Full Judgment Text
2018:BHC-AS:9605-DB
907-WP.12194.2017.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 12194 OF 2017
1. Builders Association of }
Navi Mumbai }
registered under the Bombay }
Public Trust Act, 1950 and }
the Society Registration Act, }
1860, having Regn. }
No. MH/371-2002/Thane, }
having its office at 308/309, }
Persipolis Co-op. Soc., }
Plot No. 74, Sector-17, }
Vashi, Navi Mumbai – }
400 703 }
}
2. Neelsidhi Realties }
a partnership firm, having }
nd
its address at 2 floor, }
The Emerald Building, }
besides Neel Sidhi Towers }
CHS, Navi Mumbai – 400 703 } Petitioners
versus
1. Union of India }
Through the Secretary, }
Ministry of Finance, }
Department of Revenue, }
Govt. of India, MSEB }
nd
Building, 2 floor, Estrella }
Battery Compound, Labour }
Compound, Dharavi, }
Matunga, Mumbai – 400 019 }
}
2. The Commissioner of }
Goods and Service Tax, }
th
Thane District, 16 floor, }
Satra Plaza, Plot No. 19/D, }
Palm Beach Road, Vashi, }
Navi Mumbai, Maharashtra }
Page 1 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
3. The Commissioner of }
Goods and Service Tax, }
CBD Belapur District, }
st
1 floor, CGO Complex, }
Opp. Police Commissioner's }
office, CBD Belapur, }
Navi Mumbai – 400 614, }
Maharashtra }
}
4. City Industrial and }
Development Corporation }
of Maharashtra Limited, }
nd
Nirmal, 2 floor, Nariman }
Point, Mumbai – 400 021 }
}
5. The State of Maharashtra }
through the Government }
Pleader Bombay High Court }
(OS), Bombay }
}
6. The Commissioner of }
Goods and Service Tax, }
Maharashtra, GST Bhavan, }
Byculla (East), S. Chapsi }
Road, Tadwadi, Mazgaon, }
Mumbai – 400 010 } Respondents
Mr. Vikram Nankani-Senior Advocate
with Mr. Chirag Mody, Mr. Aman
Kacheria i/b. M/s. DSK Legal for the
petitioners.
Mr. Pradeep S. Jetly with Mr. Jitendra B.
Mishra for respondent nos. 1 to 3.
Mr. B. B. Sharma for respondent no. 4.
Mr. B. V. Samant-AGP for State.
CORAM :- S. C. DHARMADHIKARI &
PRAKASH. D. NAIK, JJ.
DATED :- MARCH 28, 2018
Page 2 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
ORAL JUDGMENT:- (Per S. C. Dharmadhikari, J.)
1. Rule. Respondents waive service. By consent, Rule is made
returnable forthwith.
2. By this writ petition under Article 226 of the Constitution of
India, the petitioners are challenging an order levying/collecting
the Goods and Service Tax (GST) on the one-time lease premium
charged by respondent no. 4 while letting plots of land on lease
basis. By prayer clause (b), the petitioners seek a writ of
mandamus or any other appropriate writ, order or direction in
the nature thereof directing the respondents not to collect the
Central Goods and Service Tax on the long term lease granted by
respondent no. 4 to the members of petitioner no. 1, including
respondent no. 2.
3. Before us is the first petitioner styled as Builders'
Association of Navi Mumbai, which is a registered public
charitable trust governed by the Bombay, now Maharashtra
Public Trust Act, 1950 and the Societies Registration Act, 1860.
The second petitioner is a partnership firm carrying on business
as Builder and Developer. The first, second and the third
respondents are the Union of India, through the Secretary,
Ministry of Finance, Department of Revenue, the Commissioner of
Goods and Service Tax, Thane District and the Commissioner of
Page 3 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
Goods and Service Tax, Central Business District (CBD), Belapur.
Respondent no. 4 is the City Industrial and Development
Corporation of Maharashtra Limited (CIDCO), whereas, the sixth
respondent is the Commissioner of Goods and Service Tax,
Maharashtra.
4. The argument of the petitioners is that their members are
reputed Builders and Developers of Navi Mumbai and areas
surrounding it. They have contributed to the growth and
development of Navi Mumbai by constructing and developing
several residential and commercial properties. These projects
are undertaken and carried out after the fourth respondent,
which is registered as a company under the Companies Act, 1956,
exercises the statutory functions in terms of section 113(3A) of
the Maharashtra Regional and Town Planning Act, 1966
(hereinafter referred to as “the MRTP Act”). Insofar as the
nature of the activities and functions of the fourth respondent,
the petitioners, in para 6 of this petition, state as under:-
th
“6. Respondent No. 4 was incorporated on 17 March,
1970 with the specific aim for creating a new planned, self-
sufficient and sustainable city on the main land across
Thane Creek adjoining the Mumbai City and it disposes of
the land for development for 60 years to various builders
and developers under the Navi Mumbai Land Disposal
(Amendment) Regulation, 2008 by charging them a one-
time lease premium. In addition to this one-time lease
premium a separate lease rental is charged annually for
the period of lease. Respondent No. 4 is a special planning
authority for the areas of Navi Mumbai. The multi-
Page 4 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
dimensional activity undertaken by Respondent No. 4
under the supervision of the Government of Maharashtra
are classified under three broad concepts as enumerated
from the website of Respondent No. 4, (i) Planning and
development of new towns; (ii) Consultancy, project
management and designing; and (iii) Development of new
towns, setting up of industrial face of the city with the help
of planned urban development with the social economic
facility. In other words, Respondent No. 4 is acting as a
special planning authority on behalf of the Government of
Maharashtra and is not carrying on any business activities
as such. A copy of introduction page taken from the
website of Respondent No. 4 is appended hereto and
marked as Exhibit “1”.”
5. It is stated that in its ordinary and normal course of
business, the fourth respondent invites offers from various
entities to acquire, on lease, residential-cum-commercial plots
and three/four star hotel plots in Panvel and Navi Mumbai from
time to time. One such invitation was issued in April, 2017
inviting offers for various plots at Navi Mumbai and Panvel. The
members of petitioner no. 1 applied for allotment of various plots.
The members were allotted these plots. Under the scheme, the
tenderer/bidder is required to make an offer by quoting a rate per
square meter on account of payment of lease premium. The plots
are to be allotted on long term lease of 60 years. A base price is
already fixed for the plot in the annexure to the tender for the
payment of one-time lease premium amount and the tenderer is
required to quote a price above the base price per square meter of
the plot which the tenderer is interested in acquiring. After the
offers are scrutinised, respondent no. 4 usually allots plots on
Page 5 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
lease basis to the bidder quoting the highest rate per square
meter of the one-time lease premium amount provided such a
bidder is eligible as far as the remaining terms and conditions of
the tender document.
6. Thus, the petitioners have obtained plots in the above areas,
but what they are questioning is that when the allotment letter
was issued, the allottee was called upon to pay, on the one-time
lease premium amount, the GST separately by a Demand Draft
drawn in the name of the fourth respondent payable at
Mumbai/Navi Mumbai. The fourth respondent collected GST on
the total one-time lease premium amount payable by the
successful allottee at the rate of 18%. The details of these
allottees and the one time lease premium, the GST payable have
been indicated in a chart in para 12 of the petition. In these
circumstances, a grievance was raised by approaching the Goods
and Service Tax Commissionerate as to how the GST is collected
on the above amount and demanded from the petitioners. There
was correspondence initiated and finally, when the authorities
did not respond, the present petition has been filed.
