AI Drafter 
TaxTMI 
TaxTMI 
2025 (4) TMI 548
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....hika Vaishnav., Advocate For Sri. A Mahesh Chowdhary., Advocate). For The Respondents: (By Sri. K Hema Kumar, AGA). ORAL ORDER In W.P. No. 2552/2024, petitioner seeks for the following reliefs:- "a) Issue a writ of certiorari or any other writ or direction or order to quash Form GST DRC-01 No. ADCOM/ENF/SZ/ACCT-17/SUM-01/2023-24 dated 30.10.2023 for the period 2019-20 issued by the Respondent No.1 is enclosed as Annexure-A. b) Issue a writ of certiorari or any other writ or direction or order to quash impugned show cause notice dated 30.10.2023 bearing no. ADCOM/ENF/SZ/ACCT-17/SUM-01/2023-24 for the period of 2019-20 issued by the Respondent No.1, enclosed as Annexure-A1 for the reasons stated in the grounds. And c) Grant such other consequential reliefs as this Honourable High Court may think fit including refund of amounts paid with interest, If any and the cost of this writ petition." In W.P. No.17524/2024, petitioner seeks for the following reliefs:- "a) Issue a writ of certiorari or any other writ or direction or order to quash summary of order in Form GST DRC-07 bearing No. ZD290324053076F dated 20/03/2024 issued by the....
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.... (9) of the KGST Act, 2017 r/w CGST Act, 2017, IGST Act, 2017 and GST (Compensation) Act, 2017 vide Annexure-A as being void, illegal, beyond authority and hence unconstitutional. b) Declare the act of Respondent of issuing the impugned order vide Annexure-A is bad in law. c) Any other relief/s as this Hon'ble Court deems fit in the interest of justice and equity." 2. Since common questions of law and fact arise for consideration in all the petitions, they are taken up together and disposed of by this common order. 3. Briefly stated the facts in these petitions are as under:- The petitioners were owners of immovable properties which were acquired by the KIADB for the benefit of the BMRCL for the purpose of construction of Bangalore Metro Rail Project under the provisions contained in Section 28 of the KIAD Act. In pursuance of the same, the BMRCL offered package compensation to the petitioners, who accepted the same and entered into Agreements with the KIADB under Section 29 (2) of the KIAD Act and received compensation towards acquisition of the lands. Subsequently, the respondents -revenue issued the impugned show cause notices calling upon the pe....
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....ntly, the respondents did not have jurisdiction or authority of law to demand payment of GST on solatium from the petitioners who are not liable to pay the same and consequently, the impugned show cause notices and orders deserve to be quashed. In support of his submissions, learned Senior counsel placed reliance on the following judgments: (i) Panna Lal Ghosh vs. Land Acquisition Collector - (2004) 1 SCC 467; (ii) Sunder vs. Union of India - (2001) 7 SCC 211; (iii) Union of India vs. Tarsem Singh -(2019) 9 SCC 304; (iv) CST vs. Bhayana Builders Pvt. Ltd., - 2018 (10) GSTL 118 (SC); (v) Munjaal Manishbhai Bhatt vs. Union of India - 2022 (62) GSTL 262; (vi) GE T & D India Ltd., vs. Deputy Commissioner of Central Excise, Chennai - 2020 (35) GSTL 89 (Mad); (vii) Societe Thermale d'Eugenie-les-Bains vs.Ministere de I'Economie, des Finances et de I'Industries C-277/05; (viii) Jurgen Mohr vs. Finanzamt Bad Segeberg C-215/94; (ix) Landboden Agrardienste GmBH & Co. vs. Finanzamt Calau C-384/95; (x) CST, Chennai vs. Repco Home Finance Ltd., - 2020 (42) GSTL 104 (Tri-LB); (xi) Southeastern Coal....
