Case Law Details
Jagat Janani Services Vs Goods & Service Tax Council (Orissa High Court)
Service tax recovered in excess of amount approved by resolution plan is to be refunded by GST department
In M/s. Jagat Janani Services v. Goods & Service Tax Council and Others [W.P.(C) No.17196 of 2020 dated September 21, 2021], M/s. Jagat Janani Services (the Petitioner) has filed this writ petition challenging the realization of service tax / GST by the Opposite Parties and seeks the relief of refund.
The Petitioner, M/s. Jagat Janani Services is a registered partnership firm that is registered under the Finance Act of, 1994 and after coming into force of the Odisha GST / Central GST Act of, 2017 (the CGST Act), it has also obtained GST registration under the said statute. The Petitioner was raising invoices from time to time charging service tax prior to 1st July, 2017 and GST thereafter for various services rendered by it. It is stated that against various services against which invoices were raised by the Petitioner for the period January to December, 2017 has not been paid Rs.21,42,70,161/-. It is also stated that Opposite Party had availed of the input tax credit (“ITC”) in respect of the above sum in the input credit ledger maintained by it. It has now been clarified in the counter affidavit filed by the Opposite Party that this entry of ITC has been reversed in the ledger.
In terms of the Resolution Plan, and as per the excerpt of the list of Operational Creditors, the name of Petitioner appears against the amount of Rs.21,42,70,161/-, the admitted sum payable was indicated as Rs.18,14,03,659/-. Pursuant to the decision of the Supreme Court, the claim of the Petitioner was to be settled at 20.5% of the total claim, i.e. 20.5% of the aforementioned sum of Rs.18,14,03,659/-.
The case of the Petitioner is that it has already paid towards service tax Rs.1,41,12,429.94 and towards GST Rs.1,92,66,932/- for the aforementioned period January to December 2017. Accordingly, it submits that there has to be a pro-rata reduction of the liability since it is to get only 20.5% of the outstanding amount, which works out to Rs.3,71,87,750/- and a tax payable works out approximately to Rs. 45 lakhs. The Petitioner accordingly has calculated the excess tax paid as Rs. 2.16 crores approximately and claims this is refund from the Opposite Party. In the counter affidavit by Opposite Party, it is clarified that the service tax amount that has been paid is Rs.1,41,12,429.94 and the credit taken in this regard has now been reversed.
The Hon’ble Orissa High Court relied upon the case of GGS Infrastructure Private Limited v. Commissioner of CGST & Central Excise[WP-LD-VC-NO.268 of 2020 dated December 22, 2020] and directed the Respondent to issue, calculate and refund to the Petitioner the excess service tax paid by it by acknowledging that the Petitioner is entitled to receive only 20.5% of the admitted claim amount which works out to Rs.3,71,87,750/-. The excess service tax so calculated will be refunded to the Petitioner in accordance with the extant rules within a period of eight weeks. Hence, the Writ petition is allowed.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. The Petitioner has filed this writ petition challenging the realization of service tax / GST by the Opposite Parties and seeks the relief of refund in the circumstances explained in the petition.
2. At the outset Mr. Jagabandhu Sahoo, learned Senior counsel for the Petitioner clarifies that there is a typographical error in prayers (b), (d) and (e) of the writ petition where in place of „Opposite Party Nos.2 and 4′ it should read as „Opposite Party No.3′. In other words, he clarifies that he has no grievance against Opposite Party Nos.2 and 4 and the prayers in those prayer clauses are in fact against Opposite Party No.3. The said clarification is placed on record.
3. In view of above clarification Mr. Mishra appearing for Opposite Party Nos.2 and 4 states that he has no further submission to make.
