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TMI Blog2025 (3) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... mon 2. Brief facts: 2.1. The petitioner is a joint venture of M/s. Stroytechservice LLC, Russia and KEC International Limited, formed for executing various railway projects in India. The petitioner was assigned the following works contract vide Letter of Acceptance No. RVNL/ED/P/MAS/MEJ-NCJ Doubling/OT-2 dated 11.10.2018, for a total contract value of INR 712.48 Crores by RVNL for "Doubling of track between Vanchi Maniyachchi to Nagercoil, construction of roadbed, minor bridges, platforms, buildings, water and effluent treatment facilities, wagon / coaching maintenance infrastructure, supply of ballast, installation of tracks and other electrical, signalling and telecommunication infrastructure in Madurai and Thiruvananthapuram Divisions of Southern Railway". 2.2. During the period April 2018 to March 2019, the petitioner paid GST at the rate of 12%, on the above contract. The petitioner had discharged taxes at the rate of 12% on the premise that the said contract constitutes works contract services of original works pertaining to Railways covered under Serial No. 3 (v) (a) of the following notifications viz., a) Notification No. 11/2017 dated 28.06.2017 issued by the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ia), (ib), (ic), (id), (ie) and (if), by way of construction, erection, commissioning or installation, pertaining to railways, including monorail and metro is liable to be taxed at 12%. 3. While so, the petitioner was served with an intimation in Form GST DRC-01A dated 21.12.2022. The said notice proceeds on the premise that the subject contract between the petitioner and RVNL is liable to tax at 18%, instead the petitioner had erroneously discharged taxes at lower/concessional rate of 12% on the works contract executed by the petitioner on the following premise viz., i. RVNL does not function under the direct control of Railways; ii. RVNL is a subsidiary of Indian Railways incorporated under the Companies Act, 1956; iii. RVNL is a public sector undertaking listed on the stock exchange; iv. Employees working in RVNL are not considered as employees; and v. RVNL undertakes corporate social responsibility initiatives. 3.1. The said intimation also extracted the definition of 'railways' as provided under the Indian Railways Act, 1989, while stating that the petitioner is liable to tax at 18%. The first respondent also stated that the petitioner was liable to penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application of mind to relevant factors thereby vitiating the order. c) That the impugned orders suffers from error apparent on the face of the record, inasmuch as the impugned order relies upon an advance ruling of AAR, Gujarat in M/s. SKG-JK-NMC Associates (JV), 2021(1) TMI 425, overlooking the fact that the said ruling has since been reversed by the Appellate AAR, Gujarat in M/s. SKG-JK-NMC Associates (JV), 2021 (10) TMI 152. d) The impugned orders are contrary to the rulings delivered by AAR of other States, wherein it was held that the GST on services similar, if not identical, to those rendered by the petitioner, would be entitled to the concessional rate of 12%. 7. CASE OF THE RESPONDENT: 7.1. To the contrary, it is submitted by the learned Additional Government Pleader for the 1st respondent and the learned Counsel for the 2nd respondent, that the impugned orders have been passed after issuing notice in Form DRC-01A followed by DRC-01 and on proper consideration of the replies submitted by the petitioner. It was further submitted that exemption notification must be strictly construed and reiterated that the petitioner was not entitled for the concessional rate of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us/ Features of RVNL: 12.1. It is relevant rather necessary to note the features of RVNL, with whom the petitioner had entered into the subject contract. (a) RVNL functions as an extended arm of the Ministry of Railways and works for and on behalf of MoR. [https://rvnl.org/home]. The Central Government (ie. of India acting through MoR) presently holds 78.20% equity share capital of RVNL. [Rail Vikas Annual Report 2021-2022]. The Board of Directors of RVNL includes nominee directors appointed by MoR. RVNL functions under the direct control of Railways. The functions of RVNL and Indian Railways are inseparable from each other and both work in tandem to develop the rail transport infrastructure of the country. (b) As per the latest Annual Report Publication (FY 2023-24) of RVNL, RVNL was incorporated with the objective of bridging the infrastructure gap in Indian Railways, implementing projects relating to creation and augmentation of capacity of rail infrastructure on a fast-track basis and raising of extra-budgetary resources for special purpose vehicle projects. The vision of RVNL is to create state-of-the-art rail transport infrastructure to meet the growing demand and the mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as contained under the Railways Act, 1989, it would have done so expressly as could be seen from the above illustrations. The attempt by the respondent/authority to understand the scope of the notification by looking to the expression 'railways', as defined under the Railways Act, 1989, appears to be in conflict with the legislative intent in the absence of incorporation or reference to the above definition under the GST Act. In this regard, it may be relevant to refer to the following judgments: a) CCE v. Fiat India (P) Ltd., reported in (2012) 9 SCC 332: "39. It is well settled that whenever the legislature uses certain terms or expressions of well-known legal significance or connotations, the courts must interpret them as used or understood in the popular sense if they are not defined under the Act or the Rules framed thereunder. "Popular sense" means "that sense which people conversant with the subject-matter, with which the statute is dealing, would attribute to