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SGST High Court Cases

GST - Taxability of annuity payments under concession agreement - Applicability of Entry 23A of Notification No. 12/2017-Central Tax Rate - Scope of Circular No. 150/6/2021 - Petitioner entered into concession agreement with NHAI for construction design maintenance and operation of roads with consideration paid partly upfront and partly through deferred annual payments described as annuities over a period of ten years - Whether annuity payments for construction services falling under Heading 9954 are exempt from GST as services by way of access to road or bridge on payment of annuity falling under Heading 9967 and whether Circular No. 150/6/2021 can clarify the applicability of Entry 23A - HELD - The nature of the concession agreement is a works contract services. The contract essentially includes construction design and maintenance of roads with payments at intervals. Services for construction of roads fall under Heading 9954 while Entry 23A specifically covers Heading 9967 i.e. services by way of access to a road or bridge on payment of annuity relating to transport services. The scope of works for construction services is distinct from that of transport contracts and Entry 23A of the Notification pertains exclusively to transport services - Where the underlying service is construction of a road falling under Heading 9954 and consideration is paid partly upfront and partly through deferred annual payments described as annuities Entry 23A would not be applicable and such annuity payments would not be exempt from GST - The Circular dated 17.06.2021 is a valid clarification issued by the Board in exercise of its statutory powers under Section 168 of the CGST Act to secure uniformity in implementation of the Act. An Advance Ruling remains binding only so long as the law facts or circumstances supporting the original Advance Ruling remain unchanged. Once there is a change in circumstances forming the foundation of the Advance Ruling the binding effect ceases to operate. If Revenue officers have misunderstood the existing law their interpretation does not bind the implementing authority once the Board issues clarification – There is no merit in the challenge laid by the petitioner to the impugned Circular or in the consequential challenge to the levy of GST on the annuity payments received under the concession agreement. The challenge based upon the earlier Advance Ruling also does not alter the position, since the taxability has to be determined with reference to the statutory exemption and the true nature of the services rendered under the contract - The writ petitions are dismissed - Differed with Telangana High Court decision in GMR Pochanpalli Expreessways Limited case – HELD - The Court in a matter of CG Tollway specifically held that the scope of works for construction services is distinct from that of transport contracts. The same principles and analogy applied by the Division Bench in the CG Tollway case are directly applicable here. There is no justified reason for this Bench to adopt a differing view - The Single Bench of the Telangana High Court in the matter of GMR Pochanpalli Expreessways Limited struck down the impugned Circular, but the Division Bench in the matter of CG Tollway distinguished this decision. In its judgment, the Division Bench provided a detailed interpretation of the issues at hand. It reached a different conclusion from the analogy adopted by the Telangana High Court and we see no convincing reasons to disagree with the view taken by the Coordinate Bench - Binding Nature of Advance Ruling – HELD - The submission of petitioner counsel that Revenue should not have acted against its own advance ruling is not tenable and suffices to say that the Notification itself is binding and if revenue officers have misunderstood the existing law, their interpretation does not bind the implementing authority once the Board issues clarification. Section 168 of the Act authorises the Board to issue such instructions, orders or circulars to ensure the proper implementation of the law, especially when the Advance Ruling authority has misread the legal provisions. If such a misinterpretation results in significant revenue loss for the state, the Board has every right to step in and set things straight, as allowing the error to go unchecked would be unacceptable. Moreover, the revenue's actions following the circular in question are justified, as Section 103 of the CGST Act clearly grants the authorities the power to take such measures when the law does not specifically prohibit them.
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