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.... note that neither the agreements nor other documents entered into between the petitioners and KIADB indicate that the petitioners have been paid solatium towards compensation received by them from the KIADB. In fact, it is only in the package compensation offered by the BMRCL that it chose to split up the compensation offered to the petitioners under various heads by designating solatium under one head amongst several heads of compensation; merely because the package compensation offered by the BMRCL is split into various heads, the compensation offered by the BMRCL under the designated head "Solatium" cannot be construed or treated or understood as solatium in the real sense of the term / expression "solatium" either under the L.A. Act or under RFCTLARR Act; in other words, the package compensation offered by the BMRCL by categorising / describing various amounts out of the total package offered under various heads including solatium was for the limited / restricted purpose of offering package compensation and in reality / substance, the said amount cannot be treated as solatium in true / strict / real sense as wrongly contended by the respondents whose contention cannot be accep....
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....by the respondents cannot be accepted. (iv) It is pertinent to note that as stated supra, the primary / main ground for levying GST on solatium by the respondents is by contending that the act of the petitioners in receiving the solatium component tantamounts to agreeing to an obligation to tolerate the act of acquisition within the meaning of Entry 5 (e) of the CGST / KGST Act; in this regard, it is relevant to state that the entire compensation including the solatium component having been received by the petitioners pursuant to various documents executed by them in favour of the KIADB would clearly not amount to agreeing to an obligation to tolerate acquisition; in fact, rather than tolerating acquisition of their lands, petitioners have undisputedly executed various documents in favour of KIADB relinquishing / transferring / selling their right over the lands after receiving monetary compensation and neither these transactions nor any act, deed or thing done by the petitioners in this regard would amount to agreeing to the obligation to tolerate an act by the petitioners so as to attract Entry 5 (e) of Schedule - II and consequently, on this ground also, the contention ....
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....te a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.] Entry 5 (e) of Schedule II - Activities [or transactions] to be treated as supply of goods or supply of services, reads as under; 5. Supply of services. The following shall be treated as supply of services, namely:- (a) xxx (b) xxx (c) xxx (d) xxx (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and Entry 5(b) of the aforesaid Schedule II, reads as under:- 5. Supply of services. The following shall be treated as supply of services, namely:- (a) renting of immovable property; (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. Explanation.-Fo....
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....pecified in Schedule III shall neither be treated as supply of goods nor supply of services. (xii) Entry 5 of the III Schedule treats sale of land and subject to clause (b) of paragraph 5 of Schedule II, sale of building as neither supply of goods nor as supply of services. (xiii) The nature of GST and its brief history was dealt with by this Court in the case of Tonbo Imaging India Pvt.Ltd vs. Union of India - (2023) 4 Centax 443, wherein it was held as under: 7. Before adverting to the rival contentions and the relevant statutory provisions, a brief overview of the GST scheme is required ; in this context, it is relevant to state that the entire scheme of indirect taxes in India has undergone transformation upon introduction of GST with effect from July 1, 2017. This tax is being levied with concurrent jurisdiction of the Centre and the States on the supply of goods or services. For this purpose, the Constitution of India has been amended vide Constitution (101st Amendment) Act, 2016 with effect from September 16, 2016. The Constitutional Amendment Bill specifically mentions that the objective of introducing GST is to avoid cascading effect of taxes. ....
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.... 12. In the case of All India Federation of Tax Practitioners v. Union of India [2007] 9 VST 126 (SC) ; (2007) 7 SCC 527, the apex court held as under (page 153 in 9 VST) : "6. At this stage, we may refer to the concept of 'Value Added Tax' (VAT), which is a general tax that applies, in principle, to all commercial activities involving production of goods and provision of services. VAT is a consumption tax as it is borne by the consumer. 7. In the light of what is stated above, it is clear that service tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable only on services provided within the country. The service tax is a value added tax." 13. In the case of Union of India v. VKC Footsteps India Pvt. Ltd. [2021] 93GSTR 160 (SC) ; (2022) 2 SCC 603, the apex court held as under (para 23, page 202 in 93 GSTR) : "44. The idea which permeates GST legislation globally is to impose a multi-stage tax under which each point in a supply chain is potentially taxed. Suppliers are entitled to avail c....
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....s other than- (i) zero rated supplies made without payment of tax ; (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council : Provided further that no refund of unutilised input-tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty : Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of Central tax or claims refund of the integrated tax paid on such supplies. (4). .. Rule 89(4) of the CGST Rules, 2017 reads as under : "89. Application for refund of tax, interest, penalty, fees or any other amount.-(1) - (3). .. (4) In the case of zero-rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with the provisions of sub-section (3) of section 16 of the Integrated Goods and S....
