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TMI Blog2024 (11) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... annuities. The clarification of the 43rd GST Council saved exemption to the service under 9967 in entry No.23A and held that the exemption does not cover any deferred/annuity payment for construction service. Therefore it has been announced that the construction of roads simplicitor is taxable service, though the payment is in full or annuity to the concessionaire. The council s reiteration preserved the exemption of the Service under the Code 9967 and enunciated that the taxable Service fall within the scope of heading 9954. A close reading of notification Nos. 12, 32 and 33 of 2017 in no way suggests that the entries 23 or 23A or 24A exempts the services under 9954 i.e. construction service of the highways, bridges, and so on - there is no intersection or overlap or contradiction of direction in the resolutions of the 22nd and the 43rd GST Council vis- -vis Notifications Nos. 12, 32 and 33 of 2017 and the impugned circular. In the present case, so many factors need determination to positively conclude the petitioner s claims and in the absence of any specific tenable ground demonstrating lack or error in the jurisdiction of the respondent department in the issuance of show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, an acceptance letter dated 30.12.2005 was issued. In terms thereof, the NHAI and the petitioner entered into a contract agreement on 31.01.2006 for the execution of work on a BOT annuity basis. 5. The concession agreement stipulates that the petitioner/concessionaire has to bear all the expenditure for the fulfilment of the obligations in execution and perform the entrusted assignments including engineering, financial, construction, operation and maintenance respectively during the concession period and allow the NHAI to levy demand and collect appropriate fees from the vehicles and people liable for payment. 6. The petitioner carried out the entire construction of the road by discharging service tax and value-added tax (VAT) by 26.03.2009 and began operation and maintenance on 27.03.2009. 7. As per the concession agreement, during the period, the petitioner/concessionaire is not allowed to collect tolls from the users and the consideration for the contract is payable by the NHAI in annuity of a fixed sum in instalments towards operation and maintenance of the assigned portion of the highway. However, if there is a failure to perform its obligations during the operation period, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of supply of service in Section 7 of the CGST Act. Further citing Articles 2, 3, 6, and 18 of the agreement claimed that subject to making the availability of length of the road and period, the annuity proportionately abates, and the covenant explains that the annuity is linked to the access to the carriageway, which is, in principle as opposed to the toll charges. Therefore, the annuity paid by the NHAI to the petitioner is exempted under Sl. No.23A of the Notification No.32 of 2017. That apart, asserted that the impugned circular applies to the hybrid annuity models but not the BOT annuity model. As such, the show cause notice based on the impugned circular is untenable. 14. Besides pleaded that, in M/S DPJ Bidar Chincholi (Annuity) Road vs. Union of India Ors, Writ Petition No.22250 OF 2021 judgment dated 11.07.2022 the Hon ble High Court of Karnataka held that the Circular dated 17.6.2021 for issuance of the impugned show cause notice is contrary to the exemption Notifications and quashed the Circular. The dictum in Kusum Ingots Alloys Ltd. v.Union of India, (2004) 6 SCC 254 and Shiv Kumar v. Union of India, AIR 2014 Kar 73, T.Rajakumari and others v. Govt. of TN AIR 2016 Md 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 2022 cannot be accepted as the petitioner had raised invoices during the GST regime and received the amounts. 17. Further submits that the impugned writ petition against the show cause notice itself is premature as the proceedings are at the initial stage before the authority and any interest much less fundamental right has been infringed at the moment. Further explained that the initiation of proceedings under Section 73 of the CGST Act is time-bound and to protect the revenue, show-cause notice has been issued. Therefore the contention that the demand was predetermined by the authority is unacceptable. That apart, as there is a continuous supply of service, the pleading of the petitioner that they are not liable to pay tax as the construction was completed even before the commencement of the GST Act 2017 is unsuitable as the time of supply of service would be in tune with the issuance of the invoice by the service provider or the date of receipt of payment in terms of Section 13(2) and Section 31(5) of the CGST Act. Furthermore, the agreement and invoices drawn by the petitioner make it obvious that the ownership of the project is with the NHAI, except for rendering operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Council, hereby exempts the intra-State supply of services of description as specified in column (3) of the Table below from so much of the central tax leviable thereon under sub-section (1) of section 9 of the said Act, as is in excess of the said tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (5) of the said Table, namely:- TABLE Sl.No. Chapter,Section,Heading, Group or Serivce Code (Tariff) Description of Services Rate (per cent) Condition (1) (2) (3) (4) (5) 23 Heading 9967 Service by way of access to a road or a bridge on payment of toll charges. Nil Nil Therefore it is obvious that Sl.No.23 is specifying exempting the tax for the services by way of access to a road or a bridge, the consideration is by way of toll charges. 