4. Further, as far as Opposite Party Nos.5 and 7 are concerned, it is now been clarified by them in paragraph 5(g) of their counter affidavit as under:
“5 (g) That during the CIRP and in terms of the approved Resolution Plan, the petitioner, as an operational creditor of erstwhile ESIL, was found entitled to receive an amount of Rs.3,71,87,750/- against its admitted claim of Rs.18,14,03,659/- (a fact admitted in para 9 of the writ application). The aforesaid amounts was tendered for deposit on 16.12.2019 by way of RTGS in the Petitioner’s Indusind Bank account No.200010352623 vide UTR No. SBINI 19350394644. The payment was tendered to the Petitioner, in terms of approved Resolution Plan and aforesaid Supreme Court Judgment dated 15.11.2019, as full and final settlement of all claims of the Petitioner against ESIL and resulted in the extinguishment of all such claims. However, the payment could not be credited to the said account for reasons no way attributable to the Opposite Party 5/7 but due to Transaction Failure as Petitioner’s account “OPERATIONS SUSPENDED”. The Opposite Party No.7 is ready and willing to disburse the same, if the account details to which the same can be credited is provided by the Petitioner.”
5. In the rejoinder filed by the Petitioner to the above counter affidavit, at para 8 the Petitioner has set out the present account number of the Petitioner.
6. Counsel appearing on behalf of Opposite Parties 5 and 7 clarifies that since the Petitioner has now indicated its present account number, Opposite Parties 5 and 7 would credit in the said account the admitted amount as stated in para 5(g) of the counter affidavit. In view of the above clarification Mr. Sahoo states that he has no further grievance as far as Opposite Party Nos.5 and 7 are concerned. It is directed that the above payment be made not later than four weeks from today.
7. As regards the prayer against Opposite Party No.3, the background facts are that, the Petitioner is a registered partnership firm which is registered under the Finance Act, 1994 and after coming into force of the Odisha GST / Central GST Act, 2017 it has also obtained GST registration under the said statute. It is stated that the Petitioner was raising invoices from time to time charging service tax prior to 1st July, 2017 and GST after that date for various services rendered by it to the Opposite Party No.5. It is stated that against various services against which invoices were raised by the Petitioner for the period January to December, 2017 Opposite Party No.5 has not paid Rs.21,42,70,161/-. It is stated that Opposite Party No.5 had availed of the input tax credit in respect of the above sum in the input credit ledger maintained by it. It has now been clarified in the counter affidavit filed by Opposite Party Nos.5 and 7 that this entry of ITC has been reversed in the ledger.
8. Some of the operational creditors as well as some other creditors of Opposite Party No.5 filed applications before the National Company Law Tribunal (NCLT) Ahmedabad under the Insolvency & Bankruptcy Code, 2016 (IBC) in CP(IB) Nos.39 and 40 of 2017. By the order dated 8th March, 2019 the NCLT, Ahmedabad concluded the Corporate Insolvency Resolution Process (CIRP) approving the resolution plan submitted by Arcelor Mittal India Pvt. Ltd. (Opposite Party No.7) in terms of Section 31(1) of the IBC. The operative portion of the said order of the NCLT reads as under:
“In the light of the above stated discussions, present I.A. No.431/2018 is conditionally allowed. The resolution plan submitted by the Arcelor Mittal India Pvt. Ltd. being H-1 is approved as per Section 31(1) of the I & B Code, subject to the aforesaid observations and conditions and with the following statutory directions U/s.31(3) of the I & B Code.
(a) that the moratorium order passed by the adjudicating authority U/s.14 of the I & B Code shall cease to have effect; and
(b) that the resolution professional shall forward all records relating to the conduct of the insolvency resolution process and resolution plan to the board to be recorded in the database.”
9. An appeal was filed against the above order before the National Company law Appellate Tribunal (NCLAT). By judgment dated 4th July, 2019 the NCLAT disposed of the said appeal, filed by one of the creditors, and held that cases where the adjudicating authority or NCLAT could not decide the claim on merits, such appellants would be allowed to raise the issue before the appropriate forum in terms of Section 60(6) of the IBC.
10. Arising from the above order of the NCLAT the Committee of Creditors of Essar Steel India Ltd. (Opposite Party No.8) filed Civil Appeal Nos.8766-67 of 2019 in the Supreme Court of India. By judgment dated 15th November, 2019 the Supreme Court disposed of the aforementioned appeals, set aside the judgment of NCLAT, and held that the CIRP of the Corporate Debtor would be in accordance with the Resolution Plan of Opposite Party No.7 as amended and accepted by the Committee of Creditors on 27th March, 2019.
