Builders Association of Navi Mumbai, Neelsidhi Realties Versus Union of India Through the Secretary, Ministry of Finance, The Commissioner of Goods and Service Tax, Thane & Others
GST
2018 (4) TMI 461 – BOMBAY HIGH COURT – 2018 (12) G. S. T. L. 232 (Bom.) , [2018] 2 GSTL 129 (Bom)
BOMBAY HIGH COURT – HC
Dated:- 28-3-2018
WRIT PETITION NO. 12194 OF 2017
GST
S. C. DHARMADHIKARI & PRAKASH. D. NAIK, JJ.
Mr. Vikram Nankani-Senior Advocate with Mr. Chirag Mody, Mr. Aman Kacheria i/b. M/s. DSK Legal for the petitioners.
Mr. Pradeep S. Jetly with Mr. Jitendra B. Mishra for respondent nos. 1 to 3. Mr. B. B. Sharma for respondent no. 4. Mr. B. V. Samant-AGP for State.
ORAL JUDGMENT:- (Per S. C. Dharmadhikari, J.)
1. Rule. Respondents waive service. By consent, Rule is made returnable forthwith.
2. By this writ petition under Article 226 of the Constitution of India, the petitioners are challenging an order levying/collecting the Goods and Service Tax (GST) on the one-t
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ss District (CBD), Belapur. Respondent no. 4 is the City Industrial and Development Corporation of Maharashtra Limited (CIDCO), whereas, the sixth respondent is the Commissioner of Goods and Service Tax, Maharashtra.
4. The argument of the petitioners is that their members are reputed Builders and Developers of Navi Mumbai and areas surrounding it. They have contributed to the growth and development of Navi Mumbai by constructing and developing several residential and commercial properties. These projects are undertaken and carried out after the fourth respondent, which is registered as a company under the Companies Act, 1956, exercises the statutory functions in terms of section 113(3A) of the Maharashtra Regional and Town Planning Act, 1966 (hereinafter referred to as “the MRTP Act”). Insofar as the nature of the activities and functions of the fourth respondent, the petitioners, in para 6 of this petition, state as under:-
“6. Respondent No. 4 was incorporated on 17th March, 1970
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In other words, Respondent No. 4 is acting as a special planning authority on behalf of the Government of Maharashtra and is not carrying on any business activities as such. A copy of introduction page taken from the website of Respondent No. 4 is appended hereto and marked as Exhibit “1”.”
5. It is stated that in its ordinary and normal course of business, the fourth respondent invites offers from various entities to acquire, on lease, residential-cum-commercial plots and three/four star hotel plots in Panvel and Navi Mumbai from time to time. One such invitation was issued in April, 2017 inviting offers for various plots at Navi Mumbai and Panvel. The members of petitioner no. 1 applied for allotment of various plots. The members were allotted these plots. Under the scheme, the tenderer/bidder is required to make an offer by quoting a rate per square meter on account of payment of lease premium. The plots are to be allotted on long term lease of 60 years. A base price is already fix
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hese allottees and the one time lease premium, the GST payable have been indicated in a chart in para 12 of the petition. In these circumstances, a grievance was raised by approaching the Goods and Service Tax Commissionerate as to how the GST is collected on the above amount and demanded from the petitioners. There was correspondence initiated and finally, when the authorities did not respond, the present petition has been filed.