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....en that though the definition of services is wide enough to cover anything other than goods, money and securities, it will have to be read in its context and cannot be given such a wide meaning as to include immovable property. (102) "services" means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; (xv) In VKC Footsteps case supra, the Apex Court held that stamp duties and taxes on alcohol for human consumption provide a significant part of revenues of the states and that hence, the Parliament has consciously excluded them from the scope of GST so as to protect the revenues of States i.e., collecting stamp duties on land acquisition or sale or transfer as under: "The jurisprudential basis furnishes a depiction of an ideal State of existence of GST legislation within the purview of a modern economy, as a destination-based tax. But there can be no gain saying the fact that fiscal legislation around the world, India being no excepti....
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.... provided, a restriction of the kind which has been imposed in clause (ii) of the proviso should be enacted, it lies within the realm of policy." (xvi) As held by the Apex Court in the aforesaid judgment, though stamp duty transactions are on the instrument, given the fact that it is a major source of revenue, the GST Council deliberated on subsuming the same under GST so that real estate transactions of sale, acquisition, etc., could also be taxed under the GST regime; however, since the same could not be agreed upon, the GST regime was introduced without subsuming the said transactions and the same was left to the domain of the States. (xvii) The Agenda Item 2A to the GST council minutes before the legislation was introduced would be of some relevance to our discussion; Agenda Item 2A - GST TREATMENT OF LAND & BUILDING (REAL ESTATE) 1.1 Presently, under service tax law, the following services relating to real estate (land and building) are subjected to service tax: - (1) Any lease, tenancy, easement, license to occupy land; (2) Any lease or letting out of the building including a commercial, industrial, or residential complex ....
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....l conveyance of title of land and buildings attracts stamp duty, they cannot be subjected to GST is facile because stamp duty is levied on documents while GST would be levied on the supply of land and buildings, whether as goods or services ("aspect theory" upheld by the Supreme Court in a host of judgements). Renting/leasing are subjected to service tax presently. Documents pertaining to such renting/leasing are subjected to stamp duty. (ii) Entry 49 of the State List reads thus: - "Taxes on lands and buildings" It is felt that this entry is not an impediment to levy of GST on supply of lands and buildings because of the "aspect theory" upheld by the Supreme Court: while the stock of lands and buildings is subjected to tax by the States on the aspect of possessing land and buildings, the supply aspect can be subjected to GST. (iii) Most international jurisdictions subject supply of land and building to GST/VAT (Australia, Canada, New Zealand, Malaysia, Singapore, South Africa, EU & UK). (iv) Presently, because both VAT and service tax are leviable on under construction property and not on flats sold after completion of construction, buy....
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....r any other original works pertaining to the 'In -situ rehabilitation of existing slum dwellers using land as a resource through private participation' under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, only for existing slum dwellers; (c) a civil structure or any other original works pertaining to the Beneficiary-led individual house construction /enhancement under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana; (d) a structure meant for funeral, burial or cremation of deceased; (e) a single residential unit, on land admeasuring not more than 100 square metres; (f) low-cost houses up to carpet area of 60 square meters per house in a housing project approved by competent authority empowered under the 'Scheme of Affordable Housing in Partnership' framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India; (g) low cost houses up to a carpet area of 60 square meters per house in a housing project approved by the competent authority under: 1) the "Affordable Housing in Partnership" component of the Housing for all (Urban) Mission/ Pradhan Mantri Awas Yojana; 2) an....
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....he definition of 'goods' included only movable property. He pointed out that under the Constitution, States had power to charge stamp duty on transactions in land and building and that the rate of this duty ranged between 5% and 6%. He emphasized that under this agenda item, no change in the scheme of stamp duty was proposed as entry 63 of the State List of Schedule 7 of the Constitution empowering States to charge stamp duty remained intact. He pointed out that today, there existed a dichotomy in rates of Service Tax on property depending upon the fact whether it was bought as an under construction property (which attracted Service Tax) or as a ready-built property after obtaining completion certificate (which did not attract Service Tax). He explained that this created a cost arbitrage of about 6% in favour of buying ready-built property. He stated that, in addition, there were embedded taxes as no ITC was available on inputs like steel, cement, floor tiles, sanitary fittings, etc. used in the construction of the property. Shri Arvind Subramanian, Chief Economic Advisor to the Government of India stated that the cost arbitrage between ready-built and under-construction pr....