7. The argument of Mr. Nankani learned senior counsel is that
such a tax, as is demanded, cannot be levied, assessed and
recovered. A long term lease of 60 years tantamounts to sale of
Page 6 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
the immovable property, since the lessor is deprived of, by the
allotment the right to use, enjoy and possess the property. Our
attention is invited to section 105 of the Transfer of Property Act,
1882. The one-time premium amount is the lumpsum
consideration paid for entering into the lease. Our attention is
also invited to the fact that the lease of 60 years and with a
statutory authority is based on the position and status of that
authority. In that regard, our attention is invited to section 113
and particularly sub-section (3A) of the MRTP Act. A new town is
set up by the fourth respondent. It is a planning authority. It is a
creature of the statute. Our attention is also invited to sub-
sections (1) to (3) of section 118 of the MRTP Act. Mr. Nankani
would submit that the CIDCO discharges a Government function
and duty. In any event, it discharges a statutory obligation. The
argument of Mr. Nankani is that by virtue of Article 36, Schedule
I to the Maharashtra Stamp Act, 1958, the present transaction is
treated as a conveyance. Thus, such an instrument styled as
conveyance and conveying a right, title and interest in the
immovable property is brought into existence. Hence, the whole
transaction is akin to sale. If that is the position, then, section 7
of the GST Act cannot have any application. Once the position in
law is understood in this perspective, then, there is no warrant
for imposition of the GST. Our attention is invited to Schedule II
Page 7 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
of the GST Act and some of the clauses therein to urge that if the
intention of the legislation was to charge GST on this one-time
lease premium, then, appropriate provisions would have been
inserted. They not being inserted, as there was a clear intent to
leave out a transaction tantamounting to a sale. Mr. Nankani
attempted to point out that one-time lease premium is different
and distinct from lease rent. It is not a periodical payment, but a
one time. It is not, therefore, conceivable that on such a
premium, the tax could be levied, assessed and recovered. The
premium is akin to Salami and our attention is invited to its plain
dictionary meaning as set out in the legal dictionary. Our
attention is also invited to a judgment of the Hon'ble Supreme
Court in the case of Commissioner of Income Tax Assam, Tripura
1
and Manipur vs. Panbari Tea Co. Ltd. . Then, our attention is
invited to a judgment of the Hon'ble Supreme Court in the case of
R. K. Palshikar (HUF) vs. Commissioner of Income Tax, M. P.,
2
Nagpur . Finally, Mr. Nankani would heavily rely upon an order
rd
passed by this court on 23 August, 2017 in the case of
Commissioner of Central Excise, Nashik vs. Maharashtra
3
Industrial Development Corporation . He would submit that this
judgment and order dealt with a similar issue concerning the
1 AIR 1965 SC 1871
2 (1988) 3 SCC 594
3 Central Excise Appeal No. 164 of 2015
Page 8 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
Maharashtra Industrial and Development Corporation. Hence,
we should abide by the same.
8. In any event, the argument is that the reliance by the
respondents on a Division Bench judgment of the Allahabad High
Court is misplaced. The Allahabad High Court, in the case of
Greater Noida Industrial Dev. Authority vs. Commissioner of
4
Customs, Central Excise did not notice the judgment of the
Hon'ble Supreme Court in the case of Shri Ramtanu Co-operative
5
Housing Society Ltd. and Anr. vs. State of Maharashtra and Ors. .
For all these reasons, it is submitted that the petitioners be
granted the reliefs as prayed.
9. On the other hand, Mr. Jetly appearing for the Central
Goods and Sales Tax Commissionerate and the Union of India
would urge, based on the affidavit in reply, that this is a petition
which seeks to pre-empt the levy assessment and recovery of
GST. In any event, if the GST being now paid, then, the issue
raised is purely academic. Apart therefrom, the law does not
make any distinction between governmental and non-
governmental agencies and supply of goods or services attracts
GST. The CIDCO cannot be treated as Government. Its position as
a new town planning authority is of no consequence. Once the
4 2015(40) STR 95
5 1970() SCC 323
Page 9 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
legal provisions are clear, unambiguous and plain, then,
regardless of the consequences, the tax is leviable. The whole
edifice of Mr. Nankani's argument is based on the judgments
delivered not in the context of the GST Act. The affidavit in reply
at page 198 of the paper book and particularly paragraph no. 8
points out that the transaction is of supply of services. Once the
Income Tax Act deals with a tax on income, then, the tests are
different. The concepts are also different. It is, therefore, risky to
read into one law the definition or provision to similar effect but
from different law. A different and distinct tax law with its object
and purpose cannot be, therefore, ignored and no automatic
borrowing of any definition from another taxing statute is
permissible. For all these reasons, Mr. Jetly would submit that
the writ petition be dismissed.
10. For properly appreciating the rival contentions, we would
make a reference to the GST Act. The GST Act is an Act to make a
provision for levy and collection of tax on intra-state supply of
goods or services or both by the Central Government and for the
matters connected therewith or incidental thereto. Chapter I
contains preliminary provisions and section 2 therein defines
certain expressions and words. The term “business” is defined in
inclusive manner in section 2(17). The expression includes any
Page 10 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
trade, commerce, manufacture, profession, vocation, adventure,
wager or any other similar activity, whether or not it is for a
pecuniary benefit. It also includes any activity or transaction
undertaken by the Central Government or State Government or
any local authority in which they are engaged as public
authorities. The other definition, which is material and relevant
is to be found in section 2(31) is of the word “consideration”.
Section 2(31) reads as under:-
“2(31) “Consideration” in relation to the supply of
goods or services or both includes-
(a) any payment made or to be made, whether in money
or otherwise, in respect of, in response to, or for the
inducement of, the supply of goods or services or both,
whether by the recipient or by any other person but shall
not include any subsidy given by the Central Government
or a State Government;
(b) the monetary value of any act or forbearance, in
respect of, in response to, or for the inducement of, the
supply of goods or services or both, whether by the
recipient or by any other person but shall not include any
subsidy given by the Central Government or a State
Government:
Provided that a deposit given in respect of the supply
of goods or services or both shall not be considered as
payment made for such supply unless the supplier applies
such deposit as consideration for the said supply.”
11. Then, the definition of the term “person” appearing in
section 2(84) is also relevant. Chapter II contains provisions in
relation to administration and then follows Chapter III, which is
the charging section. Section 7 is heavily relied upon and
therefore, we reproduce the same:-
Page 11 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
“7. (1) For the purposes of this Act, the expression
“supply” includes-
(a) all forms of supply of goods or services or both
such as sale, transfer, barter, exchange, licence, rental,
lease or disposal made or agreed to be made for a
consideration by a person in the course or furtherance of
business;
(b) import of services for a consideration whether
or not in the course or furtherance of business;
(c) the activities specified in Schedule I, made or
agreed to be made without a consideration; and
(d) the activities to be treated as supply of goods or
supply of services as referred to in Schedule II.
(2) Notwithstanding anything contained in sub-
section (1),-
(a) activities or transactions specified in Schedule
III; or
(b) such activities or transactions undertaken by
the Central Government, a State Government or any local
authority in which they are engaged as public authorities,
as may be notified by the Government on the
recommendations of the Council, shall be treated neither
as a supply of goods nor a supply of services.
