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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 ..... the Arbitration Act before the Division Bench of this Court was dismissed on 8th September 2021. The order of the Division Bench was thereafter challenged before the Hon'ble Supreme Court by filing an SLP which was also dismissed on 22nd November 2021. The Hon'ble Supreme Court granted time to the MCGM up to 31st March 2022, to make payment to the Applicant. 3. In light of the above factual position, this Execution Application was moved before me on 9th March 2022. On the said date, it was pointed out to the Court that the Applicant, being a foreign entity, does not have a bank account in India (as the contract between the Applicant and the MCGM was concluded in 2003). The Applicant, therefore, requested that payment under the Arbitral Award be made by the MCGM in the name of the Applicant's lawyer and agent who would credit the same into the Applicant's account in escrow for transfer to the Applicant in Austria. The Escrow Agreement dated 3rd February 2022 was produced before the Court on the said date along with a letter dated 29th November 2021 written by the Applicant to the MCGM requesting them to credit the monies due under the Award to their lawyer's account to be held in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of GST payable by the Applicant. This deduction was made by the MCGM because of the provisions of Section 15(2)(d) of The Central Goods and Services Tax Act, 2017 (for short the "CGST Act") read with Section 20 of the Integrated Goods and Services Tax Act, 2017 (for short the "IGST Act"). 5. Thereafter, the matter was adjourned to 18th April 2022 when I heard the learned Senior Counsel for the parties. Being aggrieved by the action of the MCGM withholding the sum of Rs.67,94,965.02 towards the alleged GST liability of the Applicant, Mr. Firoz Andhyarujina, the learned Senior Counsel appearing on behalf of the Applicant, pointed out that the liability towards GST, if any, could not be foisted upon the Applicant, and therefore, the MCGM ought to be directed to pay the amount of Rs.67,94,965.02 to the Applicant. To substantiate this argument, the submissions made by Mr. Andhyarujina were twofold. The first submission was that there is no liability to pay any GST as the GST law/regime came into force much after the contract between the Applicant and the MCGM was concluded (i.e. in the year 2003) and even the Arbitral Award was passed long before the GST law/regime was brought i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitral Award as the same is awarded in favour of the Applicant because of the delay on the part of the MCGM to make payment. Mr. Sakhare submitted that considering that interest is being paid after the GST regime was brought into force, GST would be applicable on the interest component of the Arbitral Award, and which would have to be paid to the Government. 7. On the second contention of the Applicant, 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 aforesaid GST liability, Mr. Sakhare submitted that under clause 3 of the Contract between the parties, it was agreed that all taxes were to be borne by the Applicant. He, therefore, submitted that notwithstanding the Reverse Charge Mechanism (provided under the CGST Act and the IGST Act), the GST liability could not be foisted on the MCGM and would be payable solely by the Applicant. 8. In support of their respective submissions, both learned Senior Counsel also tendered to the Court their written submissions/notes of arguments. I therefore heard the parties at length on 18th April 2022 and placed the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier is based outside India). To substantiate this argument, Mr. Andhyarujina relied upon Sections 9(3), 9(4) and 9(5) of CGST Act and Sections 5(3), 5(4) and 5(5) of the IGST Act. Mr. Andhyarujina submitted that these provisions govern the Reverse Charge Mechanism for intra-State and inter-State transactions, respectively. Mr. Andhyarujina then pointed out that in exercise of the powers conferred by sub-section (3) of Section 5 of the IGST Act, the Government has notified the categories of supply in which the specified recipient of the services is liable to pay the GST under the RCM (Reverse Charge Mechanism). In this regard, the learned Senior Counsel relied upon Notification No. 10 of 2017-Integrated Tax (Rate) issued by the Government of India, Ministry of Finance (Department of Revenue), dated 28th June 2017. The relevant portion of this Notification reads thus:- GSR...(E)-In exercise of the powers conferred by sub-section (3) of section 5 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), the Central Government on the recommendations of the Council hereby notifies that on categories of supply of services mentioned in column (2) of the Table below, supplied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant. He, therefore, submitted that looking at it from any angle, the MCGM is wholly unjustified in withholding the amount of Rs.67,94,965.02 and the MCGM be directed to credit the abovementioned Bank Account with the aforesaid amount. 