TaxTMI 
TaxTMI 
2026 (6) TMI 253
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.... controls the finance and execution of projects, to augment the existing Highway of approximately 61.98 KM on the Jorabat-Shillong Section of the National Highway No. 40 in the State of Assam and Meghalaya by four laning through a Design, Finance, Operate and Transfer pattern on BOT Annuity basis, and accordingly on 08.12.2008, NHAI invited proposals from bidders. Thereafter, a proposal of a Consortium which comprised of IL&FS Transportation Networks Limited and Ramky Infrastructure, was accepted and a Letter of Acceptance dated 20.05.2010, was issued to the said Consortium. The Consortium then promoted and incorporated the petitioner entity as a Limited Liability Company under the Companies Act, 1956, which entered into a Concession Agreement dated 16.07.2010, for execution of the Highway Project on BOT (Annuity) basis. Vide the Concession Agreement, the petitioner was granted and authorized the right to construct, operate, maintain and perform all other obligations for a period of 20 years and as per the Concession Agreement, the petitioner was entitled to annuity for discharging the obligations as per the Concession Agreement after the commercial operation date. 2. In this co....
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....at Entry 23A of the exemption notification does not exempt GST on annuity paid for construction of roads, which is the basis for issuance of the impugned Show Cause Notice has also been assailed on the ground of being without jurisdiction and therefore illegal. 6. And lastly, a challenge has also been made to notification No. 14/2017 dated 01.07.2017 read with corrigendum dated 29.07.2019 issued by the respondent No. 1, to the extent of vesting the respondent No. 4 as Central Tax Officer with the powers under the CGST Act as being ultra vires Section 2(91) read with Sections 3 & 5 of CGST Act and circular No. 3/3/2017 dated 05.07.2017 issued by the respondent No. 3, to the extent of investing the respondent No. 5 with the power of 'Proper Officer' to exercise powers under Section 74 of the CGST Act as being ultra vires Section 291. This it is alleged has rendered the impugned Show Cause Notice as being without jurisdiction or authority of law. Hence, the petition. 7. Mr. S. Ghosh, learned Senior counsel assisted by Ms. A. Agarwal learned counsel for the petitioner in his submissions has referred to the Concession agreement, whereby the petitioner is entitled to annuity for di....
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....n 13.09.2023 on the allegation that the petitioner failed to pay GST on annuity payments received for road construction under the Jorabat-Shillong Expressway project. It has been submitted that the authorities classified the activity as works contract services (SAC 9954) taxable at 12-18% instead of exempt road access services (SAC 9967) under Entry 23A and a tax demand of Rs. 130.57 Crores plus interest and penalty was raised, along with allegations of suppression and mis-statement. A challenge to the show cause notice and a GST Circular dated 17.06.2021 he submits, was then made before this Court which was dismissed as being premature, and thereafter the matter was taken up by way of an SLP before the Supreme Court, which by order dated 05.02.2024, disposed the same by extending the time of reply, with directions for proper consideration of the submissions of the petitioner by the GST authorities. 11. Thereafter he submits, after hearing the petitioner, the respondents passed an order on 18.04.2024, confirming a reduced demand of Rs. 112.39 Crores with interest and penalty while holding that construction services (SAC 9954) are taxable, even if paid via annuity and the prayer ....
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....as been levied including components of interest on term deposits, which is fully exempt. The entire nature of the Concession Agreement he submits has been mis-interpreted, inasmuch as, the authorities mis-construed the true nature of the BOT annuity model, by ignoring the fact that the petitioner provided integrated service of road development and access and that the right to collect toll being with NHAI, does not negate exemption. It has also been argued that the period prior to introduction of GST i.e. pre-July 2017 period, cannot be subjected to GST, and therefore the demand to that extent is illegal and liable to be quashed. In summing up of his preliminary arguments, the learned Senior counsel has submitted that the case hinges on a pure question of law i.e. whether annuity receipts under BOT road projects are exempt and has emphasized that the petitioner's position, is supported by statutory notifications, judicial precedent and a settled principle on interpretation of exemptions and circulars. 13. The other submissions of the learned Senior counsel on the points of availability of alternate remedy, interpretation of the GST exemption notification, validity of the notifica....
