DBL Villuppuram Highways Limited Vs. Union of India & Ors. (Madras High Court)
Date: July 23, 2024
Subject Matter
GST Demand on HAM Contracts: Matter remanded for re-consideration
Summary
The petitioner, who was awarded a concession by the National Highways Authority of India under the Hybrid Annuity Model (HAM), subsequently engaged in Engineering, Procurement, and Construction (EPC) contracts. The case unfolded as follows: - An intimation concerning the petitioner’s supplies was issued in November 2023, followed by responses and a show cause notice regarding discrepancies between the value of supplies made by the EPC contractor and those reported by the petitioner. - The petitioner contended that the HAM contract should not be treated equivalently to the EPC contract, citing that their obligations extended beyond construction to include operation and maintenance, thus constituting a continuous supply of services. - The petitioner referred to Circular No.221/15/2024-GST issued by the CBIC, indicating that it recognized HAM as a single contract covering both construction and ongoing maintenance. - The government advocate argued that the time of supply is anchored in the service provision timestamp and that discrepancies in pricing provided by the EPC contractor could substantiate the completion of construction. Ultimately, the adjudicating authority noted the relevance of the CBIC circular and determined that the case required reconsideration. The original order dated February 28, 2024, was set aside and the matter was remanded to provide the petitioner with a chance for a personal hearing and subsequent issuance of a fresh decision, considering the details in the circular. The case illustrated the distinction between contract types under GST regulations and the importance of CBIC circulars in interpreting ongoing contract obligations.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner was awarded a concession by the National Highways Authority of India on Hybrid Annuity Model (HAM). The petitioner, in turn, had awarded EPC contracts. In relation to supplies made by the petitioner, an intimation was issued in November 2023. The petitioner replied thereto in December 2023. This was followed by a show cause notice issued in December 2023. By such show cause notice, the petitioner was called upon to show cause in respect of defects pertaining to the value of supplies made by the EPC contractor in comparison to the outward supply values indicated by the petitioner. The petitioner replied to such show cause notice in January 2024. The impugned order was issued thereafter on 28.02.2024.
2. Learned counsel for the petitioner submits that a contract awarded on HAM cannot be equated with an EPC contract. He submits that the obligations of the petitioner extend not only to designing, building and transferring, but also to operation and maintenance. Therefore, he submits that there is continuous supply of services and that liability cannot be imposed on the petitioner on the basis of the supply value indicated by the EPC contractor. He relies upon Circular No.221/15/2024-GST dated 26.06.2024 (Circular No.221/24). By pointing out that the said Circular was issued by the Central Board of Indirect taxes and Customs (CBIC) pursuant to representations from concessionaires, such as the petitioner, he submits that the matter requires re-consideration in light of such Circular.
3. Mr.V.Prashanth Kiran, learned Government Advocate, appears on behalf of the second to fourth respondents. Mr.Ramesh Kutty, learned senior standing counsel, appears on behalf of the first respondent. Mr.V.Prashanth Kiran contends that the time of supply is the time of provision of services under Section 31 and other applicable provisions of GST statutes. When the EPC contractor has indicated a higher value of outward supply, he submits that it constitutes clear evidence that construction was completed to that extent. Without prejudice, he submits that the matter may require re-
4. Circular No.221/15/2024-GST was placed on record. Such circular was issued in exercise of powers conferred under Section 158(1) of the Central Goods and Services Tax Act, 2017 (the CGST Act). The Circular is clarificatory. In the Circular, the CBIC noticed that a HAM contract is a single contract for construction and operation and maintenance. The Circular also draws reference to sub-section (5) of Section 31 of the CGST Act which deals with continuous supply of service. On closely examining the Circular, especially in view of such circular being labelled and characterized as clarificatory, it could have a bearing on the adjudication of this dispute. Consequently, the matters requires re-consideration.
5. For reasons set out above, impugned order dated 28.02.2024 is set aside and the matter is remanded for re-consideration. The third respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order by taking into account Circular No.221/2024. Such fresh order shall be issued within four months from the date of receipt of a copy of this order. In view of the assessment order being set aside, the bank attachment is raised.
6. W.P.No.16969 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.18689 and 18693 of 2024 are closed.