2026-VIL-189-GSTAT-LCK
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SGST Tribunal

GST - Road restoration charges paid to Public Works Department - Whether consideration for supply of service under Sections 2(31) and 7(1) of CGST Act, 2017 - The Appellant, engaged in supply of natural gas through a pipeline network, received permission from the Public Works Department to lay the pipeline, subject to payment of charges for road restoration. The Appellant paid tax under reverse charge mechanism on these charges and applied for refund under Section 54, which was rejected - Appellant contended that the charges are compensatory in nature, like liquidated damages for damage to public property, and lack the contractual reciprocity required for a supply - Whether road restoration charges paid to the PWD constitute consideration for a supply of service under Sections 2(31) and 7(1) of the CGST Act, 2017 - HELD - Section 2(31) defines consideration broadly to include any payment made in respect of, in response to, or for the inducement of, the supply of services. The transaction is distinct from a unilateral wrongful act or an award of post-injury civil damages. The Appellant entered a planned administrative arrangement and voluntarily applied for permission to cut open constructed public roads. The Public Works Department performs a distinct physical asset repair service to return the dug-up roads to their baseline state, and the fee is calculated on the structural volume of the work required. This establishes bilateral transactional reciprocity. The payment is not passive compensation for breach of contract under Circular No. 178/10/2022-GST but a direct fee for service - The case laws on unilateral wrongful acts, breach of contract or court-awarded damages and Circular No. 178/10/2022-GST on liquidated damages are distinguishable, as there is no breach of contract and the payment is a direct fee for service - The charges are consideration for supply of service and on this ground, the contention of the Appellant is rejected and the appeal is dismissed - GST - Exemption for services in relation to functions under Articles 243G and 243W of the Constitution - Notification Nos. 12/2017-Central Tax (Rate) and 14/2017-Central Tax (Rate) - Road restoration charges paid by a business entity - Whether the services are treated as neither a supply under Section 7(2) nor exempt - HELD - Routine upkeep of public roads is a function of local government. However, Notification No. 14/2017 excludes activities only where the government acts as a public authority performing sovereign duties for the collective populace. Where the Public Works Department executes request-driven repairs connected to the pipeline rollout of a commercial entity, it steps out of its generic sovereign capacity. Entry 6 of Notification No. 12/2017 excludes in clause (d) any service provided by the Government or local authority to business entities - An exemption notification must be construed strictly according to its text, and the expression "in relation to" cannot be stretched to override the explicit proviso. Taxability is governed by the nature of the recipient and the transactional context, and not by whether the work is original construction or restoration. The GST law differentiates between services to common citizens and services to commercial entities, and the request of a business entity for the work does not alter this - The services are not covered by Notification No. 12/2017 or 14/2017 and the claim of exemption is rejected - GST - Reverse charge on services supplied by Government or local authority to business entity - Notification No. 13/2017-Central Tax (Rate) - Plea of dual tax incidence and revenue neutrality - Refund under Section 54 of tax paid under reverse charge - HELD - Under Notification No. 13/2017, any taxable service supplied by the Government or a local authority to a business entity located in the taxable territory must be taxed under reverse charge by the recipient. There was no clear proof on record that the Public Works Department raised a tax invoice under forward charge or deposited tax for this permit. The statutory framework cannot be bypassed by abstract claims of revenue neutrality or double tax incidence. Tax paid by the Appellant under reverse charge was a valid statutory payment, and the First Appellate Authority committed no error in confirming the rejection of refund - The Appellant is liable to pay tax under reverse charge and the refund is not admissible - GST - Validity of Show Cause Notice and Order-in-Original - Absence of Document Identification Number - Vagueness of notice and breach of natural justice - The Appellant contended that the notice and order were issued without a DIN, that the notice was vague and travelled beyond its scope, and that natural justice was violated - HELD - The notice clearly detailed the factual and legal grounds on non-applicability of Notification No. 14/2017 to request-driven commercial road cutting. The Appellant understood the inquiry, as shown by its exhaustive point-wise reply, leaving no room for a plea of surprise or prejudice. The entire refund and dispute workflow, including application, notice, reply, processing and final order, was processed through the authenticated electronic GST portal. There is no doubt regarding the identity, source, integrity or authenticity of the documents issued by the proper officer. The mere absence of a physical DIN does not invalidate the adjudication, violate natural justice, or extinguish the tax liability - The contentions on DIN, vagueness of notice and natural justice are rejected - GST - Refund sanctioned in other States on identical facts - Binding effect - The Appellant contended that its registrations in other States were granted refunds under identical facts and that the department cannot take an inconsistent approach - Whether such refund orders bind the Tribunal - HELD - A refund sanction order passed by a proper officer in one State jurisdiction does not operate as a binding precedent or res judicata over an independent proceeding before the Appellate Authority of another State. If the officer allowed refund overlooking the restrictive criteria of Entry 6 of Notification No. 12/2017, such an erroneous order has no binding value, as the Tribunal is bound to apply the law as enacted - The reliance on refund orders of other States is rejected, the appeal is dismissed and the Order-in-Appeal is upheld.
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