to include any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, if it is for a pecuniary benefit or any activity or transaction about or incidental or ancillary to it. The definition of 'businesses further includes any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities. It is submitted that the clause (i) of Section 2(17) of the CGST Act is manifestly arbitrary and beyond Article 246A of the Co....
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....here is no rate prescribed for the services rendered by DoT in respect of the regulatory fees paid by the Appellant. • that with the advent of GST, the applicable rate of GST on provision of services is required to be determined basis of a tariff based classification system, akin to the system which is adopted to goods in erstwhile indirect tax/negative list regime. Such tariff based rate applicable to provision of services was notified by the Government under the Notification No. 11/2017-GST (Central Tax - Rate), dated 28-6-2017. Relevant portion of such notification is reproduced below. Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 Rate of GST on intra-State supply of specific services with Service Code Tariff (SAC) In exercise of the powers conferred by sub-section (1) of section 9, sub-section (1) of section 11, sub-section (5) of section 15 and sub-section (1) of section 16 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby notifies that the central tax, on the intra-State supply of servi....
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.... constitute a recognisably systematic series, not open to use by passengers. 2.5 Provided that credit of input tax charged on goods used in supplying the service has not been taken [Please refer to Explanation no. (iv)] Leasing or rental services, with or (vi) without operator, other than (i), (ii), (iii), (iv) and (v) above. Same rate of union territory tax as applicable on supply of like goods involving transfer of title in goods ..... ..... 4 Explanation. - For the purposes of this notification, (i) (ii) Reference to "Chapter", "Section" or "Heading", wherever they occur, unless the context otherwise requires, shall mean respectively as "Chapter", "Section" and "Heading" in the annexed scheme of classification of services (Annexure). (iii) ...... • that in addition to that, it is pertinent to note that the Annexure to the said rate notification provides an item code wise detailed list for classification of all services, which must mandatorily be referred and relied upon, in terms of Explanation (ii) to the rate notification, for all....
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....ble on supply of like goods involving transfer of title in goods'. However, by granting license under Section 4 of the Telegraph Act, the Government is not leasing or renting any goods. Therefore, this rate is also not applicable to the transaction in question i.e. regulatory fees payment. • that no rate is prescribed for the service codes as contained in the Annexure and as such the charge of tax is not attracted. It is thus submitted that till 31-12-2018 there was no rate prescribed for levy of tax on the License Fees and as such the tax deposited by the Appellant is liable to be refunded. • that the Notification No. 11/2017 till 31-12-2018 provided the rate of tax under Heading 9973 (Leasing or rental services, with or without operator, not covered by other entries under 9973) to be equivalent to the rate of tax on supply of goods. The Notification No. 11/2017 was amended by Notification No. 27/2018-C.T. (Rate), dated 31-12-2018 w.e.f. 1-1-2019 to introduce a residuary entry to specifically provide for rate of 9% for leasing or rental services with or without operator, not covered by other entries under 9973. • that with effect from 1-1-201....
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....ions, it is prudent to say that the tax already paid by the Appellant was inadvertently and during the period of dispute, there was no rate prescribed for such regulatory payments made to Government. Further, the Appellant has already submitted required documents including document (CA Certificate) certifying that the tax burden has not been transferred to any other person and therefore the Appellant will not be unjustly enriched if the tax paid by the Appellant be refunded back. • that the Impugned Order is not a speaking order. The Learned respondent has not given any findings as to why the refund is not in accordance with the legal provisions and procedures of refund related to Sec. 54 of RGST Act, 2017. There as on for treating the refund inadmissible is null and void. • that the Impugned Order has not discussed the submissions made by the appellant with regards to the GST rate for such supply. The Appellant in its reply submission has categorically submitted that there is no GST rate was prescribed for this transaction. In fact the Learned Respondent has inappropriately mentioned that GST is not exempted on leasing or rental services with/without oper....
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....ons' (DoT) is a 'Supply' under GST law or not? (b) whether issuance of license and allotment of spectrum as a 'Regulatory fee' attract any levy of tax as per GST law. (c) whether LF and SUC charges are 'consideration' for supply as per GST law or not? (d) whether License fee and Spectrum usage charges paid by the Appellant are covered in Service Rate Notification and are leviable to tax or not? (e) whether impugned order is non-speaking order? (a) In respect of issue at S. No. (a) I find that :- As per Section 2(83), Section 7 of the CGST Act, 2017, which reads as under :- "(83) - outward supply in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business;" "7. Supply includes - (a) all forms of supply of goods or services or bot....
