2024 (8) TMI 70 - HC - GST

Proportion of taxablity - providing services to the National Highways Department of India and that the considerations are received in two parcels - contention of the Department is that since the work has been substantially completed, the petitioner was liable to pay tax on the entire value of the work - CBIC Circular No.221/15/2024-GST dated 26.06.2024 - HELD THAT - The impugned orders are to be set aside and the cases are remitted back to the respondent to re-examine the issue in the light of the clarification issued by the Central Board of Indirect Taxes and Customs vide Circular No.221/15/2024-GST, dated 26.06.2024, pursuant to the recommendation of the GST Council in its 53rd Meeting held on 22.06.2024. Prima facie , the petitioner is not liable to pay tax if no invoice is raised by the petitioner on the NHAI. As and when the petitioner either raises invoice for payment of the amount in 30 Annuities qua balance 60% or receives amounts in Annuities, the petitioner would be liable to pay tax. Merely because, the petitioner has sub-contracted the work and completed the work in advance for receiving the payments in the form of Annuity over a period of 15 years would not either disentitle the petitioner to avail input tax credit on the tax charged by the sub-contractor on the petitioner or to draw an inference that the petitioner was indeed liable to pay tax on the entire value of the contract with NHAI, even though the petitioner has neither raised any invoice nor received the payment. The impugned orders are set aside and the cases are remitted back to the respondent to re-examine the issue in the light of the above observations and in the light of Circular No.221/15/2024-GST, dated 26.06.2024. Petition disposed off by way of remand.

Issues Involved:
1. Legality of the impugned Assessment Orders.
2. Applicability of CBIC Circular No.221/15/2024-GST.
3. Tax liability on the petitioner under the Hybrid Annuity Model (HAM).
4. Relevance of the petitioner's accounting practices and input tax credit claims.
5. Allegations of suppression of taxable turnover and misstatement of facts.

Detailed Analysis:

1. Legality of the Impugned Assessment Orders:
The petitioner challenged the impugned Assessment Orders dated 28.04.2023 for the Assessment Years 2019-20, 2020-21, and 2021-22, which demanded substantial tax, penalty, and interest amounts.

2. Applicability of CBIC Circular No.221/15/2024-GST:
The petitioner argued that the Department's stand was unjustified and relied on CBIC Circular No.221/15/2024-GST dated 26.06.2024. The Circular clarified the time of supply for payment of tax under the Hybrid Annuity Model (HAM) of the National Highways Authority of India (NHAI). According to the Circular, the tax liability under HAM contracts arises at the time of issuance of an invoice or receipt of payment, whichever is earlier, provided the invoice is issued on or before the specified date or the date of completion of the event specified in the contract.

3. Tax Liability on the Petitioner Under HAM:
The petitioner's contract with NHAI involved receiving 40% of the consideration during the execution of work and the remaining 60% annually over the next 14 years. The Department contended that since the work was substantially completed, the petitioner was liable to pay tax on the entire value. However, the Court noted that the petitioner is not liable to pay tax if no invoice is raised. Tax liability would arise only when the petitioner raises an invoice for payment in 30 Annuities or receives amounts in Annuities.

4. Relevance of the Petitioner's Accounting Practices and Input Tax Credit Claims:
The Department argued that the petitioner booked income in its Profit and Loss Account and availed 100% input tax credit on the tax paid by the sub-contractor. The petitioner countered that input tax credit must be availed as per Rule 16, and the treatment of income in the Profit and Loss Account was in accordance with accounting standards. The Court agreed that the petitioner's accounting practices and input tax credit claims were not relevant to the determination of tax liability under the HAM contract.

5. Allegations of Suppression of Taxable Turnover and Misstatement of Facts:
The Department alleged that the petitioner suppressed taxable turnover by not reporting the entire value of works completed and claimed an unjustified exemption. The Court noted that the Department's argument was based on the petitioner's failure to issue invoices within the prescribed period. However, the Court found that the petitioner's claim of exemption was not a suppression of taxable turnover but a matter of timing under the HAM contract.

Conclusion:
The Court set aside the impugned orders and remitted the cases back to the respondent to re-examine the issue in light of the CBIC Circular No.221/15/2024-GST and the Court's observations. The respondent is directed to carry out this exercise within three months and ensure that the petitioner is heard before final orders are passed. The Writ Petitions were disposed of with no costs, and connected Miscellaneous Petitions were closed.

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