it." b) Feroze N. Dotivala v. P.M. Wadhwani, reported in (2003) 1 SCC 433: "11. It appears that the legislature only intended that in cases where the landlord residing in a premises, parts with possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hospitals, water works and water supply installations, staff dwellings and any other works constructed for the purpose of, or in connection with, railway; (e) all vehicles which are used on any road for the purposes of traffic of a railway and owned, hired or worked by a railway; and (f) all ferries, ships, boats and rafts which are used on any canal, river, lake or other navigable inland waters for the purposes of the traffic of a railway and owned, hired or worked by a railway administration, but does not include- (i) a tramway wholly within a municipal area; and (ii) lines of rails built in any exhibition ground, fair, park, or any other place solely for the purpose of recreation; 14.1. A reading of the above definition would show that the above definition includes everything that would possibly have connection or is in relation to railway. Importantly, from a reading of the above definition it would appear that the definition is not with reference or in relation to a particular entity i.e., Indian Railway, but intended to cover a utility / industry viz., railway. 14.2. On applying the definition of Railway as defined under IRA it appears that the contract between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian Railway in its operation it may produce results which are incongruous inasmuch as the relevant entry under the notification covers original works pertaining not only to railways but also Mono Rail and Metro Rail which is undisputedly not part of the Indian Railway. The reference to Mono Rail and Metro Rail is only to show that the object does not appear to be to grant concession under the relevant entry to the subject notification of the qua an entity instead the object / intent appears to be to extend the benefit / concession to industry / utility mentioned therein viz., Railway, Metro Rail and Mono Rail. 16. Relevance of the expression "pertaining to": 16.1. Having found that the contract entered into between the petitioner and M/s. RVNL, would be covered by the definition of "railway" as understood in common parlance (or) on applying the definition of "Railways" under the Indian Railways Act, we shall now turn to examine the scope of the expression, "pertaining to" employed in the subject notification with reference to railway. The expression "pertaining to" employed in the subject notification with reference to railways is one of very wide import. In this regard, it may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may be relevant to refer to the following judgments: i) CCE v. Himalayan Cooperative Milk Product Union Ltd., (2000) 8 SCC 642 : "8. Such notifications by which exemption or other benefits are provided by the Government in exercise of its statutory power, normally have some purpose and policy decision behind it. Such benefits are meant to be provided to the investors and manufacturers. Therefore, such purpose is not to be defeated nor those who may be entitled to it are to be deprived by interpreting the notification which may give it some meaning other than what is clearly and plainly flowing from it. ii) Innamuri Gopalam and Maddala Nagendrudu and others v. State of Andhra Pradesh and another, (1963) 14 STC 742 : "...... The entire matter is governed wholly by the words of the provision. If the taxpayer is within the plain terms of the exemption he cannot be denied its benefit by calling in aid any supposed intention of the exempting authority." iii) Commissioner. of Customs (Import), Mumbai v. Dilip Kumar & Co., and others (2018) 9 SCC 1 : 17.2. The Constitution Bench of the Supreme Court while resolving the rule of interpretation to be placed while examining/ con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. It was argued that the goods produced for which exemption could be claimed must be goods produced on his own and on behalf of the society. The Court did not countenance such purposive interpretation. It was held that a taxing legislation should be interpreted wholly by the language of the notification. 45. The relevant observations are: (Hansraj case [Hansraj Gordhandas v. CCE and Customs, AIR 1970 SC 755 : (1969) 2 SCR 253] , AIR p. 759, para 5) "5. ... It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. If the taxpayer is within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different, but that is not the case here. In this connection we may refer to the observations of Lord Watson in Salomon v. A. Salomon & Co. Ltd. [Salomon v. A. Salomon & Co. Ltd., 1897 AC 22 (HL)] : (AC p. 38)' "Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reliance upon the Advance Ruling Authority in Re: M/s SKG-JK-NMC(JV),2021 (1) TMI 425 ,over looking the fact that the above AAR has been overruled by the Appellate Advance Ruling Authority in Re: M/s.SKG-JK-NMC Associates (JV), 2021 (10) TMI 152 and thus the impugned order suffers from error apparent on the face of the record thus stands vitiated. Importantly there are Advance Ruling Authorities of other States wherein similar if not identical contracts have been found to be covered under the very same entry in terms of the above notification, some of them Clauses (Indian Railways Act) Case Title Relevant Paragraph/Ruling Section 2 (31) (d) - Construction, supply, installation, testing and commission of electrification, signalling, and telecommunication and associated with double track. Order No. KAR ADRG 93/2019 (Quatro Rail Tech Solutions Ltd) by Karnataka (27/09/2019) The contract work of the applicant to the main contractor, who is executing the works contract to M/s. DRCCIL, is liable to tax at 6% under CGST Act and at 6% under KGST Act or 12% under IGST Act, 2017. The relevant entry is entry no. 3(v) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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