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....furtherance of the business of the appellant, since purpose for attaining license and for allotment of spectrum is purely to do business with various buyers through telecommunication services. Further, the definition of "business" is prescribed in Section 2(17), which is reproduced below :- "17. Business includes - ........ ........ (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities. In view of the above, it is implied that the rendering of service from the Government (DoT) to business entities, (in the instant case 'the appellant') established from the aforesaid statutory provision. Therefore, the levy of GST is appropriately applicable on the appellant as per sub-section (3) of Section 9 of the CGST Act, 2017 read with Notification No. 13/2017-Central Tax (Rate), dated 28 June, 2017. Further, if there was any doubt regarding 'taxability of service' then the appellant was free to approach the Authority for Advance Ruling (AAR) as per clause (e) of sub-section (2) of Section 97 of CGST Act, 2017, because question of ....
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....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; As per Section 4 of the Indian Telegraph Act, 1885 "power to grant licences" has been specified as :- "4. Exclusive privilege in respect of telegraphs, and power to grant licenses. - (1) Within [India], the Central Government shall have exclusive privilege of establishing, maintaining and working telegraphs : Provided that the Central Government may grant a license, on such conditions and in consideration of such payments as it thinks fit, to any person to establish, maintain or work a telegraph within any part of [India] : [Provided further that the Central Government may, by rules made under this Act and published in the Official Gazette, permit, subject to such restrictions and conditions as it thinks fit, the establishment, maintenance and working - (a) of wireless telegraphs on ships within Indian territor....
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.... the respective authorized service and service area as in Annexure-II. 18.2.2 In case the Licensee obtains access spectrum for operation of any authorized service in a service area, a 'presumptive AGR' for that authorized service and service area shall be arrived at in accordance with the relevant provisions of the Notice Inviting Application (NIA) document of the auction of spectrum or conditions of spectrum allotment/LoI as the case may be. The License Fee based on presumptive AGR shall be applicable from the date of issue of Letter of Intent earmarking such spectrum or the effective date of the license/authorization, whichever is later. The Licensee shall, in such cases, pay the license fee on the presumptive AGR or actual AGR or the minimum license fee referred in condition 18.2.1, whichever is higher. In case, the Licensee obtains spectrum for any service and service area in different bids, the total presumptive AGR shall be the sum of the presumptive AGRs calculated on the basis of the respective Bid amounts as prescribed in the respective NIA or conditions of spectrum allotment/LoI as the case may be. 18.2.3 The Licensor reserves the right to modi....
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....s for the right to intellectual property and similar products 258 997338 Licensing services for right to use other natural resources including telecommunication spectrum Besides above, it is submitted that GST rates are prescribed under the Service Rate Notification at 4 digits level (HSN Heading) whereas service descriptions under the scheme of classification are sub-classified up to 6 digits level (HSN sub-heading). HSN Heading is a cluster which consist of various sub-headings. Hence, sub-headings have a firm nexus with heading of HSN and rate of heading will be fully applied on its all sub-headings. Therefore, Rate of Tax that will be applicable in the instant case will be tantamount to 'same rate of central tax as applicable on supply of like goods involving transfer of title in goods' at the period in question. It is to be noted that there was no explicit exemption extended to licensing services. Further, on examining the Notification No. 27/2018-Central Tax (Rate), dated 31-12-2018 which has been issued on the recommendations of the GST Council to further amend the Notification....
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....same rate of Central Tax as on supply of like goods involving, transfer of title in goods". I have also gone through the minutes of the 31st GST Council Meeting held on 22nd December, 2018, wherein, against the aforesaid proposal, it has been minuted as follows : "Annexure-H 14 41. The Council agreed to the proposals contained in S. Nos. 1 to 19 of Annexure II, recommended by Fitment Committee in its meeting of 14th and 15th December, 2018." From the aforesaid discussion, it may be appreciated that amendment of Entry Sl. No. 17(viii) was approved merely to clarify the GST rate applicable to the right to use Intellectual Property and similar products other than IPR which are covered under Group 99733. There was no such proposal either to enhance or reduce the rate of tax as is discussed in earlier Para, the impugned service received by the Applicant is appropriately covered under description Licensing services for the right to use other natural resources including 'telecommunication spectrum' which is classifiable under SAC 997338 under Group 99733. On a conjoint reading of the Notification No. 27/2018-Central Tax (Rate), dated 31-12-2018, Minutes....