(3) Subject to the provisions of sub-sections (1) and
(2), the Government may, on the recommendations of the
Council, specify, by notification, the transactions that are
to be treated as-
(a) a supply of goods and not as a supply of
services; or
(b) a supply of services and not as a supply of
goods.”
12. A perusal of sections 7, 8, 9, 10 and 11 falling in this
Chapter leaves us in no manner of doubt that the expression
“supply” includes all forms of supply of goods or services or both
Page 12 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
such as sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business. By sub-section
(2) and which opens with a non-obstante clause, such activities or
transactions undertaken by the Central Government, a State
Government or any local authority in which they are engaged as
public authorities, as may be notified by the Government on the
recommendations of the Council, shall be treated neither as a
supply of goods nor a supply of services. Equally, subject to the
provisions of sub-sections (1) and (2), the Government may, on
the recommendation of the Council, specify, by notification, the
transactions that are to be treated as a supply of goods and not as
a supply of services or a supply of services and not as a supply of
goods. Pertinently, no notification and traceable to sub-section
(2) of section 7 has been brought to our notice.
13. What is heavily relied upon before us is the position of
CIDCO. The CIDCO relies upon a notification issued under the
MRTP Act. It may be designated as a New Town Development
Authority for the purpose of the MRTP Act. For designation of a
site as a new town and for development of any area as a site for
the new town, sub-section (3A) of section 113 enables the State
Government to require the work of developing and disposing of
Page 13 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
land in the area of new town by any such Corporation, company
or subsidiary company as referred in sub-section (2) of section
113 thereof. It could be declared, by a notification in a Official
Gazette, to be the New Town Development Authority for that
area. Pertinently, this notification, which is relied upon and
which notifies the Navi Mumbai Disposal of Land (Amendment)
Regulations, 2008 reinforces the position that by a final
notification in Official Gazette, the CIDCO is constituted and
designated as the New Town Development Authority.
14. On a plain reading of the GST Act, we do not see how we can
agree with Mr. Nankani. Mr. Nankani also relies upon Schedule
II, which is referable to section 7. These are the activities to be
treated as supply of goods or services. The substantive provision
section 7 in clearest terms says that the activities specified in
Schedule I made or agreed to be made without a consideration
and the activities to be treated as supply of goods or supply of
services referred to in Schedule II would be included in the
expression “supply”. However, clause (a) of sub-section (1) of
section 7 includes all forms of supply of goods or services or both
such as sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business. We referred to
Page 14 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
the definitions simply to reinforce our conclusion that the CIDCO
is a person and in the course or in furtherance of its business, it
disposes of lands by leasing them out for a consideration styled as
one-time premium. Therefore, if one refers to Schedule II, section
7, then, Item No. 2 styled as land and building and any lease,
tenancy, licence to occupy land is a supply of service. Any lease
or letting out of a building, including commercial, industrial or
residential complex for business, either wholly or partly is a
supply of service. It is settled law that such provisions in a taxing
statute would have to be read together and harmoniously in order
to understand the nature of the levy, the object and purpose of its
imposition. No activity of the nature mentioned in the inclusive
provision can thus be left out of the net of the tax. Once this law,
in terms of the substantive provisions and the Schedule, treats
the activity as supply of goods or supply of services, particularly
in relation to land and building and includes a lease, then, the
consideration therefor as a premium/one-time premium is a
measure on which the tax is levied, assessed and recovered. We
cannot then probe into the legislation any further.
15. The reliance placed on the judgment of the Hon'ble Supreme
Court in the case of Panbari Tea Co. Ltd. (supra) is entirely
misplaced. There, a registered lease deed by the assessee, under
Page 15 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
which two estates were leased out to a firm for a period of 10
years, was in issue. The lease was executed for a consideration as
and by way of premium and annual rent to be paid by the lessee to
Panbari. The premium was made payable as noted in the Hon'ble
Supreme Court's judgment. What went before the Income Tax
Officer is the issue of treatment to the installment paid towards
the premium in the relevant accounting year. The Income Tax
Officer treated this as a revenue receipt of the assessee. On
appeal, this order was confirmed. On further appeal, the tribunal
also held that the premium was really the rent payable under the
lease deed and, therefore, it was chargeable to income tax. After
the matter was carried to the High Court, the assessee succeeded
because the question posed for the High Court's consideration was
answered by holding that this receipt is a capital receipt. The
question that arose before the Hon'ble Supreme Court was
whether this finding is correct. It is in that context and how to
treat this income, whether as a revenue receipt or a capital
receipt that all the further observations are made. Even by
terming the gain or income as Salami, what the Hon'ble Supreme
Court was essentially concerned with is not the transaction or the
nature thereof, but the income generated or derived from it. Its
treatment, therefore, led to the Hon'ble Supreme Court referring
to section 105 of the Transfer of Property Act, 1882. In these
Page 16 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
circumstances, the opinion rendered is that the income was
treated rightly as a capital receipt. In the context, a lease of
immovable property is a transfer of right to enjoy the property as
termed by the Transfer of Property Act, 1882 for a price paid.
That is how it being a transfer that the income derived in relation
to lease of immovable property was treated as above.
16. Similarly, in the case of R. K. Palshikar (supra), the
agricultural land of the assessee was diverted to non-agricultural
purpose by developing it as housing site several years ago and it
was not disputed that the land in question constitutes a capital
asset within the meaning of section 2(4A) of the Income Tax Act,
1961. The question was whether section 12-B of that act can be
brought in to play in this case as the transfer is of leasehold
interest in immovable property for 99 years and not an outright
sale or transfer of the complete interest of the transferor in the
immovable property. The assessee was not agreeable to pay the
tax as demanded and tried to escape the levy by urging that this
was not a transaction which would invite or attract capital gain
tax. In these circumstances, the question was answered by the
Hon'ble Supreme Court and in that context, the observations
heavily reiled upon by Mr. Nankani are made. Once again, we
cannot ignore that the observations are in the context of the
Page 17 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
provisions, and the interpretation to be placed thereon, but found
in the Income Tax Act, 1961. That is an assessment of the tax on
income. We are concerned here with the GST Act and the tax on
supply of goods and services. It is not disputed that the position
of the CIDCO for the purpose of orderly planning and development
will be of no assistance in the sense while developing a new
township, the objective of the planning authority is not to earn
money, but to develop the area so that the purpose of setting up a
township is achieved by more people wanting to live in the area in
lieu of the various amenities provided in the area. The CIDCO is
one such authority. It is entirely for the legislature, therefore, to
exercise the powers conferred by sub-section (2) of section 7 of
the GST Act and issue the requisite notification. Absent that
notification, merely going by the status of the CIDCO, we cannot
hold that the lease premium would not attract or invite the
liability to pay tax in terms of the GST Act.