7. The argument of Mr. Nankani learned senior counsel is that such a tax, as is demanded, cannot be levied, assessed and recovered. A long term lease of 60 years tantamounts to sale of the immovable property, since the lessor is deprived of, by the allotment the right to use, enjoy and possess the property. Our attention is invited to section 105 of the Transfer of Property Act, 1882. The one-time premium amount is the lumpsum consideration paid for entering into the lease. Our attention is also invited to the fact that the lease of 60 years and with a statu
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then, there is no warrant for imposition of the GST. Our attention is invited to Schedule II of the GST Act and some of the clauses therein to urge that if the intention of the legislation was to charge GST on this one-time lease premium, then, appropriate provisions would have been inserted. They not being inserted, as there was a clear intent to leave out a transaction tantamounting to a sale. Mr. Nankani attempted to point out that one-time lease premium is different and distinct from lease rent. It is not a periodical payment, but a one time. It is not, therefore, conceivable that on such a premium, the tax could be levied, assessed and recovered. The premium is akin to Salami and our attention is invited to its plain dictionary meaning as set out in the legal dictionary. Our attention is also invited to a judgment of the Hon'ble Supreme Court in the case of Commissioner of Income Tax Assam, Tripura and Manipur vs. Panbari Tea Co. Ltd. AIR 1965 SC 1871. Then, our attention is i
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harashtra and Ors. 1970() SCC 323. For all these reasons, it is submitted that the petitioners be granted the reliefs as prayed.
9. On the other hand, Mr. Jetly appearing for the Central Goods and Sales Tax Commissionerate and the Union of India would urge, based on the affidavit in reply, that this is a petition which seeks to pre-empt the levy assessment and recovery of GST. In any event, if the GST being now paid, then, the issue raised is purely academic. Apart therefrom, the law does not make any distinction between governmental and non-governmental agencies and supply of goods or services attracts GST. The CIDCO cannot be treated as Government. Its position as a new town planning authority is of no consequence. Once the legal provisions are clear, unambiguous and plain, then, regardless of the consequences, the tax is leviable. The whole edifice of Mr. Nankani's argument is based on the judgments delivered not in the context of the GST Act. The affidavit in reply at page 198
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ions and words. The term “business” is defined in inclusive manner in section 2(17). The expression includes any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit. It also includes any activity or transaction undertaken by the Central Government or State Government or any local authority in which they are engaged as public authorities. The other definition, which is material and relevant is to be found in section 2(31) is of the word “consideration”.
Section 2(31) reads as under:-
“2(31) “Consideration” in relation to the supply of goods or services or both includes-
(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply 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;
(b) the monetary value
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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;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and
(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.
(2) Notwithstanding anything contained in sub-section (1),-
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services.
(3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be
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notification, the transactions that are to be treated as a supply of goods and not as a supply of services or a supply of services and not as a supply of goods. Pertinently, no notification and traceable to sub-section (2) of section 7 has been brought to our notice.
13. What is heavily relied upon before us is the position of CIDCO. The CIDCO relies upon a notification issued under the MRTP Act. It may be designated as a New Town Development Authority for the purpose of the MRTP Act. For designation of a site as a new town and for development of any area as a site for the new town, sub-section (3A) of section 113 enables the State Government to require the work of developing and disposing of land in the area of new town by any such Corporation, company or subsidiary company as referred in sub-section (2) of section 113 thereof. It could be declared, by a notification in a Official Gazette, to be the New Town Development Authority for that area. Pertinently, this notification, which
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r a consideration by a person in the course or furtherance of business. We referred to the definitions simply to reinforce our conclusion that the CIDCO is a person and in the course or in furtherance of its business, it disposes of lands by leasing them out for a consideration styled as one-time premium. Therefore, if one refers to Schedule II, section 7, then, Item No. 2 styled as land and building and any lease, tenancy, licence to occupy land is a supply of service. Any lease or letting out of a building, including commercial, industrial or residential complex for business, either wholly or partly is a supply of service. It is settled law that such provisions in a taxing statute would have to be read together and harmoniously in order to understand the nature of the levy, the object and purpose of its imposition. No activity of the nature mentioned in the inclusive provision can thus be left out of the net of the tax. Once this law, in terms of the substantive provisions and the Sc
