THE STATE OF KARNATAKA vs M/S ITD CEMINDIA JV
- Court
- Karnataka High Court
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HC-KAR
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WA No. 1528 of 2026
CNR: KAHC010374622026
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 28 DAY OF OCTOBER, 2026
PRESENT
THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
AND
THE HON'BLE MRS. JUSTICE K.S. HEMALEKHA
WRIT APPEAL NO. 1528 OF 2026 (T-RES)
BETWEEN:
1. THE STATE OF KARNATAKA
THE JOINT COMMISSIONER OF COMMERCIAL TAXES
(APPEALS) 05, SHANITHANGAR
BENGALURU - 560 027
2. THE ASSISTANT COMMISSIONER OF
COMMERCIAL TAXES, (LGSTO)-038
BENGALORE
NO.58, SECOND FLOOR
ND
HAL 2 STAGE, 100 FEET ROAD
INDIRANAGAR
BENGALURU - 560 038
…APPELLANTS
(BY SRI ADITYA VIKRAM BHAT, AGA)
Digitally
signed by
AMBIKA H B
Location:
High Court
of Karnataka
AND:
1. M/S ITD CEMINDIA JV
AN ASSOCIATION OF PERSONS REPRESENTED
BY ITS POWER OF ATTORNEY HOLDER
SRI THOMAS K.D.
S/O SRI K.M. DEVASIA
AGED ABOUT 53 YEARS
SY NO.25-26, NEAR KANEKAL CROSS
OPP ITC BISCUIT COMPANY
SOUKYA ROAD, JADIGENAHALLI HOBLI
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KACHARKANAHALLI, HOSKOTE
BENGALURU - 560 067
…RESPONDENT
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO ALLOW THE
WRIT APPEAL AND SET ASIDE THE JUDGEMENT AND ORDER
DATED 12/03/2025 PASSED BY THE LEARNED SINGLE JUDGE
OF THIS HON'BLE COURT IN W.P.NO.2817/2025.
THIS APPEAL, COMING ON FOR PRELIMINARY
HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN
AS UNDER:
CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
and
HON'BLE MRS. JUSTICE K.S. HEMALEKHA
ORAL JUDGMENT
(PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE)
1. The Revenue has filed the present appeal impugning an
order dated 12.03.2025 passed by the learned Single Judge
[ impugned order ] in Writ Petition No.2817/2025 (T-RES).
2. The present appeal has been filed after an inordinate delay
of 402 days. The Revenue has also filed an application seeking
condonation of delay along with the supporting affidavit setting out
the reasons for the delay. It is stated that the certified copy of the
judgment was delivered on 05.04.2025 and it was thereafter put up
to the Assistant Commissioner, Commercial Taxes for perusal on
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05.12.2025. There is no explanation why the said judgment was
not even placed before the concerned officer for more than ten
months after the copy was available with the Department. It was
thereafter put up before various other authorities and the
concerned officers sent a letter dated 12.12.2025 seeking legal
opinion of the Government Advocate whether to file an appeal. It is
stated that the said opinion of the law office was forwarded to the
legal cell on 05.03.2026. This opinion was thereafter
communicated by the Under Secretary, CT-1 to the concerned
authority on 13.03.2026 and thereafter, on 17.03.2026, the
concerned authority sent a letter to the Assistant Commissioner for
seeking authorisation to file an appeal.
3. The copy of the Government Order dated 25.03.2026 was
received by the office of the Advocate General and the entire file of
the writ petition was placed before the concerned law officer. The
writ appeal was finalised and filed on 05.06.2026.
4. As it is apparent from the above, the delay in filing the appeal
exceeds the reasonable period and there are no grounds to justify
that the appellant was prevented to file the appeal within the
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stipulated period. We find no grounds to countenance such a
delay.
5. Having stated the above, we have also briefly examined the
appeal on merits.
6. The respondent (writ petitioner) is a joint venture between
ITD Cementation India Limited and Italian-Thai Development Public
Company Limited. The respondent was awarded a contract by the
Bengaluru Metro Rail Corporation Limited [ BMRCL ] for
construction of elevated structures, including viaduct and stations
on 15.05.2017. Admittedly, the activities performed were covered
under Notification No.11/2017−Central Tax (Rate) dated
28.06.2017 at serial No.3(ii) being "composite supply of works
contract as defined in clause 119 of Section 2 of CGST Act, 2017".
