TaxTMI 
TaxTMI 
TaxTMI 
2025 (1) TMI 295
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.... writ of certiorari or a writ or order in the nature of certiorari to call for and examine the records of the proceedings before the Respondent No. 1, and quash and set aside the Impugned Notice dated 11.08.2022 issued by the Respondent No. 1; (c) issue a writ of mandamus or a writ in the nature of mandamus directing the Respondent No. 1 and 2 to - (i) withdraw the Impugned Notice dated 11.08.2022, as being issued without jurisdiction, without authority of law, illegal, unsustainable and void ab initio; and (ii) not act on or In consequence of the Impugned Notice dated 11.08.2022. (d) issue a writ of Prohibition or a writ in the nature of prohibition directing Respondent No. 1 & 2 not to initiate or pursue any proceedings in consequence of the Impugned Notice dated 11.08.2022. (e) Pending the hearing and final disposal of this Petition - (i) stay the operation of the Impugned Notice dated 11.08.2022 issued by the Respondent No.1; (ii) direct the Respondents not to act or in consequence of the Impugned Notice dated 11.08.2022; and (iii) (iii) direct the Respondents not to take any coercive steps on or in consequence of the Impugned Notice dated 11.08.2022. (f) gran....
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....ervice Tax was leviable. To understand these terms, we shall expound the commercial meaning thereof: ► Under the Indian Contract Act, the word 'damages' is understood as compensation under a contract that is paid by the defaulting party to the non-defaulting party. This compensation is awarded to the non-defaulting party to compensate for actionable wrongs of the former. Under a contract, the compensation awarded is categorized as liquidated or unliquidated damages awarded as per the terms governing the contract. ► Under a contract, the parties may agree to pay a certain sum upon breach of the terms of the contract, which scenario appears to be governed by Section 74 of the lndian Contract Act, 1872, When the agreement between the parties stipulates the sum payable for non-performance, the damages hence paid are known as 'liquidated damages'. Unliquidatcd damages are awarded by the courts or arbitral tribunals after assessing the loss or injury caused to the party suffering from such breach of contract and are apparently governed by Section 73 of the Indian Contract Act, 1872. Therefore, despite the sub-Article 1.2 (o) of the Concession Contract (r....
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....FA, 1994 w.e.f. 01.07.2012 in the hands of M/s. DAMEPL (in the capacity of the Concessionaire entitled to operate the metro line in terms of sub-Article 3.1 and Article 6 of the Concession Contract) inasmuch as these latter services were covered under Section 66D(o)(iii) ibid under "negative list of services' not chargeable to Service Tax. The said contention appears unacceptable in that the consideration that would have accrued from the passengers for the services of transportation provided to them by M/s. DAMEPL is not being paid for in this case by M/s. DMRC under the Termination Payment. By no stretch of imagination, the purpose of the termination payment could be equated to the service of transportation of passengers and from the factual matrix, it appears that the said payment is consideration towards 'the obligation of M/s. DAMEPL to tolerate the breach of contract by DMRC' by DMRC's not achieving the agreed-upon efficiency bar in their works and in effect, causing to deny the opportunity to M/s. DAMEPL to successfully operate the metro rail for the stipulated period under reasonable safety parameters. In the words from 'the Notice of Material Breach'....
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....which the Termination payment was accrued to M/s. DAMEPL or (ii) Section 66D(o) of the FA, l994 w.e.f.01.07.2012 insofar as the future revenue from passenger transportation by metro rail was to accrue to M/s. DAMEPL. As discussed hereinabove, the contentions of M/s. DAMEPL as to these exemptions appear wholly unsustainable inasmuch the 'termination payment' entails an entirely different cause of action and an altogether different set of 'service' which is defined under Section 66E(e) of the FA, 1994. It appears from the given set of circumstances that M/s. DAMEPL had agreed to the obligation to tolerate the termination of the contract compelled by the breach in performance or the Material adverse effect caused by DMRC, in return for the compensation of an amount of Rs.2782.33 crores. 4.8 It may not be out of place to discuss the Circular No.178/10/2022-GST, dated 03.08.2022 issued by the CBIC on the subject matter of "GST Applicability on liquidated damages, compensation and penalty arising out of breach of contract or other provisions of law". At the outset, it may be cautioned that the said Circular clarifies the scope of the entry at para 5(e) of Schedule II of....
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.... case, sub-Article 29.5 dealing with 'Termination for DMRC event of default' appears to be a separate contract unto itself' though the determination of 'the fact of default' and the modality of 'termination payment' may have been made dependent on terms specified elsewhere in that contract. It thus appears that the 'termination payment' does not merely restitute M/s. DAMEPL for the capital investments in the project but also represents consideration for 'toleration of the termination of the contract arising out of the DMRC default' itself and thus, is consideration for the service provided by M/s. DAMEPL to DMRC. The Concession Contract is entered into for execution while the part thereof as relates to 'Termination' is a contract that provides for the refraining, tolerating or doing an act by either M/s. DAMEPL or DMRC. The same would have been the case, in case, if hypothetically, DMRC were to be awarded with a Termination Payment on account of default by M/s. DAMEPL in terms of the Article 29 on 'Termination'. The said Circular clearly spells that taxability in each case would depend on the facts of that case. It there....