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receipt of the assessee. On appeal, this order was confirmed. On further appeal, the tribunal also held that the premium was really the rent payable under the lease deed and, therefore, it was chargeable to income tax. After the matter was carried to the High Court, the assessee succeeded because the question posed for the High Court's consideration was answered by holding that this receipt is a capital receipt. The question that arose before the Hon'ble Supreme Court was whether this finding is correct. It is in that context and how to treat this income, whether as a revenue receipt or a capital receipt that all the further observations are made. Even by terming the gain or income as Salami, what the Hon'ble Supreme Court was essentially concerned with is not the transaction or the nature thereof, but the income generated or derived from it. Its treatment, therefore, led to the Hon'ble Supreme Court referring to section 105 of the Transfer of Property Act, 1882. In the
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agreeable to pay the tax as demanded and tried to escape the levy by urging that this was not a transaction which would invite or attract capital gain tax. In these circumstances, the question was answered by the Hon'ble Supreme Court and in that context, the observations heavily reiled upon by Mr. Nankani are made. Once again, we cannot ignore that the observations are in the context of the provisions, and the interpretation to be placed thereon, but found in the Income Tax Act, 1961. That is an assessment of the tax on income. We are concerned here with the GST Act and the tax on supply of goods and services. It is not disputed that the position of the CIDCO for the purpose of orderly planning and development will be of no assistance in the sense while developing a new township, the objective of the planning authority is not to earn money, but to develop the area so that the purpose of setting up a township is achieved by more people wanting to live in the area in lieu of the var
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and the court came to the conclusion that the Corporation is not a Government company and cannot be termed as a trading corporation as well. It provides amenities and facilities in industrial areas, when it allots industrial plots for setting up industries so as to achieve a balanced development and growth of industries. It is performing that function and which, therefore, enabled the Hon'ble Supreme Court to hold that the constitutional entries would not allow the power of competent legislature to make the law. This judgment is of no assistance.
18. In the case of Commissioner of Central Excise, Nashik (supra), the demand of service tax was in issue. The Finance Act, 1994 and particularly section 65 clause (64) was relied upon to urge that the service charges collected by the MIDC from the allottees of the plots are in relation to services provided by the MIDC to the plot holders and the same is covered by the category “maintenance, management and repairs” under clause (64) of s
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ine between governmental and non-governmental, sovereign and regal functions and otherwise is not very thin and post globalisation, liberalisation and privatisation. In that context, a useful reference can be made to a judgment of the Hon'ble Supreme Court in the case of N. Nagendra Rao and Co. vs. State of Andhra Pradesh AIR 1994 SC 2663. The observations in paras 23 and 24 are extremely relevant. These paragraphs read as under:-
“23. In the modem sense the distinction between sovereign or non-sovereign power thus does not exist. It all depends on the nature of power and manner of its exercise. Legislative supremacy under the Constitution arises out of constitutional provisions. The legislature is free to legislate on topics and subjects carved out for it. Similarly, the executive is free to implement and administer the law. A law made by a legislature may be bad or may be ultra vires, but since it is an exercise of legislative power, a person affected by it may challenge its val
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it. The State is immune from being sued, as the jurisdiction of the courts in such matter is impliedly barred.
24. But there the immunity ends. No civilised system can permit an executive to play with the people of its country and claim that it is entitled to act in any manner as it is sovereign. The concept of public interest has changed with structural change in the society. No legal or political system today can place the State above law as it is unjust and unfair for a citizen to be deprived of his property illegally by negligent act of officers of the State without any remedy. From sincerity, efficiency and dignity of State as a juristic person, propounded in nineteenth century as sound sociological basis for State immunity the circle has gone round and the emphasis now is more on liberty, equality and the rule of law. The modern social thinking of progressive societies and the judicial approach is to do away with archaic State protection and place the State or the Government on
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ground”, or that “there could be no legal right as against the State which made the law” gradually gave way to the movement from, “State irresponsibility to State responsibility”. In Welfare State, functions of the State are not only defence of the country or administration of justice or maintaining law and order but it extends to regulating and controlling the activities of people in almost every sphere, educational, commercial, social, economic, political and even marital. The demarcating line between sovereign and non-sovereign powers for which no rational basis survives has largely disappeared. Therefore, barring functions such as administration of justice, maintenance of law and order and repression of crime etc. which are among the primary and inalienable functions of a constitutional Government, the State cannot claim any immunity. The determination of vicarious liability of the State being linked with negligence of its officers, if they can be sued personally for which there i
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