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.... 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 dated 23-12-2019 has submitted their reply and contended therein as under :- * that Se....
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....d 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 November, 2017. * that it is pertinent to note that GST Act during those days were at nascent stage and the law, provisions thereof were subject to interpretation and ....
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.... 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 consideration in furtherance of business. What constitutes business in terms of the GST regime is defined in Section 2(17) of the CGST Act which reads as under : (17) "business" includes - (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is fo....
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....he 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 Constitution of India as it includes activities undertaken by the Central Government, State Government or any local authority within the meaning of business, thereby, deeming the functions of the Government as supply being exigible to tax. It is submitted that the functions of a Government being constitutional and statutory in nature cannot be deemed to be business. The allocation of spectrum by the DoT is not akin to providing any goods or services and no business is....
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.... 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 services of description as specified in column (3) of the Table below, falling under Chapter, Section or Heading of scheme of classification of services as specified in column (2), shall be levied at the rate as specified in the corresponding entry in column (4), subject to the conditions as specified in the corresponding entry in column (5) of the said Table Table Sl. No. Chapter, Section or Heading Description of Service Rate (per cent.) Condition (1) (2) (3) (4) (5) 17 Heading 9973 (Leasing or rental services, w....
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....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 issues arising under such notification in relation to the appropriate classification of such services which is necessarily required for determining the applicable tariff on those services. * that the tariff list provided under the rate notification is divided into various categories depending on the nature of services. Also, the broad category are further divided into various sub-categories which deal with carious elements of such broad category. Therefore, for classifying a particular service, it has to be necessarily be determined whether the said service is classifiable under one of the broad category and then only, further sub-classification be resorted to....
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.... 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 1-1-2019, this newly introduced residuary entry under Heading 9973 - 'leasing or rental services, with or without operator' would also apply in context of immovable property/goods. The term lease or rent has not been defined anywhere in GST Act. We may refer to the Transfer of Property Act, 1882 to understand these terminology. The term "leasing" is defined in the Transfer of Property Act, 1882 to define that lease is a transfer of right of an immovable property to enjoy such property and whereas the term rent is also associated with leasing service and in turn is associated with immovable property only. * that in common parlance renting service never associated with intangible property and therefore the terms 'leasing' or 'rental' do not cover grant of license under Section 4 of ....
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....ubmissions 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 operator as per Notification No. 11/2017-C.T. (Rate), dated 28 June, 2017. * that as mentioned above, the said notification prescribes the rate of GST on provision of services and is nowhere related to granting of exemption from GST. The finding given by the respondent treating the refund as inadmissible is null and void in law. However, the Learned Respondent have not paid heed to such submission of the Appellant and gave such a finding which does not hold legally correct and the very fundamental and elementary understanding of the law is violated. This makes the impugned order a non-speaking order wherein no explicit or valid reason or finding has been given to reject the refund claim. Further the appellant has cited various case laws in their defence are as under :- State of Andhra Pradesh v. Y. Prabhakara Reddy, (1987) 2 SCC 136 CCE v. WIMC....
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....ence, 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 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 20-5-2012 (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 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" CBI&C has issued a Circular No. 192/02/2016-Service Tax, dated 13-4-2016 wherein at S. No.....
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....ee 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 law about determination of the liability to pay tax on any service may be sought for advance ruling to AAR as per GST law, but the same was not opted by the appellant. (b) In respect of issue at S. No. (b) I find that : With regard the contention of the appellant regarding License Fee (LF) and Spectrum User Charges (SUC) is a kind of regulatory fee and Government parting such fee by exercising sovereign functions, in this context, it is submitted that the appellant is mis-interpreted that fee of LF and SUC, which is a percentage share of revenue (AGR) is a fluctuating charges in the instant case. Therefore, the permission of granting of license by DoT and allotment of spectrum on the basis of SUC for business activities is directly nexed with their revenue, hence, it cannot be held that these charges are regulatory fee. Further, as per Section 4 of the Telegraph Act "The Government merely grants/delegat....
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....; of wireless telegraphs on ships within Indian territorial waters [and on aircraft within or above [India], or Indian territorial waters], and (b) of telegraphs other than wireless telegraphs within any part of [India]. [Explanation. - The payments made for the grant of a licence under this sub-section shall include such sum attributable to the Universal Service Obligation as may be determined by the Central Government after considering the recommendation made in this behalf by the Telecom Regulatory Authority of India established under sub-section (1) of section 3 of the Telecom Regulatory Authority of India Act, 1997.] (2) The Central Government may by notification in the Official Gazette, delegate to the telegraph authority all or any of it its powers under the first proviso to sub-section (1). Definition of LF & SUC 8. Further, the telecom sector was liberalised under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee. To provide belief from the steep fixed license fee, the Government in 1999 gave an ....
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.... above mentioned License Fee as percentage of AGR any time during the currency of this agreement. 18.3 Spectrum Related Charges : In case the Licensee obtains spectrum, the licensee shall pay spectrum related charges, including payment for allotment and use of spectrum, as per provisions specified in the relevant NIA document of the auction of spectrum or conditions of spectrum allotment/LoI/directions/instructions of the Licensor/WPC Wing in this regard. The spectrum related charges shall be payable in addition to the License Fee. 20. Schedule of payment of ANNUAL LICENSE FEE and other dues : 20.1 License Fee shall be payable in four quarterly installments during each financial year (FY) commencing 1st of April. 9. In view of the above, it is concluded that consideration 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, 2017 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....
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....decisions of the 31st GST Council meeting held on 22-12-2018. In this connection, for proper understanding of the issue, I have gone through the Agenda for 31st GST Council Meeting proposals recommended by Fitment Committee and Minutes of the Meeting of the Council available in GST Council website. Sl. No '18' of Annexure-II of Agenda Item 6, which is relevant to the issue is produced below : S. No. Proposal Comments 18 To clarify GST rate applicable on the right use Intellectual Property and similar products other than IPR Recommendation : It is proposed that to bring clarity, the residuary rate entry for Heading 9973 in Notification No. 11/2017-C.T. (Rate), dated 28-8-2017 may be split in two parts as follows. Existing Proposed Description of services Rate % Description of services Rate % Sl. 17 Heading 9973 (Leasing or rental services, with or without operator) Leasing or rental services, with or (viii) without operator, other than (i), (ii), (iii), (iv), (v), (vi) and (vii) above Same rate of Central Tax as on supply of like goods involving Leasing or renting of (viia) goods Same rate of Central ....
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....intended interpretations. It is well settled law that the legislative intent cannot be defeated by adopting interpretations which is clearly against such interpretations. I am also inclined to rely on the decision of the Hon'ble Supreme Court of India in the case of W.P.I.L. Ltd. v. Commissioner of Central Excise, Meerut, U.P. [2005 (181) E.L.T. 359 (S.C.)] which is also applicable to the present case, wherein a 31 Judges Bench of the Hon'ble Supreme Court while interpreting applicability of exemption notifications have observed in Para 15 as follows : "15. The Learned Counsel for the appellant is also right in relying upon a decision of this Court in Collector of Central Excise. Shillong v. Wood Craft Products Ltd. [(1995) 3 SCC 454]. In that case, this Court held that a Clarificatory notification would take effect retrospectively Such a notification merely clarified the position and makes explicit what was implicit. Clarificatory notifications have been issued to end the dispute between the parties." From the above discussion, the fact to be appreciated is that the rate amendments carried out vide Notification No. ....