17. Even the judgment in the case of Shri Ramtanu Co-
operative Housing Society Ltd. (supra) is of no assistance. There,
the constitutional validity of the Maharashtra Industrial
Development Act, 1962 was challenged. The argument was that
this is not an enactment and in pith and substance referable to
the constitutional entry, namely, Schedule VI List I, Entries 7 and
Page 18 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
52, List II Entry 24 within the meaning of Article 246 of the
Constitution of India. It is in this context that the functions and
powers of the Maharashtra Industrial Development Corporation
(MIDC) were referred and the court came to the conclusion that
the Corporation is not a Government company and cannot be
termed as a trading corporation as well. It provides amenities
and facilities in industrial areas, when it allots industrial plots for
setting up industries so as to achieve a balanced development and
growth of industries. It is performing that function and which,
therefore, enabled the Hon'ble Supreme Court to hold that the
constitutional entries would not allow the power of competent
legislature to make the law. This judgment is of no assistance.
18. In the case of Commissioner of Central Excise, Nashik
(supra), the demand of service tax was in issue. The Finance Act,
1994 and particularly section 65 clause (64) was relied upon to
urge that the service charges collected by the MIDC from the
allottees of the plots are in relation to services provided by the
MIDC to the plot holders and the same is covered by the category
“maintenance, management and repairs” under clause (64) of
section 65 of the Act. It is in relation to such a controversy that
the Hon'ble Supreme Court's judgment in the case of Shri
Ramtanu Co-operative Housing Society Ltd. (supra) outlining the
Page 19 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
legal position and the status of the Corporation is referred by the
Division Bench. The issue raised related to collection of service
charges, but whether the services rendered are taxable services
or not. The Division Bench noted that this consideration is an
amount received for the facilities and amenities provided. That is
a statutory function. It is in these circumstances that the
Revenue's appeal was dismissed. All the observations in the
paragraphs relied upon must be seen in the backdrop of the
essential controversy noted above. With respect, it cannot be said
that the activities performed by sovereign or public authorities
under the provisions of law, which are in the nature of statutory
obligations are excluded from the purview of the present
enactment. Pertinently, the dividing line between governmental
and non-governmental, sovereign and regal functions and
otherwise is not very thin and post globalisation, liberalisation
and privatisation. In that context, a useful reference can be made
to a judgment of the Hon'ble Supreme Court in the case of N.
6
Nagendra Rao and Co. vs. State of Andhra Pradesh . The
observations in paras 23 and 24 are extremely relevant. These
paragraphs read as under:-
“23. In the modem sense the distinction between sovereign
or non-sovereign power thus does not exist. It all depends
on the nature of power and manner of its exercise.
Legislative supremacy under the Constitution arises out of
6 AIR 1994 SC 2663
Page 20 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
constitutional provisions. The legislature is free to legislate
on topics and subjects carved out for it. Similarly, the
executive is free to implement and administer the law. A
law made by a legislature may be bad or may be ultra vires,
but since it is an exercise of legislative power, a person
affected by it may challenge its validity but he cannot
approach a court of law for negligence in making the law.
Nor can the Government in exercise of its executive action
be sued for its decision on political or policy matters. It is
in public interest that for acts performed by the State
either in its legislative or executive capacity it should not
be answerable in torts. That would be illogical and
impractical. It would be in conflict with even modem
notions of sovereignty. One of the tests to determine if the
legislative or executive function is sovereign in nature is
whether the State is answerable for such actions in courts
of law. For instance, acts such as defence of the country,
raising armed forces and maintaining it, making peace or
war, foreign affairs, power to acquire and retain territory,
are functions which are indicative of external sovereignty
and are political in nature. Therefore, they are not
amenable to jurisdiction of ordinary civil court. No suit
under Civil Procedure Code would lie in respect of it. The
State is immune from being sued, as the jurisdiction of the
courts in such matter is impliedly barred.
24. But there the immunity ends. No civilised system can
permit an executive to play with the people of its country
and claim that it is entitled to act in any manner as it is
sovereign. The concept of public interest has changed with
structural change in the society. No legal or political
system today can place the State above law as it is unjust
and unfair for a citizen to be deprived of his property
illegally by negligent act of officers of the State without any
remedy. From sincerity, efficiency and dignity of State as
a juristic person, propounded in nineteenth century as
sound sociological basis for State immunity the circle has
gone round and the emphasis now is more on liberty,
equality and the rule of law. The modern social thinking of
progressive societies and the judicial approach is to do
away with archaic State protection and place the State or
the Government on a par with any other juristic legal
entity. Any watertight compartmentalization of the
functions of the State as "sovereign and non-sovereign" or
"governmental and non-governmental" is not sound. It is
contrary to modem jurisprudential thinking. The need of
the State to have extraordinary powers cannot be doubted.
But with the conceptual change of statutory power being
statutory duty for sake of society and the people the claim
of a common man or ordinary citizen cannot be thrown out
Page 21 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
merely because it was done by an officer of the State even
though it was against law and negligent. Needs of the State,
duty of its officials and right of the citizens are required to
be reconciled so that the rule of law in a Welfare State is
not shaken. Even in America where this doctrine of
sovereignty found its place either because of the "financial
instability of the infant American States rather than to the
stability of the doctrine's theoretical foundation", or
because of "logical and practical ground", or that "there
could be no legal right as against the State which made the
law" gradually gave way to the movement from, "State
irresponsibility to State responsibility". In Welfare State,
functions of the State are not only defence of the country
or administration of justice or maintaining law and order
but it extends to regulating and controlling the activities of
people in almost every sphere, educational, commercial,
social, economic, political and even marital. The
demarcating line between sovereign and non-sovereign
powers for which no rational basis survives has largely
disappeared. Therefore, barring functions such as
administration of justice, maintenance of law and order
and repression of crime etc. which are among the primary
and inalienable functions of a constitutional Government,
the State cannot claim any immunity. The determination
of vicarious liability of the State being linked with
negligence of its officers, if they can be sued personally for
which there is no dearth of authority and the law of
misfeasance in discharge of public duty having marched
ahead, there is no rationale for the proposition that even if
the officer is liable the State cannot be sued. The liability of
the officer personally was not doubted even in Viscount
Canterbury (supra). But the Crown was held immune on
doctrine of sovereign immunity. Since the doctrine has
become outdated and sovereignty now vests in the people,
the State cannot claim any immunity and if a suit is
maintainable against the officer personally, then there is
no reason to hold that it would not be maintainable against
the State.”
19. To the similar effect are the findings in the later judgment of
the Hon'ble Supreme Court in the case of Agricultural Produce
7
Market Committee vs. Ashok Hari Kuni (see paras 22 and 31
to 33)
7 AIR 2000 SC 3116
Page 22 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
20. In the passing, we are of the opinion that the High Court of
Judicature of Allahabad, while considering the demand, not
arising out of the GST, but under the Finance Act in relation to the
services of renting of immovable property of Greater Noida, has
rightly arrived at the conclusion that the same was a taxable
service and on the consideration received, the service tax could
have been levied and demanded. Once we agree with the
reasoning of the Division Bench, then, we do not feel it necessary
to reproduce the paragraphs in the Division Bench judgment. We
are not in agreement with the learned senior counsel appearing
for the petitioners that the demand is contrary to law or unfair,
unjust and unreasonable in any manner.
21. We are, therefore, of the clear view that the demand for
payment of GST is in accordance with law. The said demand
cannot be said to be vitiated by any error of law apparent on the
face of the record. In these circumstances, we do not find any
merit in the writ petition. It is accordingly dismissed. Rule is
discharged. There would be no order as to costs.
(PRAKASH.D.NAIK, J.) (S.C.DHARMADHIKARI, J.)