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....case it is contended, the writ petition would be maintainable, as the conditions for assuming jurisdiction are missing. It has also been argued that the Show Cause Notice was already premeditated and there is error apparent on the face of the record on the misinterpretation of prevailing law by the respondents, which has resulted in the violation of the petitioner's fundamental rights to carry on trade. He therefore, submits that the case fits within the recognized exceptions and as it involves constitutional challenges, the alternate remedy is ineffective and biased, more so due to the binding circulars. The learned Senior counsel has given the list of cases relied upon, which are as follows:- i) Whirpool Corporation v. Registrar of Trademark: (1998) 8 SCC 1 ii) Onkar Nand Lal v. State of Rajasthan: (1985) 4 SCC 404 iii) Filter Co. and Another v. Commissioner of sales Tax, Madhya Pradhesh and Anr. (1986) AIR SC 626 iv) Canon India Private Limited. V. State of Tamil Nadu and Ors. 2014(305) ELT 255(Mad) v) Vistar Construction (P) Ltd. Ltd. v. Union of India & Ors.:2013 SCC Online Del 308 vi) M/s Godrej Sara Lee Ltd. v. The Excise....
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....empt from tax service by way of access to a road or bridge on payment of annuity, a notification dated 13.10.2017 had been issued inserting Entry 23A, by which service by way of access to a road or a bridge on payment of annuity was exempted. However, he submits in the 43rd GST Council meeting, a clarification to Entry 23A was proposed to not exempt annuity paid for construction of road, and to only exempt services provided by way of access to a road or bridge on payment of annuity for it. Accordingly he submits, a Circular dated 17.06.2021 was issued, clarifying that Entry 23A does not exempt GST on the annuity (deferred payments) paid for construction of roads. Thus, he submits the Circular dated 17.06.2021, is valid and based on GST Council recommendations. It is submitted that the judicial precedent i.e. the case of DPJ-Bidar-Chincholi (Annuity) Road Project cited by the petitioner is still pending consideration in appeal and has not attained finality, to make it binding in any manner. 17. The petitioner he submits as is borne out by records, is engaged in construction, operation and maintenance of highways (BOT annuity model) and as per the Concession Agreement, the work in....
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....d the Circular dated 17.06.2021 bad in law, as it had the overriding effect on the notification dated 13.10.2017, the learned DSGI submits that the petitioner herein failed to mention that in the same order dated 11.07.2022, it was also held that nothing prevents the Department from imposing GST on the consideration paid to concessionaires, like the petitioner on payment received by way of annuity but that the same has to be done in the manner known to law. The submission made earlier that the judgment has not attained finality and the appeal still pending consideration, has also been reiterated. 19. It has further been submitted that all the documents i.e. Show Cause Notice, related notifications, circulars and documents submitted by the petitioner have been examined thoroughly, which led the Adjudicating authority to come to the conclusion that the petitioner had not paid GST, on annuity payment received for the construction of road under the Jorabat-Shillong Expressway project. Though demand of duty on annuity for the month of December, 2022, had been found to be erroneously calculated, it is submitted that notwithstanding this fact, as per the Order-in-Original 18.04.2024, p....
