2021 (8) TMI 95 - Commissioner - GST

Seeking refund of CGST and SGST wrongly paid - License Fee and Spectrum Uses Charges - payment, in the form of License Fee (LF) for issuance of License and Spectrum Usage Charges (SUC) for use of spectrum, as a percentage of the Adjusted Gross Revenue (AGR) to Department of Telecommunications (DoT) - supply or not - issuance of license and allotment of spectrum as a Statutory fee - LF and SUC charges are consideration for supply or not - scope of Section 54 of the CGST Act, 2017 read with Rule 89 of CGST Rules, 2017 - power of clarifications or circulars to bring a levy or exempt a levy - issue is under litigation or not - principle of natural justice. Whether payment, in the form of License Fee (LF) for issuance of License and Spectrum Usage Charges (SUC) for use of spectrum, as a percentage of the Adjusted Gross Revenue (AGR) to Department of Telecommunications (DoT) is a Supply under GST law or not? - HELD THAT - The appellant vide para A9, A10 and A11 has mis-interpreted the fact of furtherance of business as per the Government lateral whereas it was for the person who is running a business, here the appellant. Accordingly the levy of GST is appropriately applicable on the appellant as per sub-section (3) of Section 9 of the CGST Act, 2017 read with Notification No. 13/2017-Central Tax (Rate), dated 28 June, 2017 - Further, if there was any doubt regarding taxability of service then the appellant was free to approach the Authority for Advance Ruling as per sub-section (2) of Section 97 of CGST Act, 2017, because question of law about determination of the liability to pay tax on any service may be sought for advance ruling to AAR as per GST law, but the same was not opted by the appellant. Whether issuance of license and allotment of spectrum as a Statutory fee attract any levy of tax as per GST law? - HELD THAT - On reading the decree it emerges that Price of a privilege was affirmed by the Constitution Bench in the case where fee is fixed but not in the cases where fee is fluctuating as per percentage share (LF SUC) of revenue (AGR) like in the instant case. Therefore, the permission of granting of License by DoT for business activities of the appellant as it is directly nexed with their revenue - If no GST is leviable on grant of license then why a service categories at HSN head 9973 38 as Licensing services for right to use other natural resources including telecommunication spectrum . Else all tax liability would be null, which is wrong interpretation of the aforesaid verdict. Whether LF and SUC charges are consideration for supply as per GST law or not? - HELD THAT - The consideration in the form of LF and SUC paid by the appellant to the Government is consideration as per clause (31) of Section 2 of CGST Act which cover all the elements specified under ibid section of the Act. There are service provider as well as service recipient and the element of consideration is also involved in the instant case. Hence, the taxability is fasten on these payments as per GST Act. Whether Refund claim is covered under any other category specified under Section 54 of the CGST Act, 2017 read with Rule 89 of CGST Rules, 2017? - HELD THAT - Refund of unutilized input tax credit is prescribed as per Section 54(3) of the CGST Act, 2017, which allows refund of accumulated input tax credit on input only. In Act and as well as Rules, there is no provision for refund of input tax credit accumulated on input services. Hence, the category specified by the appellant during filing of refund is improper and there is no legal backing in this regard. Whether License fee and Spectrum usage charges paid by the Appellant are covered in Service Rate Notification and are leviable to tax or not? - HELD THAT - Appellant has paid GST under the HSN Head 9984 meant for Telecommunication Services wrongly whereas, proper HSN head for the payment of GST under Reverse Charge Mechanism for Grant of License and Allocation of Spectrum is 9973 meant for Leasing and Rental services with or without operator . As per Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 rate of GST is defined at S. No. 17 against clause (vi). HSN sub-heading 9973 38, meant for Licensing services for right to use other natural resources including telecommunication spectrum is the proper classification of the nature of service in question. Whether clarifications or circulars can bring a levy or exempt a levy? - HELD THAT - The statutory liability to pay GST on the Services of Grant of License and Allocation of Spectrum by the appellant was there. Historically, LC and SUC was taxable under Service Tax regime, it clearly shows that this activities falls under the ambit of Service . Quoting the circular of Service Tax regime was only for the sake of defining these activities as Service . However, in the instant case ample statutory provisions are available to fasten liability to pay GST on the appellant. Whether issue can be decided where the issue is under litigation (writ petition filed by the appellant in the Hon ble High Court, Delhi), whether it would be appropriate to grant/sanction refund at this juncture of time? - HELD THAT - It is well settled law that if any issue is under litigation in Higher Court, then no matter can be finalized till the decision of the Higher Court. Further, the appellant is one hand filing refund for granting the same, whereas on other hand they are under litigation for taxability of the issue before High Court simultaneously. In this juncture of time, when the matter is sub judice, hence it would not be appropriate to grant refund and filing of refund application on the litigated issue itself becomes premature. Whether principle of natural justice has been properly followed in the instant case? - HELD THAT - In all cases proper opportunity have been provided to the appellant by issuing the show cause notices and by hearing the averment of the appellant before passing of the impugned order. Further, all the submissions/averment have been taken up in the appeal also - there are no merit of the appellant in this context. There are no infirmity in rejecting the refund - appeal dismissed.

