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TMI Blog2025 (1) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Single Judge of this Court on 06 March 2018. However, the appeal under Section 37, which came to be preferred by DMRC, thereafter came to be partly allowed by a Division Bench of this Court in DELHI METRO RAIL CORPORATION LTD. VERSUS DELHI AIRPORT METRO EXPRESS PRIVATE LIMITED [ 2019 (1) TMI 2058 - DELHI HIGH COURT] . Conclusion - The very foundation of the SCN and which had proceeded on the basis of the compensation which had come to be awarded to the writ petitioner under that Award, no longer survives. Petition allowed. - HON'BLE MR. JUSTICE YASHWANT VARMA And HON'BLE MR. JUSTICE DHARMESH SHARMA For the Petitioner : Mr. Mahesh Agarwal, Mr. Alok Yadav, Ms. Sayree Basu Malik and Mr. Harshvardhan Ranawat, Advs. For the Respondents : Mr. Harpeet Singh, SSC for R- 1. Mr. R. Ramachandran, Sr. SC for R-2. Ms. Nidhi Raman, CGSC with Mr. Akash Mishra, Adv. for R- 3 ORDER 1. The instant writ petition has been preferred seeking the following reliefs: (a) declare that the Impugned Notice dated 11.08.2022 issued by the Respondent No.1 to the Petitioner is: (i) without jurisdiction, without authority of law, illegal, unsustainable and void ab initio; (ii) ultra vires the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Intelligence, (erstwhile Directorate General of Central Excise Intelligence) (in short, 'DGGSTI'), Mumbai Zonal Unit ('MZU') indicating that M/s. DAMEPL, a subsidiary of Reliance Infrastructure Ltd., had been awarded a compensation of Rs.2950 crores by the Arbitral Tribunal against M/s. Delhi Metro Rail Corporation Ltd. (hereinafter referred to as 'DMRC') for alleged breach of the agreement on the Airport Express line and that the compensation covered damages as a result of the alleged breach by DMRC of its obligations under the Concession Agreement and material adverse effect. On the basis of the specific intelligence that M/s. DAMEPL had not discharged their Service Tax liability on the amount of arbitration award, enquiry was initiated on 16.05.2017 (by letter mode) against M/s. DAMEPL by officers of the DGGSTI, MZU under Section 83 of the FA, 1994 read with Section 14 of the Central Excise Act, 1944. xxxx xxxx 4.6 It can be seen from the submissions of M/s. DAMEPL vide letters dated 19.12.2019 (Paragraph 3.6 refers) and 01.10.2021 (Paragraph 3.12 refers) that while it has been contended by them earlier that the termination payment was liquidated damage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of 'service' under Section 65B(44) of the FA, 1994 read with that of 'taxable service' under Section 65B(51) ibid. Therefore, the contention raised by M/s. DAMEPL vide letter dated 01.10.2021 that the amount of Termination Payment was 'a capital receipt' does not appear acceptable. It appears that the ratio of the Advance Rulings, No. GST-ARA-15/2017-18/B-30 dated 08.05.2018 in Re: Maharashtra State Power Generation Company Ltd. of Maharashtra AAR and No. Guj/Gaar/R/2019/06 dated 04.03.2019 of Gujarat AAR in Re: Dholera Industrial City Development Project Ltd. as also the Order No. MAH/AAAR/SS-RJ/09/2018-19 dated 11.09.2018 of the Maharashtra AAAR, though in the context of GST but which are pari-materia, support the levy of ST on liquidated damages. 4.7 The further contention raised by M/s. DAMEPL vide letter dated 19.12.2019 that the Termination payment received by DAMEPL can, at the most, be construed as a substitute for the Ticket Fares that it could have collected had the Concession Agreement survived . It appears that M/s. DAMEPL have also claimed exemption from levy of Service Tax by linking the 'Termination payment' purportedly to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstructive, of the claimant, which the civil courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent. From the definition of 'service' elaborated at Paragraph 4.1 above, it can be seen that the same excludes, inter-alia, 'an activity' which constitutes merely (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner, or (ii) a transaction in money or actionable claim. It can be seen that M/s. DAMEPL had clarified in their submissions vide letter dated 19.12.2019 that the implementation of the project was undertaken by them on Build-Operate-Transfer ('BOT') basis which is also evidenced by the Article 11. l (m) of the Concession Contract dated 25.08.2008. Thus, the activity of M/s. DAMEPL under the scope of this enquiry cannot be said to be merely a transfer of title. Further, the said activity cannot be said to be an actionable claim on account of an existing debt or beneficial interest. That the transaction is a 'service' has been also impliedly admitted by M/s. DAMEPL, except that they have claimed it to be exempt as being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid as liquidated damages is an amount paid only to compensate for injury , loss or damage suffered by the aggrieved party due to breach of the contract and there is no agreement, express or implied by the aggrieved party receiving the liquidated damages, to refrain from or tolerate an act or to do anything for the party paying the liquidated damages, in such cases liquidated damages are merely a .flow of money from the party who causes breach of the contract to the party who suffers loss or damage due to such breach. Such payments do not constitute consideration for a supply and are not taxable . It may be seen that M/s. DAMEPL have not disputed the classification of the transaction being covered under 'service' as per Section 65B(44) of the FA, 1994 which activity excludes 'the transaction in money' and this latter characteristic of 'a mere flow of money', which appears to be dealt with the Paragraph 7.1.4 of the Circular with respect to leviability of GST would not apply to the instant case in terms of the discussion hereinabove. It also appears that each operative clause of a contract which is agreed to be executed between a 'promisor' and 'p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract' by their not achieving the agreed-upon standards of performance stipulated in the Concession Contract as a whole. It appears that the assessee‟s activity of' relinquishment of right as a concessionaire' or in other words, the activity of 'agreeing to tolerate an act' by M/s. DAMEPL for a consideration was squarely covered under the ambit of definition of 'service' under Section 65B(44) of the FA, 1994 read with Section 66E(e) ibid. The impugned services provided by M/s. DAMEPL, as discussed at Paragraph 4.3 above do not appear to be specified in the negative list under Section 66D of the FA, 1994. 