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....lid and issued under statutory powers and GST Council recommendations. With regard to the validity of a circular dated 05.07.2017 i.e. Proper Officer for adjudication of SCN, it has been submitted that the same was issued in exercise of the powers conferred by clause 2(91) of the CGST Act, 2017 read with Section 20 of the IGST Act, 2017 and subject to Section 5 (2) of the CGST Act, 2017 by CBEC (now CBIC). Thus he submits, the petitioner is liable to pay GST on annuity receipts as they represent consideration for taxable construction services and the Show Cause Notice and Order-in-Original being valid, lawful and within jurisdiction, the writ petition should be dismissed. 22. On behalf of the State respondents Nos. 2 & 7, apart from endorsing the submissions made by the learned DSGI, Mr. N. Syngkon, the learned GA has submitted that exemption cannot be allowed to the petitioner, in view of Entry 23A in the exemption notification, exempting only service by way of access to a road or a bridge on payment of annuity. This he submits, will apply to cases where the NHAI grants any third-party permission/license to collect toll, but such third party are paid in lieu of such collection ....
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....is he submits, will be applicable even if some items of the composite/ancillary supply may be under an exemption notification. In this context, the learned GA has referred to a write-up on understanding the meaning of composite supply and mixed supply, and submits that in a composite supply the combination of goods and services are naturally bundled, whereas in a mixed supply the same are not naturally bundled and the services provided by the petitioner being composite supply, therefore, principal supply will be the predominant of a composite supply, which in the instant case is the construction activities of the petitioner. 24. With regard to the contention of the petitioner that the show cause notice as well as the adjudication order was passed by officers, who are not proper officers, the learned GA has submitted that the same is incorrect for the reason that the show cause notice was issued by the Additional Director DGGI (Director General of Goods and Service Tax Intelligence), who is the Proper Officer in terms of Section 2(91) CGST Act, inasmuch as, in terms of the said Section proper officer means the Commissioner or an Officer of the Central Tax authority is assigned th....
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....x, who has passed the adjudication order has been mentioned in the classes of officers in Section 3. The learned GA has then contended that the power to appoint includes the power to invest with duties, is rooted in "the Doctrine of Implied Powers" which means that when a law grants a specific power to an authority, it implicitly grants all the ancillary powers to effectively carry out that primary power. Article 73 of the Constitution he submits, extends the executive power of the Union to matters on which Parliament has the right to legislate, implicitly granting the executive the necessary authority to act on these matters. In support of his contention, the learned GA has placed reliance upon the case of Union of India vs. Paras Laminates (P) Ltd., (1990) 4 SCC 453, which he submits has held that when a statute confers a jurisdiction, is also confers by implication the power of doing of such acts or employing such means as are essentially necessary to the execution. Reliance has also been placed in the case of Union of India vs. Gurbux Singh & Anr. (1975) 3 SCC 638. He then submits that the argument advanced by the petitioner that there was no investment of power to issue the sh....
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....er contends are unconstitutional. 28. Before embarking and deliberating on the issues raised, it must be kept in mind that the legal position is not settled, as even Courts like the Karnataka High Court, have given mixed rulings where from, appeals are still pending adjudication. However, for the purposes of this case, this Court will examine the core issues i.e. firstly whether in the circumstances this Court can exercise its discretionary powers under Article 226, or to relegate the petitioner to avail of alternate remedy. As noted earlier, the petitioner has invoked the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India seeking inter alia quashing of the Show Cause Notice dated 30.09.2023 and Order-in-Original dated 18.04.2024 issued under Section 74 of the Central Goods and Services Tax Act, 2017 and corresponding provisions of the Meghalaya Goods and Services Tax Act, 2017. Challenge has also been made to validity of the notifications and circulars i.e. Notification No. 14/2017 (01.07.2017), CBIC circular No. 31/05/2018-GST and circular No. 03/03/2017-GST investing powers of Proper Officer to issue the Show Cause Notice and the Order-in-....
