2021 (9) TMI 367 - HC - GST

Refund of GST alongwith interest - interpretation and scope of mutual lease (rent) agreement -who has to bear the burden of GST - seeking direction to first respondent to pay the GST on lease rent along with lease rent - scope of the word 'new introductions' occurred in Clause 14 would includes the GST or not - HELD THAT - The prime object of the petitioner in moving this writ petition by invoking Clause 14 of the agreement is that, the GST component if at all to be payable shall be paid only by the first respondent and not by the petitioner. Therefore, it is the lis between, primarily, the petitioner and the first respondent. Even though, the argument has been extended by the learned counsel for the petitioner as to the very leviability of GST on lands and buildings in the teeth of Entry 49 of list II of Schedule 7 of the Constitution, those issues cannot be agitated here, as the issue admittedly had been pending before the Hon'ble Supreme Court. Whether the word 'new introductions' occurred in Clause 14 would includes the GST, which was introduced on 01.07.2017 or not, and if it includes, the same would be borne by which party is the only question or lis to be resolved by the arbitrator before whom the parties can be relegated by invoking Clause 21 of the agreement? - HELD THAT - It is the settled proposition that when there is an arbitration clause in writing, where both parties have signed, without invoking Arbitration Clause, the parties cannot be permitted to come before the High Court, especially by invoking Article 226 of the Constitution - this is a classic case, where, there is a written provision/clause available in the agreement, signed by both parties, where Arbitral Tribunal can be constituted, for which the sole arbitrator can be nominated by mutual consent of both parties, before whom, whatever be the controversy (ies)/dispute(s)/difference(s)/claim(s)/claim(s) in tort in relation to the agreement, the same can be very well referred to. The present writ petition with the aforesaid prayer as has been sought for by the petitioner cannot be entertained by this Court at this moment. Hence, for all these reasons, this Court is inclined to dispose of this writ petition with the following orders that the prayer sought for herein cannot be granted and therefore the writ petition is liable to be rejected and accordingly, it is rejected.

Summary

Issues Involved:
1. Refund of GST component paid by the petitioner.
2. Interpretation of Clause 14 of the lease agreement regarding tax liability.
3. Legality of GST on land and buildings.
4. Arbitration clause applicability.

Issue-wise Detailed Analysis:

1. Refund of GST Component Paid by the Petitioner:
The petitioner sought a Writ of Mandamus to direct the first respondent to refund the GST component of ?43,73,269/- for the period from July 2017 to June 2021, along with 18% interest per annum. The petitioner argued that GST should not be levied on lands and buildings, and any such tax, if introduced post-agreement, should be borne by the first respondent. The court, however, did not grant this prayer, noting that the issue of GST's applicability on lands and buildings is pending before the Supreme Court.

2. Interpretation of Clause 14 of the Lease Agreement Regarding Tax Liability:
Clause 14 of the lease agreement stated that all taxes, rates, cess, and other levies, including new introductions, shall be borne by the first party (the petitioner). The petitioner argued that GST, being a post-agreement tax, should not be included under 'new introductions' and should be paid by the first respondent. The first respondent contended that Clause 14 unambiguously places the burden of all taxes, including new introductions, on the petitioner. The court refrained from interpreting Clause 14, suggesting that this issue should be resolved through arbitration as per Clause 21 of the agreement.

3. Legality of GST on Land and Buildings:
The petitioner challenged the imposition of GST on leased land, arguing that it falls under Entry 49 of List II (State List) of Schedule 7 of the Constitution, and thus, only the state can levy such taxes. The petitioner cited a pending Supreme Court case (Union of India vs. UTV News Limited) addressing this larger constitutional issue. The court noted that this issue is not within its purview in this writ petition and should be resolved by the Supreme Court.

4. Arbitration Clause Applicability:
Clause 21 of the agreement mandates arbitration for any disputes arising out of the agreement. The first respondent argued that the dispute over GST liability should be referred to arbitration. The court agreed, stating that when an arbitration clause exists, parties must resort to arbitration before seeking judicial intervention. Consequently, the court directed the parties to constitute an Arbitral Tribunal with a sole arbitrator by mutual consent to resolve the dispute.

Conclusion:
The court dismissed the writ petition, directing the parties to resolve their dispute through arbitration as per Clause 21 of their agreement. The court emphasized the settled legal proposition that disputes arising from contractual terms should be referred to arbitration when an arbitration clause is present. The court did not express any view on the interpretation of Clause 14 or the legality of GST on lands and buildings, leaving these issues to be resolved by the arbitrator and the Supreme Court, respectively.