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....ould further worsen the situation. The Hon'ble Minister from Bihar suggested to form a small committee to further examine this proposal. The Commissioner (GST) CBEC stated that if tax was imposed on re-sale of property, say, a hotel, this would help in claiming ITC and lowering the cost of business for the buyer of the hotel. He also stated that charging GST on re-sale of property would also capture the value addition over a period of time. The Hon'ble Deputy Chief Minister of Gujarat pointed out that there was stamp duty on re-sale. The Hon'ble Minister from West Bengal stated that he supported the views expressed by the Hon'ble Deputy Chief Minister of Gujarat and the Hon'ble Ministers from Uttar Pradesh and Telangana. He observed that all fittings and raw materials used in buildings would largely be tax-paid and this was presently an additional tax gain for the State as no ITC was available on them. He expressed that the proportion of evaded inputs like steel, cement, etc. might not be very high. He further stated that there were much larger transactions in smaller and medium houses and these should not be taxed in addition to the levy of stamp duty.....
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....uncil agreed that this issue could be revisited after a year or so of the implementation of GST. 11. In view of the discussion above for agenda item 2A, the Council decided not to introduce GST on land and building at this stage and agreed that this issue could be revisited after a year or so of the implementation of GST. (xix) Having regard to the judgment of the Apex Court in VKC Footsteps case supra and the discussion of the GST Council, it can be concluded that transactions such as, acquisition and transfer of immovable property were not sought to be subsumed under the GST regime. (xx) At this stage, it would be relevant to understand that immovable property in its traditional sense always meant the tangible property but as there were developments and changes in the practices of society, it came to be recognized as a bundle of rights in immovable property. As rightly contended by the learned Senior counsel, rights in immovable property is different from the usage to which it could be put and the latter may or may not amount to services depending on the statute but the former would certainly not be a service in the light of the discussions held above. ....
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....e of U.P., AIR (1960) SC 1563 p. 1568, this Court held that the word "land" is wide enough to include all lands whether agricultural or non-agricultural land. In State of U.P. v. Sarju Devi, [1978] 1 SCF 18, this court held that the definition of the land in Section 3 (14) shows that it is not necessary for the land to fall within its purview that it must be actually under cultivation or occupied for purposes connected with agriculture. The requirement is amply satisfied even if the land is either held or occupied for the purposes connected with agriculture. The word "held" only means possession of legal title and does not require actual connected occupation. In State of Gujarat v. Kamla Ben Jivan Bhai, [1979] Supp. 2 SCC 440, this Court held that actual cultivation is not necessary to constitute an estate and the right to collect grass is a right annexed to land which was held to be an estate and abolition of the right to pay annual amount was an agrarian reform. In Sri Ram Ram Narain Medhi v. State of Bombay, [1959] Supp. 1 SCR 489, this Court held that the Code is a law relating to land tenures. The right in relation to an estate used in Article 31A has been noted in a very com-....
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....y that may be argued to have attached itself to judgments, decrees, sentences or orders passed or made by certain District Judges appointed before 1966, otherwise than in accordance with the provision of Article 233 and Article 235 of the Constitution. The twentieth amendment was the consequence of the decision of the Supreme Court in Chandra Mohan v. State of U.P. [AIR 1966 SC 1987 : (1967) 1 SCR 77 : (1967) 1 LLJ 412] that appointments of District Judges made otherwise than in accordance with the provisions of Articles 233 and 235 were invalid. As such appointments had been made in many States, in order to pre-empt mushroom litigation springing up all over the country, it was apparently thought desirable that the precise position should be stated by the constituent body by amending the Constitution. Shri Phadke, learned Counsel for the appellants, argued that the constituent body could not be imputed with the intention of making superfluous amendments to the Constitution. Shri Phadke invited us to say that it was a necessary inference from the twentieth amendment of the Constitution that, but for the amendment, the judgments, decrees etc. of the District Judges appointed otherwis....