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....t. The Show Cause Notice was issued by the Additional Director DGGI (Director General of Goods and Service Tax Intelligence), who in terms of Section 2(91) of the CGST Act, would be regarded as Proper Officer, inasmuch as, it is provided therein, that the same can mean the Commissioner or the Officer of the Central Tax, who is assigned that function by the Commissioner in the Board. The function therefore, in the context of the instant case, would mean the function of the Commissioner and as by notification No. 14/2017 Central Tax dated 01.07.2017, the Board having appointed the Additional Director DGGI as Central Tax Officer and having invested him with the power of Commissioner, in the considered view of this Court the Additional Director DGGI was competent to issue the Show Cause Notice in terms of Section 74 of the CGST Act. 34. With regard to the adjudication order passed by the Additional Commissioner CGST, Shillong, the same analogy would apply, inasmuch as, he would also be a Proper Officer in view of his appointment as a Central Tax Officer vide notification No. 2/2017 Central Tax dated 19.06.2017 and subsequently vide notification No. 2/2022 Central Tax dated 11.03.202....
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....nal Commissioners or the Joint Commissioners of Central Tax, as the case may be, subordinate to the Principal Commissioners of Central Tax or the Commissioners of Central Tax, as specified in column (2) of Table V, are hereby vested with the powers as specified in the corresponding entry in Column (3) of the said Table."; (ii) after Table IV, the following Table shall be inserted, namely:- "TABLE V Powers of Additional Commissioner or Joint Commissioner of Central Tax for passing an order or decision in respect of notices issued by the officers of Directorate General of Goods and Services Tax Intelligence Sl.No. Principal Commissioner or Commissioner of Central Tax Powers (Exercisable throughout the territory of India) (1) (2) (3) 1. Principal Commissioner Ahmedabad South Passing an order or decision in respect of notices issued by the officers of Directorate General of Goods and 2. Principal Commissioner Bhopal 3. Principal Commissioner Chandigarh 4. Commissioner Chennai South 5. Principal Commissioner Delhi North 6. Principal Commissioner Guwahati 7. Commissioner Rangareddy 8. Principa....
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....ral, Goods and Services Tax Intelligence or Additional Director General, Goods and Services Tax or Additional Director General, Audit Commissioner 5. Additional Director, Goods and Services Tax Intelligence or Additional Director, Goods and Services Tax or Additional Director, Audit Additional Commissioner 6. Joint Director, Goods and Services Tax Intelligence or Joint Director, Goods and Services Tax or Joint Director, Audit Joint Commissioner 7. Deputy/Assistant Director, Goods and Services Tax Intelligence or Deputy/Assistant Director, Goods and Services Tax or Deputy/Assistant Director, Audit Deputy Commissioner or Assistant Commissioner 8. Senior Intelligence Officer, Goods and Services Tax Intelligence or Superintendent, Goods and Services Tax or Superintendent, Audit Superintendent 9. Intelligence Officer, Goods and Services Tax Intelligence or Inspector, Goods and Services Tax or Inspector, Audit Inspector 2. This notification shall come into force with effect from the 1st day of July, 2017. [F. No. 349/52/2017-GST] (Dr. Sreeparvathy S.L.) Under Secretary to the Government of India [TO BE PUBLISHED IN THE GAZETT....
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....Central Tax (Audit) specified in the corresponding entry in column (5) of the said Table. [TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)] Government of India Ministry of Finance Department of Revenue) Central Board of Indirect Taxes and Customs Corrigendum New Delhi, the 29th July, 2019 G.S.R. (E).:- In the notification of the Government of India, in the Ministry of Finance, Department of Revenue, No.14/2017-Central Tax, dated the 01st July, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 818(E), dated the 01st July, 2017, in English version, in page 2, in line 3, for " the Central Board of Excise and Customs" read "the Government". [F. No 349/52/2017-GST] (Ruchi Bisht) Under Secretary to the Government of India 35. It is to be noted that though Section 2(91) of CGST Act is a provision which provides the definition of a Proper officer, however the enabling provisions are Sections 3 (officers under the Act) and Section 5 (powers of officers). As per Section 5(1) of the Act, it is the Board that confers and enforces such conditions and l....