The said supply was chargeable to Central Goods and Services
Tax at the rate of 9% and the Karnataka Goods and Services Tax
at the rate of 9%. Thus, in aggregate, GST was payable on the
said supply at the rate of 18%.
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1
7. Subsequently, by a notification dated 22.08.2017 , Serial
No.3(iii) of Notification No.11/2017 was substituted. The
respondent's activities were covered under serial No.3(v)(a) of the
said notification, which attracted GST at the rate of 12% (6% CGST
and 6% SGST), but supply pertaining to railways, including
monorail and metro was not covered. Thereafter, by Notification
No.1/2018-Central Tax (Rate) dated 25.01.2018, the benefit of the
lower rate of GST for composite supply of works contract services
was extended to supply pertaining to railways, excluding monorail
and metro. Thus, the respondent was liable to pay GST at the rate
of 12%. However, most of the inputs such as cement, steel, HDPE
pipes, etc., which were required for rendering the works contract
services, carried higher GST rates of 18% and 28%. In view of the
inverted tax structure, the respondent could not avail the benefit of
the entire input tax credit [ ITC ] on goods and services.
8. The respondent claimed that it was entitled to refund of
unutilised ITC under Section 54(3) of the Central Goods and
Services Tax Act, 2017 [ CGST Act ]. According to the respondent,
1
Notification No.2017 Central (Rate)
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it’s case fell within the scope of clause (ii) of Section 54(3) of the
CGST Act. Sub-section (3) of Section 54 reads as under:
“(3) Subject to the provisions of sub-section (10), a
registered person may claim refund of any unutilised
input tax credit at the end of any tax period:
Provided that no refund of unutilised input tax credit
shall be allowed in cases other than –
(i) zero-rated supplies made without payment of tax;
(ii) where the credit has accumulated on account of
rate of tax on inputs being higher than the rate of tax
nil
on output supplies (other than rated or fully
exempt supplies), except supplies of goods or
services or both as may be notified by the
Government on the recommendations of the Council:
Provided also that no refund of input tax credit shall
be allowed, if the supplier of goods or services or
both avails of drawback in respect of central tax or
claims refund of the integrated tax paid on such
supplies.”
9. The respondent applied for refund of unutilized input tax
credit aggregating to ` 3,11,86,340/- for the tax period May 2020.
The Assistant Commissioner [ the Adjudicating Authority ] issued
a notice of rejection in Form GST-RFD-08 on 19.06.2022.
According to the Adjudicating Authority, in terms of Notification
No.15/2017 Central Tax (Rate) dated 28.06.2017, refund of
unutilized input tax credit was not permissible in case of supply of
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service specified in Sub-item (b) of Item 5 of Schedule II of the
CGST Act. The reason proposing to reject the respondent’s claim
as set out in the said notice is reproduced below:
“ As per Notification No.15/2017-Central Tax (Rate)
Dated 28-06-2017 (W.E.F 01/07/2017) , No refund of
unutilized input tax credit shall be allowed under sub-
section (3) of section 54 of the said Credit Goods and
Services Tax Act, in case of supply of services
specified in sub-item (b) of item 5 of Schedule II of the
Central Goods and Services Tax Act. Therefore you
are not eligible to claim Refund on account of ITC
accumulated due to Inverted Tax Structure, since
outward supply falls under Sub-item (b) of item 5 of
Schedule II of the Central/State Goods and Services
Tax Act-2017. Therefore above mentioned refund
application is liable to be rejected.”
[ emphasis added ]
10. The respondent filed its submissions in the prescribed form
contesting the said notice of rejection. The respondent disputed
that its services fell under Sub-item (b) of Item 5 of Schedule II. It
claimed that its services were covered under the expression
“composite supply” under Item 6 of Schedule II to the CGST Act as
the same were covered within the meaning of “works contract” as
defined under clause 119 of Section 2 of the CGST Act.
