GST LIABILITY OF A CHARITABLE TRUST OPERATING A MARRIAGE HALL

[DR.MARIAPPAN GOVINDARAJAN]

We used to see the many trusts are running marriage halls.  Instead of levying rent and other charges for the marriage functions conducted in the halls they only issued bill for the amount received from the clients as donation to claim exemption to pay tax under the Income Tax Act, 1961.  Whether such an exemption is available under Central Goods and Services Tax Act, 2017 (‘Act’ for short)  The said amount is considered as revenue by the Department and  GST is levied accordingly.

In M/S. ANNAI ANGAMMAL ARAKKATTALAI (PRE MAHAL) , VERSUS THE JOINT COMMISSIONER OR GST (APPEALS) , COIMBATORE, THE ASSISTANT COMMISSIONER OF GST & CENTRAL EXCISE, KARUR DIVISION. - 2025 (1) TMI 1429 - MADRAS HIGH COURT the petitioner is a charitable trust having registered office at Karur.  The petitioner runs a marriage hall under the name and style of Prem Mahal at Kovai Road.   The preventive unit visited the said marriage hall on 23.01.2020.  The Unit asked the petitioner to handover entire accounts and records. The Authorities further issued summons to the petitioner to supply income tax returns, Balance Sheet and Profit and Loss account up to 31.03.2019 along with bank statement of the Trust and Trustees.   The petitioner submitted the same and specifically stated that some amounts are reimbursable to the persons concerned.

The GST authority of Preventive Unit arrived at a receipt of Rs. 3,86,36,410/- for the marriage hall from July, 2017 to January, 2020.  The petitioner paid a sum of Rs. 58,93,702/- as GST liability and a sum of Rs. 8,84,056/- as penalty liability under cum-tax basis method applying Rule 35 of CGST Rules, voluntarily to avoid further disputes.  The Authority rejected the claim of the petitioner for the payment of tax on cum-tax benefit.  The Authority issued a show cause notice dated 31.12.2021 arriving a sum of Rs. 69,54,554/- as GST liability for the total value of Rs. 3,86,36,410/-.  The petitioner gave a reply on 12.01.2022, to justify the application of cum-tax basis method and objected the interest and to invoke Section 74 (1) CGST Act. 

The Assistant Commissioner, the second respondent passed an order in original dated 23.02.2022, demanding balance GST liability of Rs. 10,60,852/- along with interest and full amount of GST liability as penalty i.e. Rs. 69,54,554/-.  The petitioner preferred an appeal before the first respondent, Joint Commissioner (Appeals).   The first Appellate Authority confirmed the order in original vide dated 29.07.2022.  The petitioner filed the present writ petition before the High Court challenging the orders of both the authorities below.

The petitioner submitted the following before the High Court-

• The petitioner registered as service provider under CGST Act w.e.f. 14.02.2020.
• The petitioner gave a reply on 12.01.2022 to the show cause notice to the petitioner  justifying the application of cum-tax basis method by the petitioner.
• The petitioner objected the interest and to invoke Section 74 (1) CGST Act on the ground that the petitioner neither suppressed any payments nor wilfully misrepresented. 
•  The total value arrived at by the second respondent includes advance, reimbursable amount and GST.
• The second respondent assumption is against the basic principles of indirect taxation and the petitioner is not liable to pay service tax as it is agent of government which has to be paid by the person concerned.
• The second respondent invoking Section 74 (1) of CGST Act rejected the petitioner claim of cum tax basis benefit. 
• The second respondent had not even established the petitioner involved in fraud or wilful misstatement or suppression of facts available to invoke section 74 (1) of CGST Act
• The tax element is included in the total value of taxable supply and petitioner is entitled to arrive GST liability applying cum tax basis under Rule 35 of CGST Rules 2017.
• No penalty shall be levied since the petitioner already discharged full tax liability as per Section 73 (8) of the Act even before the initiation of proceedings.
•  Non-registration is neither wilful nor wanton.
• The petitioner admitted the total value only in order to buy peace.
• The petitioner engaged other person to provide service and paid them. Hence, the total value of receipt is not reliable. 
• The second respondent would not have issued notice under Section 73(1) when tax liability and penalty is paid or otherwise the second respondent would have issued notice only for the short fall amount.
• Section 122 (2) (b) of CGST Act penalty applies for registered entity and not the petitioner which is not registered at the time of visit by the respondents. 
• For non-registered entity penalty of Rs. 10,000/- can be levied under Section 122 (1) of the CGST Act.

The petitioner, in view of the above arguments, sought for the intervention of the High Court in these original petition and appeal. 

The Department submitted the following before the High Court-

• The petitioner was rendering taxable activities such as renting of marriage hall and other related taxable supply. 
• It is found that the petitioner neither registered with the GST Department nor discharged the GST liability. 
• As per Section 22 (1) CGST Act, Tax payer must have registered themselves with GST Dept w.e.f. 01.07.2017.
• But the petitioner got itself registered with the Department on 14.02.2020, after a lapse of more than 2 years 13 months.
• The petitioner registered with the Department only after 20 days of the visits of the Department Authorities.
• Based on incriminating documents and depositions of the petitioner and few clients, the GST liability was arrived to a tune of Rs. 69,54,554/- for the period July, 2017 to January, 2020. 
• The petitioner computed GST liability on cum-tax basis and discharged GST liability of Rs. 58,93,702/- and penalty a sum of Rs. 8,84,056/- on 03.08.2020.
• The second respondent rejected the claim of cum-tax valuation method and confirmed the demand of GST Rs. 69,54,554/- with interest, appropriated amount of Rs. 58,93,702/- and penalty of Rs. 69,54,554/-, appropriating penalty Rs. 8.84,056/- under Section 122 (2) (b) of CGST Act.
• The payment of tax by the petitioner cannot be said to be a voluntary payment and has been made only to wriggle out of the penal consequences.
• Such conduct of the petitioner to evade tax will also fall under suppression and fraudulent activities envisaged under Section 74 of the GST Act. 

The High Court considered the submissions of both the parties.  The High Court perused the order-in-original and order-in-appeal.  The High Court observed that there is a deliberate attempt to evade payment of tax by not registering himself under the Act and also issuing receipts as donation to the Trust.  Only after the inspection they have agreed to pay the tax by registering themselves. This conduct cannot be said to be a voluntary conduct. There have been contraventions of provisions of the GST Act for which the petitioner is liable to make good the non-payment and also suffer penal consequences for the same.  the Original Authority as well as the Appellate Authority have considered the case of the petitioner in its proper perspective and had applied the Provisions of law on the issue in its right perspective which do not call for any interference by this Court.

The High Court dismissed the writ petition.