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....tandstill. It is, therefore, urgently necessary to validate the judgments, decrees, orders, and sentences passed or made heretofore by all such District Judges in those States " (xxiv) In the case of Chotanagpur Banking Association Ltd vs. Govt. of India - 1957 SCC Online Patna 81, the Patna High Court held as under: 46. The use of the word "absolutely" in Sections 16 and 17 of the Land Acquisition Act, and the absence of this word in R. 75A(3) will not make any difference, in that, the word "absolutely" only makes the intention of the Legislature more emphatic, and nothing more. It has been used only as abundans cautela as an abundant caution, in that Abundans Cautela Non Nocet, that is, excess of caution does no harm. The words "the property shall vest in Government free from any mortgage, pledge, lien, or other similar encumbrance" alone are clear manifestations of the intention of the Legislature that the vesting of the property is not for any limited purpose or limited duration. (xxv) It is therefore clear that even if Entry 5 of Schedule III were not there, sale of land and building cannot be brought under GST as they are covered under the State Lis....
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....is shop against a monthly payment by the hawker, or an RWA tolerating the use of loudspeakers for early morning prayers by a school located in the colony subject to the school paying an agreed sum to the RWA as compensation (iii) Agreeing to the obligation to do an act - This would include the case where an industrial unit agrees to install equipment for zero emission/discharge at the behest of the RWA of a neighbouring residential complex against a consideration paid by such RWA, even though the emission/discharge from the industrial unit was within permissible limits and there was no legal obligation upon the individual unit to do so. (xxviii) From the above, it becomes clear that the said entry 5 (e) of Schedule III would be attracted only if it can meet the following criteria: (a) There should be two parties. (b) They should agree on a subject matter. (c) The subject matter should be an obligation. (d) The said obligation should be to tolerate an act, or to do an act or to refrain from an act; (e) The said obligation should be compensated with a consideration which can be linked to such obligations. (xxix) ....
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.... there is an express or implied promise by the recipient of money to agree to do or abstain from doing something in return for the money paid to him, it cannot be assumed that such payment was for doing an act or for refraining from an act or for tolerating an act or situation. Payments such as liquidated damages for breach of contract, penalties under the mining act for excess stock found with the mining company, forfeiture of salary or payment of amount as per the employment bond for leaving the employment before the minimum agreed period, penalty for cheque dishonour etc. are not a consideration for tolerating an act or situation. They are rather amounts recovered for not tolerating an act or situation and to deter such acts; such amounts are for preventing breach of contract or non-performance and are thus mere 'events' in a contract. Further, such amounts do not constitute payment (or consideration) for tolerating an act, because there cannot be any contract: (a) for breach thereof, or (b) for holding more stock than permitted under the mining contract, or (c) for leaving the employment before the agreed minimum period or (d) for doing something leading to the dishonour of a c....
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....is willing to part with the land. The owner is free to settle terms of transfer and choose the buyer as also to appoint the point of time when he would be receiving consideration and parting with his title and possession over the land. But in the compulsory acquisition the landowner is deprived of the right and opportunity to negotiate and bargain for the sale price. It depends on what the Collector or the court fixes as per the provisions of the Act. The solatium envisaged in sub-section (2) "in consideration of the compulsory nature of the acquisition" is thus not the same as damages on account of the disinclination to part with the land acquired." (emphasis supplied) Thus, the solatium that is paid to a landowner is on account of the fact that a landowner, who may not be willing to part with his land, has now to do so, and that too at a value fixed legislatively and not through negotiation, by which, arguably, such landowner would get the best price for the property to be sold. Once this is understood in its correct perspective, it is clear that "solatium" is part and parcel of compensation that is payable for compulsory acquisition of land. (xxxiii) S....
