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TMI Blog2022 (6) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... f the supplier of such goods or services. This is however only in respect of the categories notified under Sections 9(3), 9(4) 9(5) of the CGST Act and Sections 5(3), 5(4) and 5(5) of the IGST Act. There are similar provisions, namely, Sections 9(3), 9(4) 9(5), even in the Maharashtra Goods and Services Tax Act, 2017 (the State Goods and Services Tax Act). From the N/N. 10 of 2017-Integrated Tax (Rate) dated 28th June 2017, it is clear that any service supplied by any person, who is located in a non-taxable territory to any person located in the taxable territory [other than a non-taxable online recipient], it is the recipient of the service who would be liable to pay the GST on a Reverse Charge basis - In the present case, it is not in dispute that the Applicant was the supplier of services who is located in a nontaxable territory. The MCGM is a person located in the taxable territory and is not a non-taxable online recipient. This being the case, by virtue of the aforesaid Notification, it would be the MCGM [the recipient of the service] who would be liable to pay the GST on a Reverse Charge basis as contemplated under Section 5(3) of the IGST Act. In the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i 400 021 with the sum of Rs.67,94,965.02 on or before 30th August 2022. Once this amount is credited in the aforesaid Bank Account, the Arbitral Award dated 23rd June 2014 shall be marked as fully satisfied and the Applicant would thereafter have no claim whatsoever against the MCGM. The Execution Application is disposed of. - COMMERCIAL EXECUTION APPLICATION NO.54 OF 2016 - - - Dated:- 7-6-2022 - HON BLE B. P. COLABAWALLA, J. Mr. Firoz Andhyarujina, Senior Counsel a/w Mr. Javed Gaya, Manek Andhyarujina, Vidya Chaudhari, Mona Malvade i/b Chamber of Javed Gaya, for the Applicant. Mr. A. Y. Sakhare, Senior Counsel a/w Jitendra Mishra, Pooja Yadav, for MCGM. P. C.: 1. The above Execution Application is filed for executing the Arbitral Award dated 23rd June 2014 passed in favour of the Applicant and against the Municipal Corporation of Greater Mumbai (for short the MCGM ). 2. The MCGM was aggrieved by the Award passed by the Arbitral Tribunal, and therefore challenged the same before this Court under Section 34 of the Arbitration and Conciliation Act, 1996 (for short the Arbitration Act ). However, the said challenge was repelled by a learned single ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Award dated 23rd June 2014 would stand satisfied and the Applicant would have no claim whatsoever against the MCGM (in relation to the Arbitral Award dated 23rd June 2014). It was also directed that the costs of Rs.1 Lakh deposited by the MCGM in this Court shall also be credited by the Prothonotary and Senior Master in the aforesaid Bank Account on or before 31st March 2022. Accordingly, the above Execution Application was placed on Board for compliance and disposal on 5th April 2022. 4. When the matter came up on 5th April 2022, it was pointed out to the Court that the amounts deposited in the aforesaid Bank Account was not the entire amount due and payable under the Award but after withholding an amount of Rs.67,94,965.02 allegedly towards payment of the Goods and Services Tax ( GST ), and which according to the MCGM, was the liability of the Applicant. It was pointed out that as per the Arbitral Award, the principal amount due was Rs.6,83,55,000/- and the interest amount due was Rs.4,45,44,770.69/-. Hence, the total amount payable under the Arbitral Award was Rs.11,28,99,770.69/-. However, the MCGM had credited only an amount of Rs.10,61,04,805.67 on 31st March 2022. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d June 2014 (which determined the amounts due to the Applicant along with interest). However, the said Award was under challenge, and during the period of such challenge, the GST regime was introduced. In this regard, Mr. Sakhare drew my attention to Section 15 of the CGST Act read with Section 20 of the IGST Act and contended that the said provisions stipulate that the value of supply of goods or services or both, shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both, where the supplier and the recipient of the supply are not related, and the price is the sole consideration for the supply. He submitted that what is to be included in the value of supply is enumerated in sub-clauses (a) to (e) of sub-section (2) of Section 15 of the CGST Act. He submitted that Section 15(3) provides for what would not be included in the value of supply. Mr. Sakhare submitted that for the purposes of the present dispute, Section 15(2)(d) of the CGST Act [read with Section 20 of the IGST Act] is relevant, which inter-alia provides that the value of supply shall include interest or late fees or penalty for delayed payment of any con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er reserved judgement due to paucity of time. 9. In view of the statement made by Mr. Andhyarujina (recorded earlier), I am now only deciding the second point canvassed by him, namely, that under the CGST Act as well as under the IGST Act there was a Reverse Charge Mechanism ( RCM ) under which it was the liability of the MCGM to make payment of the GST. In support of this argument, Mr. Andhyarujina submitted that in the case of normal taxable supply, the supplier issues a tax invoice to the recipient of the goods or services and receives the amount from the recipient along with the GST and then discharges his GST liability to the Government. This is referred to be as the forward charge . In case of a reverse charge the supplier of the services or goods does not charge GST on the invoice and receives the amount from the recipient without any GST. Further, the liability to pay the GST is on the recipient of the goods or services instead of the supplier of such goods or services in respect of notified categories of supply. Mr. Andhyarujina submitted that the objective of shifting the burden of paying GST to the recipient is (i) to widen the scope of levy of tax on various unorg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, as admittedly the Applicant is a person who is located in a non-taxable territory and the recipient of the service (the MCGM) was a person located in the taxable territory. This being the factual position, it is the recipient of the service (in India) who would have to pay the GST, was the submission of Mr. Andhyarujina. 