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2021 (4) TMI 1209 - HC - GSTLevy of GST - license fee granted to the Private Contractors to run parking of vehicles - HELD THAT - The license, rental, lease amounts to supply and as per Schedule II of the Act, license to occupy the land and renting of an immovable property, are also supply of services - It is an admitted fact that all the writ petitioners are Contractors, who were granted license to run parking areas for vehicles in the Railway premises by the Southern Railway. All the writ petitioners participated in the tender process and were successful in the tender and entered into an agreement with the Southern Railway, agreeing certain terms and conditions stipulated. When there is no provision to collect the GST from the contractors on the license fee, then the terms and conditions of the agreement became null and void and therefore, the conditions imposed in the agreement would not be binding on the contractors. In this regard, the learned counsel for the petitioner relied on Section 32 of the CGST Act and sub-clause (2) to Section 32 stipulates that no registered person shall collect tax except in accordance with the provision of this Act or the Rules made thereunder - In the present cases, even before the introduction of the present CGST Act, the Contractors were paying the taxes based on the erstwhile Act, mainly Service Tax Act. After the implementation of the CGST Act, when there is prohibition of unauthorised collection of tax, the demand now made by the Southern Railways is in violation of the provisions of the CGST Act and therefore, the writ petitions are to be allowed. When there is a specific bar under the Act, more specifically, under Section 32, there is no reason whatsoever to make a demand for recovery of GST from the writ petitioners. Such a collection of tax is unauthorised and it is clarified that the collection of tax in such circumstances, more specifically, from the licensees are impermissible - In these cases, the respondent-Railways have treated the parking as rented out of property and therefore, the same would not fall under the provisions of the CGST Act and the writ petitioners are not liable to pay the tax. This Court is of the considered opinion that, the liability regarding tax regime is concerned, the Courts are expected to adopt strict interpretation of law. Liberal interpretation is impermissible, which can be adopted only in respect of certain welfare legislations and as far as the tax laws are concerned, it is to be borne in mind that strict interpretation of provisions are to be adopted, so as to recover taxes from the assessees by following the procedures contemplated - In the present cases, liability of the licensees are well enumerated with reference to Section 7 and Schedule II to the Act. As discussed above, when the liability is unambiguous and the nature of services are also falling within the scope of Section 7 r/w Schedule II, then there is no reason to consider the claim of the writ petitioners for invoking Section 32 of the Act. It is made very clear that the Southern Railways is liable to pay service tax for the license fee collected from the respective contractors and the respective contractors are liable to pay service tax for the collections made from the end users/customers in respect of the parking slot services. Such contractors are bound to register their name under the CGST Act, by following the procedures contemplated therein there are two services involved in the entire transactions and the first service is from the Railway to the contractors and the second service is from the contractors to the customers/end users - there are two services involved in the entire transactions and the first service is from the Railway to the contractors and the second service is from the contractors to the customers/end users. Petition dismissed.
Issues Involved:
1. Demand for 18% GST on license fees for parking areas by Southern Railway. 2. Definition and scope of 'services' under the CGST Act. 3. Applicability of GST on renting of immovable property and license to occupy land. 4. Legal obligations of contractors under the CGST Act. 5. Validity of terms and conditions in agreements regarding tax liability. 6. Prohibition of unauthorized tax collection under Section 32 of the CGST Act. 7. Interpretation of relevant legal precedents and their applicability post-CGST Act. Detailed Analysis: 1. Demand for 18% GST on License Fees for Parking Areas by Southern Railway: The batch of writ petitions challenges the demand by Southern Railway for 18% GST on the license fee for vehicle parking areas. The court examined the provisions of the CGST Act and relevant circulars issued by the Railway Board and the Chief Commissioner of Central Tax and Customs. 2. Definition and Scope of 'Services' under the CGST Act: Section 2(102) of the CGST Act defines "services" as anything other than goods, money, and securities, including activities related to money use or conversion. Section 7(1) elaborates on the scope of supply, including all forms of supply of goods or services such as sale, transfer, barter, exchange, license, rental, lease, or disposal made for consideration in the course of business. 3. Applicability of GST on Renting of Immovable Property and License to Occupy Land: Under Schedule II of the CGST Act, any lease, tenancy, easement, or license to occupy land is considered a supply of services. Renting of immovable property is also treated as a supply of services. The court noted that both licenses to occupy land and renting of immovable property fall under the definition of services as per the CGST Act. 4. Legal Obligations of Contractors under the CGST Act: The petitioners, who are contractors granted licenses to run parking areas, argued that the demand for 18% GST was not supported by the CGST Act. However, the court found that the agreements signed by the contractors explicitly stated their liability to pay taxes, including GST, as applicable. The court emphasized that the contractors are bound by the terms of the agreements they signed. 5. Validity of Terms and Conditions in Agreements Regarding Tax Liability: The agreements included clauses that required contractors to pay all applicable taxes, including GST. The court upheld these clauses, stating that the contractors had agreed to these terms and could not now claim exemption from GST. 6. Prohibition of Unauthorized Tax Collection under Section 32 of the CGST Act: The petitioners argued that the demand for GST was unauthorized under Section 32 of the CGST Act, which prohibits unauthorized tax collection. The court rejected this argument, stating that the collection of GST was in accordance with the provisions of the CGST Act and the agreements signed by the contractors. 7. Interpretation of Relevant Legal Precedents and Their Applicability Post-CGST Act: The petitioners cited various legal precedents to support their case. However, the court noted that these cases were decided before the implementation of the CGST Act and were not applicable to the current legal framework. The court emphasized that the provisions of the CGST Act, implemented from July 1, 2017, were clear and unambiguous regarding the liability to pay GST on services rendered. Conclusion: The court concluded that the Southern Railway is liable to pay GST on the license fee collected from the contractors, and the contractors are liable to pay GST on the parking fees collected from end users. The court dismissed the writ petitions, stating that the provisions of the CGST Act are explicit, and there is no scope for exemption from the tax liability as demanded by the Southern Railway. The court also clarified that the exemption would apply only to services provided by contractors to end users if such services are exempted under the CGST Act, subject to verification by the GST Department.
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