12. On the other hand, Mr. Sakhare, the learned Senior Counsel appearing on behalf of the MCGM, submitted that there is no merit in the arguments canvassed by Mr. Andhyarujina. He submitted that it is true that under the Notification relied upon by Mr. Andhyarujina (referred to by me above), the liability to pay the GST would be on the MCGM because admittedly the Applicant is a person who is located in a non-taxable territory and is supplying services to a person in the taxable territory (other than a non-taxable online recipient). In such a situation, any person located in a non-taxable territory, and supplying services to a person located in the taxable territory (other than a non-taxable online recipient), it is the recipient of the service that would be liable to pay the GST. He has submitted that though this is the law, the burden of tax can always be shifted by the parties by entering into a contract to the contrary. In this regard, Mr. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the papers and proceedings in the above Execution Application. As mentioned earlier, both parties also tendered written submissions/notes in support of their arguments. It can hardly be disputed that in case of a normal taxable supply, the supplier issues a tax invoice to the recipient of the goods and services and receives the amount from the recipient along with the GST and then discharges its GST liability to the Government. This, as Mr. Andhyarujina puts it, is a "forward charge". Then a concept of "Reverse Charge" is also introduced in the GST regime. In the 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 adding GST to his invoice. This is because under the Reverse Charge Mechanism, the liability to pay the GST is on the recipient of the goods or services instead of 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritory, 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." 15. Similarly, Sections 5(3), 5(4) and 5(5) of the IGST Act read thus: "5. Levy and collection ---- (1) ........... (2) ........... (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. From the aforesaid Notification, 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. 18. I must mention that this position has even been conceded by the MCGM, not only in oral arguments, but also in the written note submitted by the MCGM. In this note, it is specifically stated that though the MCGM is the assessee under the provisions of law and is liable to pay the GST under the Reverse Charge Mechanism, since the Applicant has agreed to bear all the taxes (under the contract), the MCGM is entitled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant became the assessee due to amendment of 2000, his position is exactly the same as in respect of sales tax, where the seller is the assessee, and is liable to pay sales tax to the tax authorities, but it is open to the seller, under his contract with the buyer, to recover the sales tax from the buyer, and to pass on the tax burden to him. Therefore, though there is no difficulty in accepting that after the amendment of 2000 the liability to pay service tax is on the appellant as the assessee, the liability arose out of the services rendered by the respondent to the appellant, and that too prior to this amendment when the liability was on the service provider. 39. The provisions concerning service tax are relevant only as between the appellant as an assessee under the statute and the tax authorities. This statutory provision can be of no relevance to determine the rights and liabilities between the appellant and the respondent as agreed in the contract between the two of them. There was nothing in law to prevent the appellant from entering into an agreement with the respondent handling contractor that the burden of any tax arising out of obligations of the respondent under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be included in the rates and prices bid and would have to be borne by the Applicant. This clause does not contemplate the payment of any taxes that have arisen on account of payment of interest because of a default on the part of the MCGM to make payment in a timely manner. This is something that could have never been contemplated when the Applicant submitted its rates and prices bid in the priced Bill of Quantities under Clause 3 of the Contract. In the present case, the liability to pay GST has arisen because there were disputes between the Applicant and the MCGM on the amounts payable by the MCGM to the Applicant. Since, the MCGM did not make those payments, the Applicant invoked Arbitration which finally culminated into an Arbitral Award dated 23rd June 2014. Since the Arbitrator found that there were monies due and payable by the MCGM to the Applicant and which were not paid, the Arbitral Tribunal awarded interest on the aforesaid amounts at the rates more particularly mentioned in the Arbitral Award. This Award was subjected to a challenge all the way upto to the Supreme Court without any success (the SLP was dismissed on 22nd November 2021). Whilst this challenge was pendi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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