4.10 For determining the point in time when the impugned service shall be deemed to have been provided, we refer to the Point of Taxation Rules, 2011 or the POT Rules [introduced vide Notification No. 18/2011-ST, dated 01.03.2011 as amended]. The relevant Rule 3(a) reads thus: RULE 3. Determination of point of taxation. - For the purposes of these rules, unless otherwise provided, point of taxation shall be,- (a) the time when the invoice for the service provided or agreed to be provided is issued: Provided that where the invoice is not issued with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmination payment'. Therefore, in terms of the provisions of Section 67 of the FA, 1994 relating to valuation of taxable services read with the ST Valuation Rules, the reimbursement of security deposit and the reimbursement of net costs of operating the metro line are, both, not connected to the taxable services in question and hence, not within the scope of this Notice. The refund of bank guarantee and the differential commission demanded by the bank are, both, not connected to the impugned service dealt with by this Notice and hence, are out of the scope of this Notice. It is also noticed that the award includes interest on each of the said amounts. In view of Rule 6(2) of the ST Valuation Rules, the interest on delayed payment of the consideration in respect of the impugned service in question or for that matter, in respect of any of the services, would not be includible in the value of the taxable service. 6.4 The assessee appear not to have submitted any reply/documents called for regarding the copies of all the basic underlying documents i.e., vouchers, debit notes, invoices raised on DMRC for dues, under the Arbitral Award. Hence in the absence of data to the contrary, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of the resultant ST due from them. xxxx xxxx 16. This Notice is restricted to the issue of non-payment of Service Tax on the impugned 'declared services‟ classifiable under Section 66E(e) of the FA, 1994 provided by M/s. DAMEPL to DMRC during the period mentioned in the Show Cause Notice. This Notice is issued without prejudice to any other action that may be taken against M/s. DAMEPL or any other person(s), whether mentioned herein above or not, under the provisions of the Finance Act, 1994, and the Rules made thereunder, and/or, under any other law for the time being in force in India. 4. The challenge which now survives, however, would fall within a narrow compass as would be manifest from the recordal of the following facts. 5. The arbitral proceedings culminated in an Award dated 11 May 2017 which came to be rendered in favour of the writ petitioner and against the Delhi Metro Rail Corporation DMRC . The validity of that Award came to be assailed in a petition under Section 34 of the Arbitration and Conciliation Act, 1996 Act and which came to be dismissed by a learned Single Judge of this Court on 06 March 2018. However, the appeal under Section 37, which c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Arbitral Tribunal was deciding whether there was a breach of the agreement and whether the defects were cured within the cure period; hence the safety of the line was not an issue before the Tribunal. This Court held that the Commissioner may be the competent authority to determine the safety of the project but the certificate itself did not show that the defects were cured within 90 days. This Court disagreed with the Division Bench and held that CMRS certificate had no bearing on the validity of the termination. 45. There is a fundamental error in the manner in which this Court dealt with the challenge to the decision of the High Court. This jurisdiction of this Court was invoked under Article 136 of the Constitution. The Court was exercising its jurisdiction over a decision rendered by the Division Bench of the High Court in appeal under Section 37. The Division Bench had held that the award overlooked crucial facts and evidence on record that were crucial to the determination of the issues before the Arbitral Tribunal. This led to the award being perverse and patently illegal within the parameters of Section 34 as explained in the judgments of this Court in Associate Builder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court failed, while entertaining the special leave petition under Article 136, to justify its interference with the well-considered decision of the Division Bench of the High Court. The decision of this Court fails to adduce any justification bearing on any flaws in the manner of exercise of jurisdiction by the Division Bench under Section 37 of the Arbitration Act. By setting aside the judgment [DMRC v. Delhi Airport Metro Express (P) Ltd., 2019 SCC OnLine Del 6562 (Division Bench)] of the Division Bench, this Court restored a patently illegal award which saddled a public utility with an exorbitant liability. This has caused a grave miscarriage of justice, which warrants the exercise of the power under Article 142 in a curative petition, in terms of Rupa Hurra [Rupa Ashok Hurra v. Ashok Hurra, (2002) 4 SCC 388] . 68. The curative petitions must be and are accordingly allowed. The parties are restored to the position in which they were on the pronouncement of the judgment of the Division Bench. The execution proceedings before the High Court for enforcing the arbitral award must be discontinued and the amounts deposited by the petitioner pursuant to the judgment of this Court s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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