Case Law Details
DBL Villuppuram Highways Limited Vs Union of India (Madras High Court)
The Hon’ble High Court of Madras set aside the demand order and remitted the matter back for reconsideration. It held: (i) services provided on HAM basis cannot be compared with EPC contracts; (ii) as per circular dated 26.06.2024 issued by CBIC, it has been clarified that HAM contract is a continuous supply of service; the circular is issued under section 168 of the Act and is clarificatory in nature; (iii) the matter requires reconsideration in light of the circular as it was issued after the impugned order came to be passed; (iv) lifts the bank attachment.
The petitioner is a concessionaire. It was awarded a contract by NHAI. The contract was on Hybrid annuity model (HAM) basis. It includes design, constitution, operation and maintenance of roads. The payment was on annuity basis. A demand of GST was raised on the ground that supply is complete and in terms of section 31 of the Act, time of supply has occurred. Such demand was challenged in writ petition.
The Hon’ble High Court of Madras set aside the demand order and remitted the matter back for reconsideration. It held: (i) services provided on HAM basis cannot be compared with EPC contracts; (ii) as per circular dated 26.06.2024 issued by CBIC, it has been clarified that HAM contract is a continuous supply of service; the circular is issued under section 168 of the Act and is clarificatory in nature; (iii) the matter requires reconsideration in light of the circular as it was issued after the impugned order came to be passed; (iv) lifts the bank attachment.
The matter was argued by Ld. Counsel Bharat Raichandani
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner was awarded a concession by the National Highways Authority of India on Hybrid Annuity Model (HAM). The petitioner, in turn, had awarded EPC contracts. In relation to supplies made by the petitioner, an intimation was issued in November 2023. The petitioner replied thereto in December 2023. This was followed by a show cause notice issued in December 2023. By such show cause notice, the petitioner was called upon to show cause in respect of defects pertaining to the value of supplies made by the EPC contractor in comparison to the outward supply values indicated by the petitioner. The petitioner replied to such show cause notice in January 2024. The impugned order was issued thereafter on 28.02.2024.
2. Learned counsel for the petitioner submits that a contract awarded on HAM cannot be equated with an EPC contract. He submits that the obligations of the petitioner extend not only to designing, building and transferring, but also to operation and maintenance. Therefore, he submits that there is continuous supply of services and that liability cannot be imposed on the petitioner on the basis of the supply value indicated by the EPC contractor. He relies upon Circular No.221/15/2024-GST dated 26.06.2024 (Circular No.221/24). By pointing out that the said Circular was issued by the Central Board of Indirect taxes and Customs (CBIC) pursuant to representations from concessionaires, such as the petitioner, he submits that the matter requires re-consideration in light of such Circular.
3. Mr.V.Prashanth Kiran, learned Government Advocate, appears on behalf of the second to fourth respondents. Mr.Ramesh Kutty, learned senior standing counsel, appears on behalf of the first respondent. Mr.V.Prashanth Kiran contends that the time of supply is the time of provision of services under Section 31 and other applicable provisions of GST statutes. When the EPC contractor has indicated a higher value of outward supply, he submits that it constitutes clear evidence that construction was completed to that extent. Without prejudice, he submits that the matter may require re-
4. Circular No.221/15/2024-GST was placed on record. Such circular was issued in exercise of powers conferred under Section 158(1) of the Central Goods and Services Tax Act, 2017 (the CGST Act). The Circular is clarificatory. In the Circular, the CBIC noticed that a HAM contract is a single contract for construction and operation and maintenance. The Circular also draws reference to sub-section (5) of Section 31 of the CGST Act which deals with continuous supply of service. On closely examining the Circular, especially in view of such circular being labelled and characterized as clarificatory, it could have a bearing on the adjudication of this dispute. Consequently, the matters requires re-consideration.
5. For reasons set out above, impugned order dated 28.02.2024 is set aside and the matter is remanded for re-consideration. The third respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order by taking into account Circular No.221/2024. Such fresh order shall be issued within four months from the date of receipt of a copy of this order. In view of the assessment order being set aside, the bank attachment is raised.
6. W.P.No.16969 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.18689 and 18693 of 2024 are closed.
Author Bio