Page 23 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 12194 OF 2017
1. Builders Association of }
Navi Mumbai }
registered under the Bombay }
Public Trust Act, 1950 and }
the Society Registration Act, }
1860, having Regn. }
No. MH/371-2002/Thane, }
having its office at 308/309, }
Persipolis Co-op. Soc., }
Plot No. 74, Sector-17, }
Vashi, Navi Mumbai – }
400 703 }
}
2. Neelsidhi Realties }
a partnership firm, having }
nd
its address at 2 floor, }
The Emerald Building, }
besides Neel Sidhi Towers }
CHS, Navi Mumbai – 400 703 } Petitioners
versus
1. Union of India }
Through the Secretary, }
Ministry of Finance, }
Department of Revenue, }
Govt. of India, MSEB }
nd
Building, 2 floor, Estrella }
Battery Compound, Labour }
Compound, Dharavi, }
Matunga, Mumbai – 400 019 }
}
2. The Commissioner of }
Goods and Service Tax, }
th
Thane District, 16 floor, }
Satra Plaza, Plot No. 19/D, }
Palm Beach Road, Vashi, }
Navi Mumbai, Maharashtra }
Page 1 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
3. The Commissioner of }
Goods and Service Tax, }
CBD Belapur District, }
st
1 floor, CGO Complex, }
Opp. Police Commissioner's }
office, CBD Belapur, }
Navi Mumbai – 400 614, }
Maharashtra }
}
4. City Industrial and }
Development Corporation }
of Maharashtra Limited, }
nd
Nirmal, 2 floor, Nariman }
Point, Mumbai – 400 021 }
}
5. The State of Maharashtra }
through the Government }
Pleader Bombay High Court }
(OS), Bombay }
}
6. The Commissioner of }
Goods and Service Tax, }
Maharashtra, GST Bhavan, }
Byculla (East), S. Chapsi }
Road, Tadwadi, Mazgaon, }
Mumbai – 400 010 } Respondents
Mr. Vikram Nankani-Senior Advocate
with Mr. Chirag Mody, Mr. Aman
Kacheria i/b. M/s. DSK Legal for the
petitioners.
Mr. Pradeep S. Jetly with Mr. Jitendra B.
Mishra for respondent nos. 1 to 3.
Mr. B. B. Sharma for respondent no. 4.
Mr. B. V. Samant-AGP for State.
CORAM :- S. C. DHARMADHIKARI &
PRAKASH. D. NAIK, JJ.
DATED :- MARCH 28, 2018
Page 2 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
ORAL JUDGMENT:- (Per S. C. Dharmadhikari, J.)
1. Rule. Respondents waive service. By consent, Rule is made
returnable forthwith.
2. By this writ petition under Article 226 of the Constitution of
India, the petitioners are challenging an order levying/collecting
the Goods and Service Tax (GST) on the one-time lease premium
charged by respondent no. 4 while letting plots of land on lease
basis. By prayer clause (b), the petitioners seek a writ of
mandamus or any other appropriate writ, order or direction in
the nature thereof directing the respondents not to collect the
Central Goods and Service Tax on the long term lease granted by
respondent no. 4 to the members of petitioner no. 1, including
respondent no. 2.
3. Before us is the first petitioner styled as Builders'
Association of Navi Mumbai, which is a registered public
charitable trust governed by the Bombay, now Maharashtra
Public Trust Act, 1950 and the Societies Registration Act, 1860.
The second petitioner is a partnership firm carrying on business
as Builder and Developer. The first, second and the third
respondents are the Union of India, through the Secretary,
Ministry of Finance, Department of Revenue, the Commissioner of
Goods and Service Tax, Thane District and the Commissioner of
Page 3 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
Goods and Service Tax, Central Business District (CBD), Belapur.
Respondent no. 4 is the City Industrial and Development
Corporation of Maharashtra Limited (CIDCO), whereas, the sixth
respondent is the Commissioner of Goods and Service Tax,
Maharashtra.
4. The argument of the petitioners is that their members are
reputed Builders and Developers of Navi Mumbai and areas
surrounding it. They have contributed to the growth and
development of Navi Mumbai by constructing and developing
several residential and commercial properties. These projects
are undertaken and carried out after the fourth respondent,
which is registered as a company under the Companies Act, 1956,
exercises the statutory functions in terms of section 113(3A) of
the Maharashtra Regional and Town Planning Act, 1966
(hereinafter referred to as “the MRTP Act”). Insofar as the
nature of the activities and functions of the fourth respondent,
the petitioners, in para 6 of this petition, state as under:-
th
“6. Respondent No. 4 was incorporated on 17 March,
1970 with the specific aim for creating a new planned, self-
sufficient and sustainable city on the main land across
Thane Creek adjoining the Mumbai City and it disposes of
the land for development for 60 years to various builders
and developers under the Navi Mumbai Land Disposal
(Amendment) Regulation, 2008 by charging them a one-
time lease premium. In addition to this one-time lease
premium a separate lease rental is charged annually for
the period of lease. Respondent No. 4 is a special planning
authority for the areas of Navi Mumbai. The multi-
Page 4 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
dimensional activity undertaken by Respondent No. 4
under the supervision of the Government of Maharashtra
are classified under three broad concepts as enumerated
from the website of Respondent No. 4, (i) Planning and
development of new towns; (ii) Consultancy, project
management and designing; and (iii) Development of new
towns, setting up of industrial face of the city with the help
of planned urban development with the social economic
facility. In other words, Respondent No. 4 is acting as a
special planning authority on behalf of the Government of
Maharashtra and is not carrying on any business activities
as such. A copy of introduction page taken from the
website of Respondent No. 4 is appended hereto and
marked as Exhibit “1”.”
5. It is stated that in its ordinary and normal course of
business, the fourth respondent invites offers from various
entities to acquire, on lease, residential-cum-commercial plots
and three/four star hotel plots in Panvel and Navi Mumbai from
time to time. One such invitation was issued in April, 2017
inviting offers for various plots at Navi Mumbai and Panvel. The
members of petitioner no. 1 applied for allotment of various plots.
The members were allotted these plots. Under the scheme, the
tenderer/bidder is required to make an offer by quoting a rate per
square meter on account of payment of lease premium. The plots
are to be allotted on long term lease of 60 years. A base price is
already fixed for the plot in the annexure to the tender for the
payment of one-time lease premium amount and the tenderer is
required to quote a price above the base price per square meter of
the plot which the tenderer is interested in acquiring. After the
offers are scrutinised, respondent no. 4 usually allots plots on
Page 5 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
lease basis to the bidder quoting the highest rate per square
meter of the one-time lease premium amount provided such a
bidder is eligible as far as the remaining terms and conditions of
the tender document.
6. Thus, the petitioners have obtained plots in the above areas,
but what they are questioning is that when the allotment letter
was issued, the allottee was called upon to pay, on the one-time
lease premium amount, the GST separately by a Demand Draft
drawn in the name of the fourth respondent payable at
Mumbai/Navi Mumbai. The fourth respondent collected GST on
the total one-time lease premium amount payable by the
successful allottee at the rate of 18%. The details of these
allottees and the one time lease premium, the GST payable have
been indicated in a chart in para 12 of the petition. In these
circumstances, a grievance was raised by approaching the Goods
and Service Tax Commissionerate as to how the GST is collected
on the above amount and demanded from the petitioners. There
was correspondence initiated and finally, when the authorities
did not respond, the present petition has been filed.
