2018 (5) TMI 1282 - HC - GST

Recovery of arrears of Land Revenue - Who is liable to discharge the GST laibility - Scope of mutual contract - Challenge raised is that it is not the liability of the petitioner and rather it is the Nagar Nigam that has benefited from the contract and therefore it is the Nagar Nigam which is liable to pay the G.S.T. realisable under the Act, 2017 - whether recovery could have proceeded against the petitioner or not? Held that - recovery of GST can be make as arrears of land revenue by the Collector of the District on a requisition by the Proper Officer - Section 79(2) of Act, 2017 further clarifies that where there are terms of agreement under any instrument for recovery of the tax under Section 79(1) of the Act, 2017, the same may, without prejudice to any other mode of recovery, be recovered in accordance with the provisions of that sub-section. It is therefore, undisputed that there is a provision of recovery, provided there is an agreement between the parties. In the present case also there is no dispute that such an agreement exists - In the present case it is undisputed that the procedure for deducting the amount has not been followed by the Nagar Nigam in terms of Rule 143 of Rules, 2017. In such circumstances, proceedings for recovery had to be undertaken inasmuch as the Nagar Nigam as well as the petitioner both have defaulted simultaneously, the former by not making deductions and the latter by not paying the GST which is a liability on him under the terms of the agreement. Since the petitioner himself has given an undertaking for depositing the entire amount of G.S.T., the recovery certificate stands modified to the aforesaid extent and it shall be enforced only to the extent of ₹ 3,24,000/- subject to payment by the petitioner as undertaken before us - petition disposed off.

Summary

Issues:
1. Liability of the petitioner for Goods and Service Tax (G.S.T.) recovery under U.P. Goods and Service Tax Act, 2017.
2. Dispute regarding recovery of G.S.T. as arrears of land revenue.
3. Existence of agreement between the petitioner and Nagar Nigam for liability of tax payment.
4. Interpretation of provisions under the Act, 2017 for recovery of tax.
5. Non-compliance with Rule 143 of U.P. Goods and Services Tax Rules, 2017 by Nagar Nigam.
6. Undertaking by the petitioner to deposit the G.S.T. amount.

Analysis:
The judgment of the High Court of Allahabad involved a case where the petitioner challenged the recovery certificate issued to him for deposit of Goods and Service Tax (G.S.T.) as arrears of land revenue under the U.P. Goods and Service Tax Act, 2017. The petitioner contended that the liability of G.S.T. did not fall on him but on the Nagar Nigam, as they were the beneficiaries of the contract. The Nagar Nigam, represented by counsel, argued that there was a clear agreement stating that any tax liability, including G.S.T., would be borne by the contractor, as per the terms of the contract. The counsel for Nagar Nigam highlighted the clause in the agreement specifying the contractor's responsibility to pay under the Act, 2017, over and above the consideration amount. The contention was that the G.S.T. amount, after adjustments, was the only outstanding payment due from the petitioner.

The Court examined the provisions of the U.P. Goods and Service Tax Act, 2017 relating to recovery of tax and the definition of terms like 'local authority' and 'Proper Officer.' It was noted that the transaction between the petitioner and Nagar Nigam fell within the scope of 'supply' under the Act. The recovery of G.S.T. as arrears of land revenue was discussed, along with the authority of the Proper Officer to prepare a certificate for recovery. The Court emphasized that recovery could proceed based on an agreement between the parties, which was acknowledged to exist in this case.

Further, the Court analyzed Rule 143 of the U.P. Goods and Services Tax Rules, 2017, which outlined the procedure for deductions by the 'Specified Officer,' including an officer of a 'Local Authority.' It was observed that the Nagar Nigam had not followed the deduction procedure as required by the Rules, resulting in the need for recovery proceedings due to default by both parties. The judgment highlighted that the recovery certificate had been issued for the entire amount due, including G.S.T., although the Nagar Nigam had realized its consideration amount by adjusting the security deposit without deducting the tax amount. Consequently, the recovery amount was modified based on the petitioner's undertaking to deposit the G.S.T. amount, subject to enforcement if the petitioner defaulted on the payment.

In conclusion, the High Court disposed of the writ petition with directions for enforcement of the recovery certificate only for the G.S.T. amount, as specified, and reserved the right for the Taxing Department to proceed with recovery from either the petitioner or the Nagar Nigam in case of non-compliance with the undertaking.