11. Mr. Andhyarujina further submitted that under the provisions of the GST regime, the recipient of the service (in the present case MCGM) can avail of Input Tax Credit for the GST paid under the Reverse Charge Mechanism. The only condition is that the goods and services are used or will be used for business or furtherance of business. Hence, looking to the overall facts of the matter, Mr. Andhyarujina submitted that there is absolutely no justification for the MCGM to withhold the amount of Rs.67,94,965.02 towards the alleged liability of GST from the Applicant. Mr. Andhyarujina submitted that if the amount of Rs.67,94,965.02 is allowed to be retained by the MCGM (which belongs to the Applicant) and is thereafter paid over to the Government towards the liability of GST, it would amount to unjust enrichment on the part of the MCGM because the MCGM would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of Quantities shall include taxes and duties as well. Mr. Sakhare therefore contended that in the present case, though the MCGM is the assessee under the provisions of the GST regime and was liable to pay the GST under the Reverse Charge Mechanism, since the Applicant had agreed to bear all the taxes, the MCGM was entitled and justified to deduct from the Applicant the GST payable by the MCGM. He, therefore, submitted that the MCGM was well within its rights to withhold the amount of Rs.67,94,965.02 towards payment of the GST in view of Clause 3 of the contract between the parties. 13. As far as the argument of Mr. Andhyarujina regarding the Input Tax Credit is concerned, Mr. Sakhare submitted that the aforesaid argument has no merit because firstly the MCGM has not claimed any Input Tax Credit on the amount of Rs.67,94,965.02 and therefore there is no question of a double benefit or unjust enrichment on the part of the MCGM. Secondly, Mr. Sakhare submitted that in any event, MCGM s output liability towards payment of GST is miniscule as the MCGM is providing most of the services which are exempt from tax and no Input Tax Credit can be availed on exempted services. For all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both. (5) The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services: Provided that where an electronic com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in the taxable territory and also does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax. 16. It is not in dispute that the services rendered by the Applicant to the MCGM would be governed by the IGST Act as the same are in relation to inter-State supply of services. It is also not in dispute that the Government of India, Ministry of Finance [Department of Revenue] has issued Notification No. 10 of 2017-Integrated Tax (Rate) dated 28th June 2017 under which, the Government, in exercise of powers conferred by sub-section (3) of Section 5 of the IGST Act, has notified that on categories of supply of services mentioned in column (2) of the Table appended to the said Notification and supplied by a person as specified in column (3) of the said Table, the whole of the integrated tax leviable under section 5 of the IGST Act, shall be paid on a Reverse Charge basis by the recipient of the such services as specified in column (4) of the said Table. As far as the present matter is concerned, the relevant entry of the table is at Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble Supreme Court in the case of Rashtriya Ispat Nigam Limited [Supra], has clearly held that as far as indirect taxes are concerned, an assessee can enter into a contract to shift its liability on the other party. The relevant portion of the Supreme Court Judgment reads thus: 4. Clause 9.3 thereof reads as follows: 9.3. The contractor shall bear and pay all taxes, duties and other liabilities in connection with discharge of his obligations under this order. Any income tax or any other taxes or duties which the company may be required by law to deduct shall be deducted at source and the same shall be paid to the tax authorities for the account of the contractor and the company shall provide the contractor with required tax deduction certificate. ********************** 36. It was submitted on behalf of the respondent that Clause 9.3 and the contract must be read as a whole and one must harmonise various provisions thereof. However, in fact when that is done as above, Clause 9.3 will have to be held as containing the stipulation of the contractor accepting the liability to pay the service tax, since the liability did arise out of the discharge of his obliga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party viz. the bank was responsible for the formulation of the voluntary retirement scheme, and the employees had only to decide whether to opt for it or not, and the principle of contra proferentem was applied. Unlike the VRS scheme, in the present case we are concerned with a clause in a commercial contract which is a bilateral document mutually agreed upon, and hence this principle can have no application. Therefore, Clause 9.3 will have to be read as incorporated only with a view to provide for contractor's acceptance of the tax liability arising out of his obligations under the contract. (emphasis supplied) 20. It is therefore clear that the MCGM, even though being the assessee, can always contract to shift its liability to pay GST on the Applicant. 21. Having said this, I shall now examine the contract between the parties. According to Mr. Sakhare, the contract entered into between the parties, clearly contemplates that it is the Applicant who would have to pay all taxes and duties together with all general risks, liabilities, and obligations set out or implied in the contract. In this regard, Mr. Sakhare relied upon Clause 3 of the contract which reads thus: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld certainly not have taken into consideration that the MCGM would not make payment in a timely manner, raise disputes, which would then make them liable to pay interest and which would be subjected to the levy of GST. This, according to me, is also made clear from clause 4, which stipulates that the rate of price (which is to include all taxes and duties) shall be entered against each item in the priced Bill of Quantities whether quantities are stated or not. The costs of item against which the contractor has failed to enter a rate of price shall be deemed to be covered by other rates and prices entered in the Bill of Quantities. When one reads clauses 3 4 of the contract in conjunction with each other, the inescapable conclusion is that the taxes and duties referred to in clause 3 did not in any way contemplate the liability of GST that may arise due to payment of interest for delayed payment of any consideration for the supply of the services. This, according to me, was never in contemplation of the parties when they entered into the contract. I am therefore of the opinion that clause 3 of the contract does not come to the assistance of the MCGM to deduct the GST of Rs.67,94 ..... 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