7. The argument of Mr. Nankani learned senior counsel is that
such a tax, as is demanded, cannot be levied, assessed and
recovered. A long term lease of 60 years tantamounts to sale of
Page 6 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
the immovable property, since the lessor is deprived of, by the
allotment the right to use, enjoy and possess the property. Our
attention is invited to section 105 of the Transfer of Property Act,
1882. The one-time premium amount is the lumpsum
consideration paid for entering into the lease. Our attention is
also invited to the fact that the lease of 60 years and with a
statutory authority is based on the position and status of that
authority. In that regard, our attention is invited to section 113
and particularly sub-section (3A) of the MRTP Act. A new town is
set up by the fourth respondent. It is a planning authority. It is a
creature of the statute. Our attention is also invited to sub-
sections (1) to (3) of section 118 of the MRTP Act. Mr. Nankani
would submit that the CIDCO discharges a Government function
and duty. In any event, it discharges a statutory obligation. The
argument of Mr. Nankani is that by virtue of Article 36, Schedule
I to the Maharashtra Stamp Act, 1958, the present transaction is
treated as a conveyance. Thus, such an instrument styled as
conveyance and conveying a right, title and interest in the
immovable property is brought into existence. Hence, the whole
transaction is akin to sale. If that is the position, then, section 7
of the GST Act cannot have any application. Once the position in
law is understood in this perspective, then, there is no warrant
for imposition of the GST. Our attention is invited to Schedule II
Page 7 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
of the GST Act and some of the clauses therein to urge that if the
intention of the legislation was to charge GST on this one-time
lease premium, then, appropriate provisions would have been
inserted. They not being inserted, as there was a clear intent to
leave out a transaction tantamounting to a sale. Mr. Nankani
attempted to point out that one-time lease premium is different
and distinct from lease rent. It is not a periodical payment, but a
one time. It is not, therefore, conceivable that on such a
premium, the tax could be levied, assessed and recovered. The
premium is akin to Salami and our attention is invited to its plain
dictionary meaning as set out in the legal dictionary. Our
attention is also invited to a judgment of the Hon'ble Supreme
Court in the case of Commissioner of Income Tax Assam, Tripura
1
and Manipur vs. Panbari Tea Co. Ltd. . Then, our attention is
invited to a judgment of the Hon'ble Supreme Court in the case of
R. K. Palshikar (HUF) vs. Commissioner of Income Tax, M. P.,
2
Nagpur . Finally, Mr. Nankani would heavily rely upon an order
rd
passed by this court on 23 August, 2017 in the case of
Commissioner of Central Excise, Nashik vs. Maharashtra
3
Industrial Development Corporation . He would submit that this
judgment and order dealt with a similar issue concerning the
1 AIR 1965 SC 1871
2 (1988) 3 SCC 594
3 Central Excise Appeal No. 164 of 2015
Page 8 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
Maharashtra Industrial and Development Corporation. Hence,
we should abide by the same.
8. In any event, the argument is that the reliance by the
respondents on a Division Bench judgment of the Allahabad High
Court is misplaced. The Allahabad High Court, in the case of
Greater Noida Industrial Dev. Authority vs. Commissioner of
4
Customs, Central Excise did not notice the judgment of the
Hon'ble Supreme Court in the case of Shri Ramtanu Co-operative
5
Housing Society Ltd. and Anr. vs. State of Maharashtra and Ors. .
For all these reasons, it is submitted that the petitioners be
granted the reliefs as prayed.
9. On the other hand, Mr. Jetly appearing for the Central
Goods and Sales Tax Commissionerate and the Union of India
would urge, based on the affidavit in reply, that this is a petition
which seeks to pre-empt the levy assessment and recovery of
GST. In any event, if the GST being now paid, then, the issue
raised is purely academic. Apart therefrom, the law does not
make any distinction between governmental and non-
governmental agencies and supply of goods or services attracts
GST. The CIDCO cannot be treated as Government. Its position as
a new town planning authority is of no consequence. Once the
4 2015(40) STR 95
5 1970() SCC 323
Page 9 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
legal provisions are clear, unambiguous and plain, then,
regardless of the consequences, the tax is leviable. The whole
edifice of Mr. Nankani's argument is based on the judgments
delivered not in the context of the GST Act. The affidavit in reply
at page 198 of the paper book and particularly paragraph no. 8
points out that the transaction is of supply of services. Once the
Income Tax Act deals with a tax on income, then, the tests are
different. The concepts are also different. It is, therefore, risky to
read into one law the definition or provision to similar effect but
from different law. A different and distinct tax law with its object
and purpose cannot be, therefore, ignored and no automatic
borrowing of any definition from another taxing statute is
permissible. For all these reasons, Mr. Jetly would submit that
the writ petition be dismissed.
10. For properly appreciating the rival contentions, we would
make a reference to the GST Act. The GST Act is an Act to make a
provision for levy and collection of tax on intra-state supply of
goods or services or both by the Central Government and for the
matters connected therewith or incidental thereto. Chapter I
contains preliminary provisions and section 2 therein defines
certain expressions and words. The term “business” is defined in
inclusive manner in section 2(17). The expression includes any
Page 10 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
trade, commerce, manufacture, profession, vocation, adventure,
wager or any other similar activity, whether or not it is for a
pecuniary benefit. It also includes any activity or transaction
undertaken by the Central Government or State Government or
any local authority in which they are engaged as public
authorities. The other definition, which is material and relevant
is to be found in section 2(31) is of the word “consideration”.
Section 2(31) reads as under:-
“2(31) “Consideration” in relation to the supply of
goods or services or both includes-
(a) any payment made or to be made, whether in money
or otherwise, in respect of, in response to, or for the
inducement of, the supply of goods or services or both,
whether by the recipient or by any other person but shall
not include any subsidy given by the Central Government
or a State Government;
(b) the monetary value of any act or forbearance, in
respect of, in response to, or for the inducement of, the
supply of goods or services or both, whether by the
recipient or by any other person but shall not include any
subsidy given by the Central Government or a State
Government:
Provided that a deposit given in respect of the supply
of goods or services or both shall not be considered as
payment made for such supply unless the supplier applies
such deposit as consideration for the said supply.”
11. Then, the definition of the term “person” appearing in
section 2(84) is also relevant. Chapter II contains provisions in
relation to administration and then follows Chapter III, which is
the charging section. Section 7 is heavily relied upon and
therefore, we reproduce the same:-
Page 11 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
“7. (1) For the purposes of this Act, the expression
“supply” includes-
(a) all forms of supply of goods or services or both
such as sale, transfer, barter, exchange, licence, rental,
lease or disposal made or agreed to be made for a
consideration by a person in the course or furtherance of
business;
(b) import of services for a consideration whether
or not in the course or furtherance of business;
(c) the activities specified in Schedule I, made or
agreed to be made without a consideration; and
(d) the activities to be treated as supply of goods or
supply of services as referred to in Schedule II.
(2) Notwithstanding anything contained in sub-
section (1),-
(a) activities or transactions specified in Schedule
III; or
(b) such activities or transactions undertaken by
the Central Government, a State Government or any local
authority in which they are engaged as public authorities,
as may be notified by the Government on the
recommendations of the Council, shall be treated neither
as a supply of goods nor a supply of services.