21. Thenceforward the 22nd GST Council s deliberation on the issue of payment of annuity in place of toll charges to the developers of public infrastructure and its recommendation to treat the annuity on par with toll and exempt from tax for the service by way of access to a road or bridge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eading, Group or Serivce Code (Tariff) Description of Services Rate (per cent) Condition (1) (2) (3) (4) (5) 24A Heading 9967 Service by way of access to a road or a bridge on payment of annuity. Nil Nil 23. Hence, the above notifications by supplementing the Serial Numbers 23A and 24A in the GST Act 2017 and IGST Act 2017 respectively, the services by way of access to a road or bridge on payment of an annuity, under the service head of 9967 are exempted from tax. 24. Subsequently at the instance of the government authorities on a query, the 43rd GST Council explicated that the annuity paid as deferred payment for construction of roads has not been exempted from GST. Nonetheless reiterated that Entry No.23A of 2017 Notification exempts service by way of providing access to road or bridge on payment of annuity. 25. Thereupon the respondent department issued an impugned circular on 17.06.2021 as clarification, which reads as under: CIRCULAR No.150/06/2021-GST [CBIC-190354/36/2021-TRU SECTION-CBEC] SECTION 9, READ WITH SECTION 11 OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 LEVY AND COLLECTION OF TAX CLARIFICATION REGARDING APPLICABILITY OF GST ON ACTIVITY OF CONSTRUCTION OF ROAD W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Additionally, explained that the service code covers (a) supporting services in transport (b) operation services of National Highways, State Highways, Express Highways, Roads and streets, (c) bridges and tunnel operation services, by way of access to a road or bridge on payment of toll under Entry 23 of the Notification. In substance, the services enumerated in 23 and 23A for providing access to roads or bridges are exempted, whether the consideration is in the form of tolls or annuities. On top of that, specified the services of construction of highways, streets, road railways, airfield runways, bridges and tunnels, which fall under Service Code 9954, whether the consideration may be upfront or partially in deferred annual payment/annuity is not covered under Entry 23A and not exempt from the GST. 27. The resolution of the 22nd GST Council and the consequent notification Nos.32 and 33 of 2017 elucidates that payment of annuity to the developers of public infrastructure has been equated with toll which was already exempted from tax. In effect, the service of access to a road or bridge on payment of an annuity covered under Code 9967 is qualified for exemption. Therefore inserti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be within the compass of whether the service of the petitioner falls within the heading of SAC 9967 covered under Entry 23A or the annuity is being paid for the construction and maintenance of the road within the meaning of services covered under heading 9954 to make out the taxability under GST. Thus, we are of the considered opinion that a fact-finding deliberation is essential in determining the petitioner s position, which cannot be done in a writ petition. 31. Be that as it may, the challenge in the writ petition is against the show cause notice. It is a settled position that ordinarily no writ petition can be entertained against a show cause notice. A mere show cause notice does not give rise to any cause of action or cannot be considered as an adverse order that affects the rights of the parties unless it is established that such show cause notice has been issued by an authority without jurisdiction or the show cause notice has been issued without affording the recipient an opportunity to be heard or it is vague or ambiguous or the show cause notice is issued with malicious intention or in abuse of process or the notice threatened to cause irreparable harm, the court may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r after holding an enquiry the authority concerned may drop the proceedings and/or hold that the charges are not established. It is well settled that a writ petition lies when some right of the party is infringed. A mere show-cause notice or charge sheet does not infringe on the rights of anyone. It is only when a final order imposing some punishment or otherwise adversely affecting a party is passed, that the said party can be said to have any grievance. 15. Writ jurisdiction is discretionary jurisdiction and hence such discretion under Article 226 should not ordinarily be exercised by quashing a show-cause notice or charge-sheet. 16. No doubt, in some very rare and exceptional cases the High Court can quash a charge sheet or show-cause notice if it is found to be wholly without jurisdiction or for some other reason if it is wholly illegal. However, ordinarily, the High Court should not interfere in such a matter. (iii) In, Secretary, Ministry of Defence and others v. Prabhash Chandra Mirdha - (2012) 11 SCC 565 in para No.10 held as under: 10. Ordinarily, a writ application does not lie against a charge- sheet or show-cause notice for the reason that it does not give rise to any c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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