Summary

Issues Involved:
1. Whether payment in the form of License Fee (LF) for issuance of License and Spectrum Usage Charges (SUC) for use of spectrum, as a percentage of the 'Adjusted Gross Revenue' (AGR) to 'Department of Telecommunications' (DoT) is a 'Supply' under GST law or not?
2. Whether issuance of license and allotment of spectrum as a 'Statutory fee' attract any levy of tax as per GST law.
3. Whether LF and SUC charges are 'consideration' for supply as per GST law or not?
4. Whether refund claim is covered under any other category specified under Section 54 of the CGST Act, 2017 read with Rule 89 of CGST Rules, 2017?
5. Whether License fee and Spectrum usage charges paid by the Appellant are covered in Service Rate Notification and are leviable to tax or not?
6. Whether clarifications or circulars can bring a levy or exempt a levy?
7. Whether issue can be decided where the issue is under litigation (writ petition filed by the appellant in the Hon’ble High Court, Delhi), whether it would be appropriate to grant/sanction refund at this juncture of time?
8. Whether principle of natural justice has been properly followed in the instant case?

Detailed Analysis:

Issue 1: Whether payment in the form of License Fee (LF) for issuance of License and Spectrum Usage Charges (SUC) for use of spectrum, as a percentage of the 'Adjusted Gross Revenue' (AGR) to 'Department of Telecommunications' (DoT) is a 'Supply' under GST law or not?

The term 'license' is covered under Sections 2(83) and 7 of the CGST Act, 2017, which defines 'supply' to include all forms of supply of goods or services such as sale, transfer, barter, exchange, license, rental, lease, or disposal made for a consideration by a person in the course or furtherance of business. The adjudicating authority concluded that the payment of LF and SUC constitutes a supply under the GST law.

Issue 2: Whether issuance of license and allotment of spectrum as a 'Statutory fee' attract any levy of tax as per GST law.

The adjudicating authority referenced the Constitution Bench decision in Har Shankar v. Dy. Excise and Taxation Commr., (1975) 1 SCC 737, which affirmed that 'license fee' is the price of consideration charged by the Government for parting with its privilege. The authority concluded that granting permission for establishing, maintaining, and working telegraphs and allocation of spectrum is a service falling under HSN Head 9973 38, which defines "Licensing services for right to use other natural resources including telecommunication spectrum."

Issue 3: Whether LF and SUC charges are 'consideration' for supply as per GST law or not?

The definition of 'consideration' under Section 2(31) of the CGST Act includes any payment made in respect of the supply of goods or services. The adjudicating authority found that LF and SUC paid by the appellant to the Government are 'consideration' for the supply of services, thus making them taxable under GST.

Issue 4: Whether refund claim is covered under any other category specified under Section 54 of the CGST Act, 2017 read with Rule 89 of CGST Rules, 2017?

The adjudicating authority concluded that the refund claim is not covered under the 'any other category' as specified in Section 54(3) of the CGST Act, which allows refund of accumulated input tax credit on 'input' only, not on input services.

Issue 5: Whether License fee and Spectrum usage charges paid by the Appellant are covered in Service Rate Notification and are leviable to tax or not?

The adjudicating authority found that the appellant had wrongly paid GST under HSN Head 9984 meant for Telecommunication Services, whereas the proper HSN head for the payment of GST under Reverse Charge Mechanism for 'Grant of License' and 'Allocation of Spectrum' is 9973 meant for 'Leasing and Rental services with or without operator.'

Issue 6: Whether clarifications or circulars can bring a levy or exempt a levy?

The adjudicating authority noted that statutory provisions under Sections 2(83) and 7 of the CGST Act clearly define 'license' as a supply, and thus, clarifications or circulars cannot override these statutory provisions to exempt a levy.

Issue 7: Whether issue can be decided where the issue is under litigation (writ petition filed by the appellant in the Hon’ble High Court, Delhi), whether it would be appropriate to grant/sanction refund at this juncture of time?

The adjudicating authority held that since the issue is under litigation in the Hon’ble High Court, it would not be appropriate to grant a refund at this juncture, making the refund application premature.

Issue 8: Whether principle of natural justice has been properly followed in the instant case?

The adjudicating authority found that proper opportunities were provided to the appellant by issuing show cause notices and conducting hearings. Therefore, the principle of natural justice was adhered to.

Conclusion:
The adjudicating authority rejected all five appeals filed by the appellant, concluding that the payments for LF and SUC are taxable under GST law, the refund claims are not covered under the specified categories, and the principles of natural justice were followed. The appeals were disposed of accordingly.