11. The Adjudicating Authority rejected the respondent’s
application for refund by an order in original dated 02.10.2022. The
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respondent filed an appeal under Section 107 against the order in
original dated 02.10.2022 before the Appellate Authority. The
Appellate Authority dismissed the said appeal by an order dated
24.04.2024 holding that the supply made by the respondent fell
under Sub-item (b) of Item 5 of Schedule II of the CGST Act and
not Item 6 as claimed by the respondent.
12. The respondent assailed the said order by filing a writ
petition, which was allowed by the impugned order. The learned
Single Judge had referred to an earlier order dated 28.08.2024
passed in Writ Petition No.2490/2023, whereby it was held that
Notification No.15/2023 dated 19.10.2023 clarified that the refund
of unutilised ITC was not permissible only in relation to construction
activity for the purpose of sale in the real estate sector. The said
notification had substituted Notification No.15/2017 dated
28.06.2017 whereby the Central Government had notified that
there shall be no refund of unutilised ITC in case of supply of
services of construction of complex, building or a part thereof
intended for sale to a buyer, wholly or partly, where the amount
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charged from the recipient of the service includes the value of land
or undivided share of land, as the case may be.
13. The learned counsel appearing for the Revenue contended
that the supply made by the respondent could not be accepted as
“composite supply” without examining the relevant facts. He
submitted that the copy of the contract between the parties and the
respondent was not examined and, therefore, it could not be
ascertained whether the services rendered merely constituted a
supply of construction services or a works contract service, which
would be a composite supply.
14. We note that the averments made in the present appeal are
somewhat at variance with the aforesaid argument. It is the
Revenue’s case in the present appeal that the learned Single
Judge has erred by holding that the works contract services
rendered by the respondent do not fall within the scope of Sub-item
(b) of Item 5 of Schedule II of the CGST Act. There is no dispute
that the respondent renders works contract services.
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15. It may be relevant to refer to Items 5 and 6 of Schedule II of
CGST Act. The same are reproduced below:
“ 5. Supply of Services : The following shall be
treated as supply of services namely:-
(a) xxxxxxxxxxxx
(b) Construction of a complex, building, civil structure
or a part thereof, including the complex or building
intended for sale to a buyer, wholly or partly, except
where the entire consideration has been received
after issuance of completion certificate, where
required by the competent authority or after its first
occupation, whichever is earlier…..
`
6. Composite supply : The following composite
supplies shall be treated as supply of services
namely:-
(a) Works contract as defined in clause (119) of
Section 2;
(b) xxxx”
16. The term “works contract” is defined under Section (2) 119 of
CGST Act as under:
“Works contract means a contract for building,
construction, fabrication, completion, erection,
installation, fitting out, improvement, modification,
repair, maintenance, renovation, alteration or
commissioning of any immovable property wherein
transfer of property in goods (whether as goods or in
some other form) is involved in the execution of such
contract.”
17. We note that there is no dispute that the activities of the
respondent are covered under the definition of the term “works
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contract”. Neither the order passed by the Adjudicating Authority
nor the Appellate Authority disputes the respondent’s claim that the
supply made by the respondent is covered under works contract.
The averments made in the present appeal also do not dispute the
same.
18. We may also refer to paragraph 9 of the order passed by the
Appellate Authority which expressly records that the respondent
undertakes contract services. The opening sentence of paragraph
9 of the order passed by the appellate authority is set out below:
“Perusal of records shows appellant undertaken
works contract services for construction of metro
stations of Bangalore Metro Rail Corporation Ltd.,
(‘BMRCL’)”
19. In view of the above, we are unable to accept that there is
any doubt that the respondent is engaged in providing composite
supplies as covered under Item 6 of Schedule II to CGST Act .
20. We concur with the view of the learned Single Judge that the
respondent’s claim for refund could not be denied on the ground
that its services fell within the scope of clause (b) of Item 5 of
Schedule II of the CGST Act.
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21. In view of the above, the appeal is dismissed on merits as
well as on account of delay.
Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE
Sd/-
(K.S. HEMALEKHA)
JUDGE
AHB
List No.: 2 Sl No.: 33