(3) Subject to the provisions of sub-sections (1) and
(2), the Government may, on the recommendations of the
Council, specify, by notification, the transactions that are
to be treated as-
(a) a supply of goods and not as a supply of
services; or
(b) a supply of services and not as a supply of
goods.”
12. A perusal of sections 7, 8, 9, 10 and 11 falling in this
Chapter leaves us in no manner of doubt that the expression
“supply” includes all forms of supply of goods or services or both
Page 12 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
such as sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business. By sub-section
(2) and which opens with a non-obstante clause, such activities or
transactions undertaken by the Central Government, a State
Government or any local authority in which they are engaged as
public authorities, as may be notified by the Government on the
recommendations of the Council, shall be treated neither as a
supply of goods nor a supply of services. Equally, subject to the
provisions of sub-sections (1) and (2), the Government may, on
the recommendation of the Council, specify, by notification, the
transactions that are to be treated as a supply of goods and not as
a supply of services or a supply of services and not as a supply of
goods. Pertinently, no notification and traceable to sub-section
(2) of section 7 has been brought to our notice.
13. What is heavily relied upon before us is the position of
CIDCO. The CIDCO relies upon a notification issued under the
MRTP Act. It may be designated as a New Town Development
Authority for the purpose of the MRTP Act. For designation of a
site as a new town and for development of any area as a site for
the new town, sub-section (3A) of section 113 enables the State
Government to require the work of developing and disposing of
Page 13 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
land in the area of new town by any such Corporation, company
or subsidiary company as referred in sub-section (2) of section
113 thereof. It could be declared, by a notification in a Official
Gazette, to be the New Town Development Authority for that
area. Pertinently, this notification, which is relied upon and
which notifies the Navi Mumbai Disposal of Land (Amendment)
Regulations, 2008 reinforces the position that by a final
notification in Official Gazette, the CIDCO is constituted and
designated as the New Town Development Authority.
14. On a plain reading of the GST Act, we do not see how we can
agree with Mr. Nankani. Mr. Nankani also relies upon Schedule
II, which is referable to section 7. These are the activities to be
treated as supply of goods or services. The substantive provision
section 7 in clearest terms says that the activities specified in
Schedule I made or agreed to be made without a consideration
and the activities to be treated as supply of goods or supply of
services referred to in Schedule II would be included in the
expression “supply”. However, clause (a) of sub-section (1) of
section 7 includes all forms of supply of goods or services or both
such as sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business. We referred to
Page 14 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
the definitions simply to reinforce our conclusion that the CIDCO
is a person and in the course or in furtherance of its business, it
disposes of lands by leasing them out for a consideration styled as
one-time premium. Therefore, if one refers to Schedule II, section
7, then, Item No. 2 styled as land and building and any lease,
tenancy, licence to occupy land is a supply of service. Any lease
or letting out of a building, including commercial, industrial or
residential complex for business, either wholly or partly is a
supply of service. It is settled law that such provisions in a taxing
statute would have to be read together and harmoniously in order
to understand the nature of the levy, the object and purpose of its
imposition. No activity of the nature mentioned in the inclusive
provision can thus be left out of the net of the tax. Once this law,
in terms of the substantive provisions and the Schedule, treats
the activity as supply of goods or supply of services, particularly
in relation to land and building and includes a lease, then, the
consideration therefor as a premium/one-time premium is a
measure on which the tax is levied, assessed and recovered. We
cannot then probe into the legislation any further.
15. The reliance placed on the judgment of the Hon'ble Supreme
Court in the case of Panbari Tea Co. Ltd. (supra) is entirely
misplaced. There, a registered lease deed by the assessee, under
Page 15 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
which two estates were leased out to a firm for a period of 10
years, was in issue. The lease was executed for a consideration as
and by way of premium and annual rent to be paid by the lessee to
Panbari. The premium was made payable as noted in the Hon'ble
Supreme Court's judgment. What went before the Income Tax
Officer is the issue of treatment to the installment paid towards
the premium in the relevant accounting year. The Income Tax
Officer treated this as a revenue receipt of the assessee. On
appeal, this order was confirmed. On further appeal, the tribunal
also held that the premium was really the rent payable under the
lease deed and, therefore, it was chargeable to income tax. After
the matter was carried to the High Court, the assessee succeeded
because the question posed for the High Court's consideration was
answered by holding that this receipt is a capital receipt. The
question that arose before the Hon'ble Supreme Court was
whether this finding is correct. It is in that context and how to
treat this income, whether as a revenue receipt or a capital
receipt that all the further observations are made. Even by
terming the gain or income as Salami, what the Hon'ble Supreme
Court was essentially concerned with is not the transaction or the
nature thereof, but the income generated or derived from it. Its
treatment, therefore, led to the Hon'ble Supreme Court referring
to section 105 of the Transfer of Property Act, 1882. In these
Page 16 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
circumstances, the opinion rendered is that the income was
treated rightly as a capital receipt. In the context, a lease of
immovable property is a transfer of right to enjoy the property as
termed by the Transfer of Property Act, 1882 for a price paid.
That is how it being a transfer that the income derived in relation
to lease of immovable property was treated as above.
16. Similarly, in the case of R. K. Palshikar (supra), the
agricultural land of the assessee was diverted to non-agricultural
purpose by developing it as housing site several years ago and it
was not disputed that the land in question constitutes a capital
asset within the meaning of section 2(4A) of the Income Tax Act,
1961. The question was whether section 12-B of that act can be
brought in to play in this case as the transfer is of leasehold
interest in immovable property for 99 years and not an outright
sale or transfer of the complete interest of the transferor in the
immovable property. The assessee was not agreeable to pay the
tax as demanded and tried to escape the levy by urging that this
was not a transaction which would invite or attract capital gain
tax. In these circumstances, the question was answered by the
Hon'ble Supreme Court and in that context, the observations
heavily reiled upon by Mr. Nankani are made. Once again, we
cannot ignore that the observations are in the context of the
Page 17 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
provisions, and the interpretation to be placed thereon, but found
in the Income Tax Act, 1961. That is an assessment of the tax on
income. We are concerned here with the GST Act and the tax on
supply of goods and services. It is not disputed that the position
of the CIDCO for the purpose of orderly planning and development
will be of no assistance in the sense while developing a new
township, the objective of the planning authority is not to earn
money, but to develop the area so that the purpose of setting up a
township is achieved by more people wanting to live in the area in
lieu of the various amenities provided in the area. The CIDCO is
one such authority. It is entirely for the legislature, therefore, to
exercise the powers conferred by sub-section (2) of section 7 of
the GST Act and issue the requisite notification. Absent that
notification, merely going by the status of the CIDCO, we cannot
hold that the lease premium would not attract or invite the
liability to pay tax in terms of the GST Act.
17. Even the judgment in the case of Shri Ramtanu Co-
operative Housing Society Ltd. (supra) is of no assistance. There,
the constitutional validity of the Maharashtra Industrial
Development Act, 1962 was challenged. The argument was that
this is not an enactment and in pith and substance referable to
the constitutional entry, namely, Schedule VI List I, Entries 7 and
Page 18 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
52, List II Entry 24 within the meaning of Article 246 of the
Constitution of India. It is in this context that the functions and
powers of the Maharashtra Industrial Development Corporation
(MIDC) were referred and the court came to the conclusion that
the Corporation is not a Government company and cannot be
termed as a trading corporation as well. It provides amenities
and facilities in industrial areas, when it allots industrial plots for
setting up industries so as to achieve a balanced development and
growth of industries. It is performing that function and which,
therefore, enabled the Hon'ble Supreme Court to hold that the
constitutional entries would not allow the power of competent
legislature to make the law. This judgment is of no assistance.