11. In terms of the said Resolution Plan, and as per the excerpt of the list of Operational Creditors (which has been enclosed as Annexure-4 in the present petition), the name of present Petitioner appears at Sl. No.754. As against the amount of Rs.21,42,70,161/-, the admitted sum pay able by Opposite Party No.5 was indicated as Rs.18,14,03,659/-. Pursuant to the decision of the Supreme Court the claim of the Petitioner was to be settled at 20.5% of the total claim, i.e. 20.5% of the aforementioned sum of Rs.18,14,03,659/-.
12. The case of the Petitioner is that it has already paid towards service tax Rs.1,41,12,429.94 and towards GST Rs.1,92,66,932/-for the aforementioned period January to December, 2017. It accordingly submits that there has to be a pro-rata reduction of the liability since it is to get only 20.5% of the outstanding amount, which works out to Rs.3,71,87,750/- and a tax payable works out approximately to Rs.45 lakhs. The Petitioner accordingly has calculated the excess tax paid as Rs.2.16 crores approximately and claims this is refund from Opposite Party No.3. In the counter affidavit by Opposite Party Nos.5 and 7 it is clarified that the service tax amount that has been paid is Rs.1,41,12,429.94 and the credit taken in this regard has now been reversed.
13. It is seen that in similar circumstances one GGS Infrastructure Private Limited had approached the Bombay High Court in WP-LD-VC-NO.268 of 2020 and by judgment dated 22nd December, 2020 the Bombay High Court observed as under on the facts of that case:
“39. Following the above, we have no hesitation to hold that once a resolution plan is approved by the committee of creditors by the requisite percentage of voting and the same is thereafter sanctioned by the adjudicating authority (Tribunal in this case), the same is binding on all the stakeholders including the operational creditors. As a matter of fact, respondent herein as an operational creditor had lodged its claim before the resolution professional. The resolution plan provides for settlement of service tax dues at 5% of the amount of principal dues that would be crystallized upon adjudication, further providing for waiver of interest, penal interest and penalty that may be charged. As we have held above, respondent may be justified in proceeding with the show-cause cum demand notices because that has resulted in crystallization of the total amount of service tax dues i.e., the principal amount payable by the petitioner which is Rs.7,02,20,725.00. The amount of service tax dues having thus crystallized as above, the resolution plan says that the same would be settled at 5% of the principal dues adjudicated. The word used is “adjudicated” and not “adjusted” as sought to be read and applied by the respondent. Therefore, the amount that the petitioner would be required to pay is 5% of Rs.7,02,20,725.00. In so far the recovered amount i.e. Rs.6,23,82,214.00 is concerned, the same is part of the total demand determined i.e. Rs.7,02,20,725.00. After retaining 5% of Rs.7,02,20,725.00, respondent would be duty bound to refund the balance amount to the petitioner which will not only be in terms of the resolution plan and thus in accordance with law but will also be a step in the right direction for revival of the petitioner which is the key objective of the Code. There is no question of retaining the said amount. Submissions made by Mr. Jetly that the amount already recovered should be allowed to be appropriated by the respondent and that petitioner should pay 5% of the balance of the principal dues i.e. 5% of Rs.7,02,20,725.00 less Rs.6,23,82,214.00 is without any substance and liable to be rejected. It is accordingly rejected.”
It is seen that the Bombay High Court in the above decision took note of the judgment of the Supreme Court in Civil Appeal Nos.8766-67 of 2019 filed by Committee of Creditors of Essar Steel India Ltd. (Opposite Party No.8).
14. Consequently the writ petition is allowed and a direction is issued to Opposite Party No.3 to calculate and refund to the Petitioner the excess service tax paid by it by acknowledging that the Petitioner is entitled to receive only 20.5% of the admitted claim amount which works out to Rs.3,71,87,750/-. The excess service tax so calculated will be refunded to the Petitioner in accordance with the extant rules within a period of eight weeks from today.
15. An urgent certified copy of this order be issued as per rules.
*****
(Author can be reached at info@a2ztaxcorp.com)
Author Bio