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....erent class of officers, who had been construed to be DGSI officers in terms of Notification No. 14/2017. 20. A conjoint reading of Notification No. 14/2017 dated 01.07.2017 and Circular No. 3/3/2017-GST dated 05.07.2017 sufficiently contemplates the assigning of powers to DGSI officers by the Board. Let's take an example, as per the circular of 05.07.2017, a Superintendent of Central Tax has been assigned the power to function as is mentioned in Sub-section (1) of section 70 and a reading of Notification 14/2017 leads us to conclude as mentioned in serial No. 8 that a senior Intelligence officer, Goods and Service Tax Intelligence or Superintendent, Goods and Service Tax or Superintendent, Audit has been notified to be appointed under section 3 of the GST Act as a central Tax officer and is invested with all the powers under the central Goods and Service Tax Act, 201, throughout the territory of India, as are exercisable by the central Tax officers of the rank of "superintendent". In any case, this court does not find any force in holding that such technical nuances to be fatal for the Notification or to the functions performed by various DGGI officers. The jurisprude....
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....nce under Article 226. 39. The petitioner has also contended that constitutional challenges have been raised against the notifications and circulars and therefore the writ petition deserves to be entertained. 40. This Court observes that merely because a challenge to notifications or circulars has been couched in constitutional terms does not automatically confer maintainability where the substance of the dispute pertains to tax assessment and classification. Courts are required to examine the true nature of the controversy and not merely the form in which reliefs have been drafted. 41. On a careful consideration of the pleadings, it is evident that the central controversy between the parties concerns classification of services under SAC 9954 or SAC 9967, applicability of exemption under Entry 23A of Notification No. 12/2017, characterization of annuity receipts under BOT projects, and taxability of composite supplies under the CGST framework. Though on a plain analysis, by virtue of Entry 23A, the petitioner would be liable for payment of GST on Annuity, the other questions that remain however would involve the interpretation of contractual clauses, examination of the nat....
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....ade to the judgement in the case of Bela Singh Daulat Singh Vs Commissioner of Income Tax reported in (1966) 62 ITR 250, 1965 SCC online All 499 wherein, in an extract from paragraph 7 it has been held as follows:- "The assessee relied upon a circular said to have been issued by the Central Board of Revenue. The circular is not a law; it may bind the income-tax authorities but cannot be said to be law merely because it does so. A party is bound by a decree passed against him and a Government is bound by a mandamus issued against it but neither the decree in the first instance nor the mandamus in the second instance amounts to law. Consequently, the Tribunal was not, and this court is not, bound to take judicial notice of the circular."..... Similarly, in another case that is Indo-Gulf Fertilizers and Chemicals Corporation Limited Vs Union of India and another reported in 1992 SCC Online All 1067, at paragraph 11 thereof, it has been held as follows:- "11. To re-enforce the submission that the additional tax on the loss figure, after adjustment, has been rightly levied, learned counsel for the opposite parties has placed reliance upon the directions issued by th....
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....tural justice and Orders/Proceedings that are wholly without jurisdiction or where the vires of a statute is challenged. ii) Canon India Private Limited vs. State of Tamil Nadu, which supports the direct invocation of writ jurisdiction where departmental policy pre-determines the outcome. iii) Aircel Limited vs. Commissioner Tax (supra), wherein it was held that since the materials facts were undisputed and only legal question arose, the High Court ought to have adjudicated the matter instead of dismissing it on the ground of alternative remedy. iv) Calcutta Discount Company vs. Income Tax Officer Companies District etc., (supra) on the principle that the existence of statutory preconditions is essential before jurisdiction can be exercised which supports judicial interference when statutory conditions authorising action are absent. v) NCS Pearson Inc. vs. UOI on the principle that jurisdiction under Section 74 of the CGST Act depends upon the existence of wilful suppression with intent to evade tax and that when this fact is neither satisfied or fulfilled in the SCN, the same deserves to be quashed. vi) Onyx Fisheries Ltd., vs Union of ....