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....rty) to the first party for such (a) refraining or (b) tolerating or (c) doing. Such contractual arrangement must be an independent arrangement in its own right. Such arrangement or agreement can take the form of an independent stand-alone contract or may form part of another contract. Thus, a person (the first person) can be said to be making a supply by way of refraining from doing something or tolerating some act or situation to another person (the second person) if the first person was under an obligation to do so and then performed accordingly. (xxxv) So also, the CBIC Circular No. 214/1/2023-ST dated 28.02.2023 reads as under: Circular No. 214/1/2023-Service Tax F.NO. CBIC-110267/14/2023-CX-VIII SECTION-CBEC Government of India Ministry of Finance Department of Revenue Central Board of Indirect Tax & Customs (CX & ST Wing) New Delhi, dated: 28th February, 2023 To, 1. The Principal Chief Commissioner / Chief Commissioner, CGST & CX (All) 2. The Principal Director General/ Director General (All) 3. The Principal Commissioner / Commissioner, CGST & CX (All) 4. [email protected] for uploadin....
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....r abstain from doing something and the other agrees to pay consideration to the first party for doing or abstaining from such an act. Such contractual arrangement must be an independent arrangement in its own right. There must be a necessary and sufficient nexus between the supply (i.e. agreement to do or to abstain from doing something) and the consideration. 5. The issue also came up in the CESTAT in Appeal No. ST/ 50080 of 2019 in the case of M/s Dy. GM (Finance) Bharat Heavy Electricals Ltd in which the hon'ble Tribunal relied on the judgment of divisional bench in case of M/s South Eastern Coal Fields Ltd Vs. CCE Raipur {2021(55) G.S.T.L 549(Tri-Del)}. Board has decided not to file appeal against the CESTAT order ST/A/50879/2022-CU[DB] dated 20.09.2022 in this case and also against Order A/85713/2022 dated 12.8.2022 in case of M/s Western Coalfields Ltd. Further, Board has decided not to pursue the Civil Appeals filed before the Apex Court in M/s South Eastern Coalfields Ltd. supra (CA No. 2372/2021), M/s Paradip Port Trust (Dy. No. 24419/2022 dated 08-08-2022), and M/s Neyveli Lignite Corporation Ltd (CA No. 0051-0053/2022) on this ground. 6. In view of abov....
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....t or tolerate an act and on this score also, the contention of the respondents cannot be accepted and solatium would not be exigible/amenable to levy of GST. (xxxvii) A perusal of the various documents executed between the petitioners and the KIADB viz., agreements, receipts, affidavits, indemnity bonds etc., will clearly indicate that the same puts certain conditions viz., the compensation including solatium was paid by way of full and final settlement, petitioners shall not be entitled to any enhancement of compensation etc.,; in this context, it is significant to note that the terms and conditions of the agreements, documents executed between the petitioners and KIADB are merely conditions to a contract and do not reflect an obligation coupled with consideration and the same cannot be construed or treated as an obligation to do an act, or an obligation to tolerate an act or an obligation to refrain from an act so as to attract Entry 5 (e) of Schedule II of the CGST/KGST Act. (xxxviii) It is relevant to state that "conditions to a contract" are different from "consideration to a contract"; so also, "conditions" contained in the contract cannot be seen in the lig....
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....y the service provider. In fact, it has no nexus whatsoever with the taxable services for which value is sought to be determined." (emphasis supplied) 24. The aforesaid view was reiterated by the Supreme Court in Union of India v. Intercontinental Consultants and Technocrafts [2018 (10) G.S.T.L. 401 (S.C.)] and it was observed : "23. Obviously, this Section refers to service tax, i.e., in respect of those services which are taxable and specifically referred to in various sub-clauses of Section 65. Further, it also specifically mentions that the service tax will be @ 12% of the "value of taxable services". Thus, service tax is reference to the value of service. As a necessary corollary, it is the value of the services which are actually rendered, the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupon. 24. In this hue, the expression "such" occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing "such" taxable services. As a fortiori, any other amount which....