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....n of provision of the service." In the instant case, the provision of the service in question by M/s. DAMEPL appears to be completed on the date of the arbitral award i.e.,11.05.2017, which is when the service of 'agreeing to tolerate an act' and the consideration accrued from DMRC to M/s. DAMEPL on that account was recognized. 4.11 The provisions of Section 142(11)(b) of the CGST Act, 2017, read thus: "(b) notwithstanding anything contained in section 13, no tax shall be payable on services under this Act to the extent the tax was leviable on the said services under Chapter V of the Finance Act, 1994 (32 of 1994);" Inasmuch as it appears that the provision of the service of 'agreeing to the obligation to tolerate an act ... ' by M/s, DAMEPL was completed before the coming into force of the GST law w.e.f.01.07.2017; the amounts received on or after 01.07.2017 would not attract the levy of GST in keeping with the provisions of Section 142(11)(6) of the CGST Act, 2017 as the said amounts have been subjected to levy of Service Tax under the FA, 1994. ----To sum up, despite the contentions of the assessee to the contrary, the aforesaid activities of the M/s. D....
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....rged" for the taxable service in question." xxxx xxxx 12. Now, therefore, M/s. Delhi Airport Metro Express P. Ltd., SPV of Reliance Infrastructure Limited, situated at Reliance Centre, Ground Floor, 19 Walchand Hirachand Marg, Ballard Estate, Mumbai, Maharashtra-400001, are hereby required to show cause, within 30 days of receipt of this notice, to the Principal Commissioner, Central Tax & Cx,, Delhi West COST & CX Commissionerate, having office at 4th & 5th Floor, ElL Annexe Building, Plot 2B, Bhikaji Cama Place, New Delhi-110066, as to why: (i) The services provided by them, as discussed at Paragraph 4 above, should not be classified as declared service under the category of "agreeing to the obligation to tolerate an act" as defined under Section 66E(e) of the FA, 1994 read with Section 65B(44) and Section 65B(51) of the FA, 1994 as amended w.e.f. 01,07,2012; (ii) Service Tax amounting to Rs. 4,17,34,98,483/- [Basic ST: Rs. 3,89,52,65,251/-, SBC: Rs. 13,91,16,616/-, KKC: Rs. 13,91,16,616/-] (Rupees Four hundred Seventeen crores Thirty Four Lakhs Ninety Eight thousand Four hundred Eighty Three Only) (as per Paragraph 7 above) under 'the declared service' viz. '....
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....d by a Division Bench of this Court in DMRC vs. Delhi Airport Metro Express Pvt. Ltd. 2019 SCC OnLine Del 6562 6. A Special Leave Petition against that judgment came to be preferred before the Supreme Court wherein two learned Judges of the Supreme Court allowed that appeal in Delhi Airport Metro Express Pvt. Ltd. vs. DMRC (2022) 1 SCC 131 and as a consequence of which the Award came to be restored. 7. The aforesaid decision of the Supreme Court has ultimately come to be set aside in terms of the judgment rendered on 10 April 2024 on a curative petition in DMRC vs. Delhi Airport Metro Express Pvt. Ltd. (2024) 6 SCC 357 We deem it appropriate to extract the following paragraphs from the decision rendered in that set of curative petitions: "42. While adjudicating the merits of a special leave petition and exercising its power under Article 136, this Court must interfere sparingly and only when exceptional circumstances exist, justifying the exercise of this Court's discretion. [Chandi Prasad Chokhani v. State of Bihar, 1961 SCC OnLine SC 165 : AIR 1961 SC 1708; Pritam Singh v. State, 1950 SCC 189.] The Court must apply settled principles of judicial review such as whether the....
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....) 2 SCC (Civ) 204] and Ssangyong [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] . The award overlooked the express terms of Clause 29.5.1(i) which stipulated that if "effective steps" were taken during the cure period by DMRC, the contractual power to terminate could not be exercised. This Court incorrectly considered CMRS certificate to be irrelevant to the validity of the termination. xxxx xxxx 66. In essence, therefore the award is unreasoned on the above important aspects. It overlooks vital evidence in the form of the joint application of the contesting parties to CMRS and CMRS certificate. The Arbitral Tribunal ignored the specific terms of the termination clause. It reached a conclusion which is not possible for any reasonable body of persons to arrive at. The Arbitral Tribunal erroneously rejected CMRS sanction as irrelevant. The award bypassed the material on record and failed to reconcile inconsistencies between the factual averments made in the cure notice, which formed the basis of termination on the one hand and the evidence of the successful running of the line on the other. The Division Bench correctly held [DMRC v. ....