18. In the case of Commissioner of Central Excise, Nashik
(supra), the demand of service tax was in issue. The Finance Act,
1994 and particularly section 65 clause (64) was relied upon to
urge that the service charges collected by the MIDC from the
allottees of the plots are in relation to services provided by the
MIDC to the plot holders and the same is covered by the category
“maintenance, management and repairs” under clause (64) of
section 65 of the Act. It is in relation to such a controversy that
the Hon'ble Supreme Court's judgment in the case of Shri
Ramtanu Co-operative Housing Society Ltd. (supra) outlining the
Page 19 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
legal position and the status of the Corporation is referred by the
Division Bench. The issue raised related to collection of service
charges, but whether the services rendered are taxable services
or not. The Division Bench noted that this consideration is an
amount received for the facilities and amenities provided. That is
a statutory function. It is in these circumstances that the
Revenue's appeal was dismissed. All the observations in the
paragraphs relied upon must be seen in the backdrop of the
essential controversy noted above. With respect, it cannot be said
that the activities performed by sovereign or public authorities
under the provisions of law, which are in the nature of statutory
obligations are excluded from the purview of the present
enactment. Pertinently, the dividing line between governmental
and non-governmental, sovereign and regal functions and
otherwise is not very thin and post globalisation, liberalisation
and privatisation. In that context, a useful reference can be made
to a judgment of the Hon'ble Supreme Court in the case of N.
6
Nagendra Rao and Co. vs. State of Andhra Pradesh . The
observations in paras 23 and 24 are extremely relevant. These
paragraphs read as under:-
“23. In the modem sense the distinction between sovereign
or non-sovereign power thus does not exist. It all depends
on the nature of power and manner of its exercise.
Legislative supremacy under the Constitution arises out of
6 AIR 1994 SC 2663
Page 20 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
constitutional provisions. The legislature is free to legislate
on topics and subjects carved out for it. Similarly, the
executive is free to implement and administer the law. A
law made by a legislature may be bad or may be ultra vires,
but since it is an exercise of legislative power, a person
affected by it may challenge its validity but he cannot
approach a court of law for negligence in making the law.
Nor can the Government in exercise of its executive action
be sued for its decision on political or policy matters. It is
in public interest that for acts performed by the State
either in its legislative or executive capacity it should not
be answerable in torts. That would be illogical and
impractical. It would be in conflict with even modem
notions of sovereignty. One of the tests to determine if the
legislative or executive function is sovereign in nature is
whether the State is answerable for such actions in courts
of law. For instance, acts such as defence of the country,
raising armed forces and maintaining it, making peace or
war, foreign affairs, power to acquire and retain territory,
are functions which are indicative of external sovereignty
and are political in nature. Therefore, they are not
amenable to jurisdiction of ordinary civil court. No suit
under Civil Procedure Code would lie in respect of it. The
State is immune from being sued, as the jurisdiction of the
courts in such matter is impliedly barred.
24. But there the immunity ends. No civilised system can
permit an executive to play with the people of its country
and claim that it is entitled to act in any manner as it is
sovereign. The concept of public interest has changed with
structural change in the society. No legal or political
system today can place the State above law as it is unjust
and unfair for a citizen to be deprived of his property
illegally by negligent act of officers of the State without any
remedy. From sincerity, efficiency and dignity of State as
a juristic person, propounded in nineteenth century as
sound sociological basis for State immunity the circle has
gone round and the emphasis now is more on liberty,
equality and the rule of law. The modern social thinking of
progressive societies and the judicial approach is to do
away with archaic State protection and place the State or
the Government on a par with any other juristic legal
entity. Any watertight compartmentalization of the
functions of the State as "sovereign and non-sovereign" or
"governmental and non-governmental" is not sound. It is
contrary to modem jurisprudential thinking. The need of
the State to have extraordinary powers cannot be doubted.
But with the conceptual change of statutory power being
statutory duty for sake of society and the people the claim
of a common man or ordinary citizen cannot be thrown out
Page 21 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
merely because it was done by an officer of the State even
though it was against law and negligent. Needs of the State,
duty of its officials and right of the citizens are required to
be reconciled so that the rule of law in a Welfare State is
not shaken. Even in America where this doctrine of
sovereignty found its place either because of the "financial
instability of the infant American States rather than to the
stability of the doctrine's theoretical foundation", or
because of "logical and practical ground", or that "there
could be no legal right as against the State which made the
law" gradually gave way to the movement from, "State
irresponsibility to State responsibility". In Welfare State,
functions of the State are not only defence of the country
or administration of justice or maintaining law and order
but it extends to regulating and controlling the activities of
people in almost every sphere, educational, commercial,
social, economic, political and even marital. The
demarcating line between sovereign and non-sovereign
powers for which no rational basis survives has largely
disappeared. Therefore, barring functions such as
administration of justice, maintenance of law and order
and repression of crime etc. which are among the primary
and inalienable functions of a constitutional Government,
the State cannot claim any immunity. The determination
of vicarious liability of the State being linked with
negligence of its officers, if they can be sued personally for
which there is no dearth of authority and the law of
misfeasance in discharge of public duty having marched
ahead, there is no rationale for the proposition that even if
the officer is liable the State cannot be sued. The liability of
the officer personally was not doubted even in Viscount
Canterbury (supra). But the Crown was held immune on
doctrine of sovereign immunity. Since the doctrine has
become outdated and sovereignty now vests in the people,
the State cannot claim any immunity and if a suit is
maintainable against the officer personally, then there is
no reason to hold that it would not be maintainable against
the State.”
19. To the similar effect are the findings in the later judgment of
the Hon'ble Supreme Court in the case of Agricultural Produce
7
Market Committee vs. Ashok Hari Kuni (see paras 22 and 31
to 33)
7 AIR 2000 SC 3116
Page 22 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::
907-WP.12194.2017.doc
20. In the passing, we are of the opinion that the High Court of
Judicature of Allahabad, while considering the demand, not
arising out of the GST, but under the Finance Act in relation to the
services of renting of immovable property of Greater Noida, has
rightly arrived at the conclusion that the same was a taxable
service and on the consideration received, the service tax could
have been levied and demanded. Once we agree with the
reasoning of the Division Bench, then, we do not feel it necessary
to reproduce the paragraphs in the Division Bench judgment. We
are not in agreement with the learned senior counsel appearing
for the petitioners that the demand is contrary to law or unfair,
unjust and unreasonable in any manner.
21. We are, therefore, of the clear view that the demand for
payment of GST is in accordance with law. The said demand
cannot be said to be vitiated by any error of law apparent on the
face of the record. In these circumstances, we do not find any
merit in the writ petition. It is accordingly dismissed. Rule is
discharged. There would be no order as to costs.
(PRAKASH.D.NAIK, J.) (S.C.DHARMADHIKARI, J.)
Page 23 of 23
J.V.Salunke,PA
::: Uploaded on - 10/04/2018 ::: Downloaded on - 31/03/2024 17:10:05 :::