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....or preliminary hearing, in essence, was whether a sum paid as a deposit by a client to a hotelier, where the client exercises the cancellation option available to him and that sum is retained by the hotelier, can be regarded as consideration for the supply of a reservation service, which is subject to VAT, or as a fixed compensation for cancellation, which is not subject to VAT. The Court found that there has to be a direct link between the service rendered and the consideration received. The same paid must constitute a genuine consideration for an identifiable service supplied in the context of a legal relationship for which performance is reciprocal. It is in this context that Court observed : "26. Since the obligation to make a reservation arises from the contract for accommodation itself and not from the payment of a deposit, there is no direct connection between the service rendered and the consideration received (Apple and Pear Development Council, paragraphs 11 and 12; Tolsma, paragraph 13; and Kennemer Golf, paragraph 39). The fact that the amount of the deposit is applied towards the price of the reserved room, if the client takes up occupancy, confirms that the d....
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....rvice recipient may be required to fulfil certain conditions contained in the contract but that would not necessarily mean that this value would form part of the value of taxable services that are provided. 28. It is also necessary to remind ourselves that the word "include" is generally used in interpretation clauses to enlarge the meaning of the words or phrases occurring in the body of the statute and when it is so used, such words or phrases must be construed to comprehend, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. This is what was stated in Dilworth v. Commissioner of Stamps [1899 AC 99]. 29. Justice G.P. Singh in "Principles of Statutory Interpretation" (Thirteenth Edition) has also remarked that where a word is defined to "include" such and such, the definition is prima facie not exhaustive and so the natural meaning of the word cannot be narrowed down by the "includes" part. 30. In this connection it would also be pertinent to refer to TRU Circular dated 20 June, 2012 issued by the Central Board of Excise and Customs as an Educatio....
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....anies and the customers is repayment of the loan amount over an agreed period. The banks and non-banking financial companies would not desire premature termination of the loan advanced by them as it is in their interest that the loan runs the entire agreed tenure for the banks thrive on interest earned from lending activities. As premature termination of a loan results in loss of future interest income, the banks charge an amount for foreclosure of loan to compensate for the loss in interest income. It is the customer who has taken the loan, who moves for foreclosure of the loan by making the payment of the loan amount before the stipulated period and thereby breaching the promise to service the loan for the agreed period of time. This results in a unilateral act of the borrower in repudiating the contract and consequently breach of one of the essential terms of the loan agreement. A breach of contract may give rise to a claim for damages. 33. Breach of contract has been defined in Black's Law Dictionary (Eighth Edition) as follows : "Breach of contract. Violation of a contractual obligation by failing to perform one's own promise, by repudiating it, or by interfe....
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....es in these cases is to protect the injured party's expectation interest. Sometimes it does so directly, by actually ordering the party in breach to perform his part of the contract. Sometimes it does so indirectly by ordering him to pay the injured party damages for loss of his bargain. The result of awarding damages on this basis is to compensate the injured party, not because he is worse off than he was before the contract was made, but because the other party has failed to make him better off. The law of contract takes this position in response to the needs of commercial certainty. It is probably going too far to say that business could not be carried on at all if the law did not protect the injured party's expectation interest. Some industries (such as the credit betting industry) are carried on without this, or indeed any other legally recognised, sanction. But in relation to other sphere of commercial activity, such as share and commodity markets and the insurance industry (to take a few random examples) the protection of expectations is of crucial importance. In these cases, that protection promotes stability and furthers one of the central purposes of the law of contract i....
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....d in the loan agreements and other commercial contracts so as to ensure certainty in dealings and also serve as a deterrent measure. This aspect of damage is known as liquidated damages. 38. Liquidated damages have been dealt with by Pollock & Mulla in the book titled "The Indian Contract and Specific Relief Acts" (Fourteenth Edition) and the relevant portion is reproduced below : "Liquidated Damages 'Liquidated damages' means that it shall be taken as the sum which the parties have by the contract assessed as damages to be paid whatever may be the actual damage. A fixed figure of damages, which is not assessed for all circumstances, but is graduated to correspond with passage of time between the making of contract and of its breach, is a proper estimate of the damages to be anticipated from the breach, and is liquidated damages." 39. It would thus be seen that clauses relating to damages for foreclosure of loan are usually incorporated in contracts as an agreed measure of damages which can be enforced in the event there is a breach of contract with a view to bring about certainty in contracts. These clauses do not and cannot give rise to any "co....