ITD Cemindia JV Vs Joint Commissioner of Commercial Taxes (Appeals)

FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT

In this petition, petitioner seeks for the following reliefs:-

“a) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the order passed by the Respondent No.1 in Form GST-APL-04 dated 14.08.2023 under section 107(11) of the Karnataka Goods and Services Tax Act, 2017 and Central Goods and Services Tax Act, 2017 herein marked as Annexure-A.

b) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the refund rejection order passed by the Respondent No.2 rejecting the refund claim of the petitioner in Form GST-RFD-06 for the tax period September 2019 dated 30.11.2022 herein marked as Annexure – B1.

c) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the refund rejection order passed by the Respondent No.2 rejecting the refund claim of the petitioner in Form GST-RFD-06 for the tax period December 2019 dated 30.11.2022 herein marked as Annexure – B2.

d) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the refund rejection order passed by the Respondent No.2 rejecting the refund claim of the petitioner in Form GST-RFD-06 for the tax period September 2020 dated 30.11.2022 herein marked as Annexure – B3.

e) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the refund rejection order passed by the Respondent No.2 rejecting the refund claim of the petitioner in Form GST-RFD-06 for the tax period October dated 22.12.2022 herein marked as Annexure – B4.

f) Issue a writ of a writ of mandamus or direction in the nature of writ of mandamus directing the Respondent No.2 to issue the refund claimed by the petitioner for the September 2019, December 2019, September 2020 and October 2020 aggregating to a sum of Rs.3,30,16,780/-, together with interest.

g) And pass such other orders as this Hon’ble Court deems fit and proper in the interest of justice and equity.”

2. Heard learned Senior counsel for the petitioner and learned HCGP for the respondent and perused the material on record.

3. A perusal of the material on record will indicate that the present petition relates to the assessment year September-2019, December-2019, September-2020 and October-2020 in relation to which the petitioner sought for refund, which was rejected by the respondents by passing the impugned orders and confirmed by the First Appellate Authority. Aggrieved by the impugned refund rejection orders, which were confirmed by the First Appellate Authority, which were related to tax periods September-2019, December-2019, September-2020 and October-2020, the petitioner is before this Court by way of the present petition, by placing reliance upon the orders passed in W.P.No.2490/2023 dated 28.08.2024 and in W.P.No.2817/2025 dated 12.03.2025, passed in favour of the very same petitioner in relation to the different tax periods.

4. Per contra, learned HCGP submits that there is no merit in the petitioner and that the same is liable to be dismissed.

5. The petitioner herein i.e., M/s ITD Ceminida JV approached this Court in W.P.No.2490/2023 in relation to the tax period March-2018, April-2018, May-2018, June-2018, August-2018, September-2018, October-3028, January-2019 and July-2019, which was allowed in favour of the petitioner by final order dated 28.08.2024, which reads as under:

In this petition, petitioner seeks for the following reliefs:-

“i) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the order passed by the Respondent No.1 in Form GST-APL-04 dated 15.12.2022 under section 107(11) of the Karnataka Goods and Services Tax Act, 2017 and Central Goods and Services Tax Act, 2017 herein marked as Annexure-A.

ii) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the refund rejection order passed by the Respondent No.2 rejecting the refund claim of the petitioner in Form GST-RED-06 for the tax period March 2018 dated 08.10.2020 herein marked as Annexure-B1.

iii) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the refund rejection order passed by the Respondent No.2 rejecting the refund claim of the petitioner in Form GST-RFD-06 for the tax period April 2018 dated 08.10.2020 herein marked as Annexure – B2.

iv) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the refund rejection order passed by the Respondent No.2 rejecting the refund claim of the petitioner in Form GST-RFD-06 for the tax period May 2018 dated 20.10.2020 herein marked as Annexure – B3.

v) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the refund rejection order passed by the Respondent No.2 rejecting the refund claim of the petitioner in Form GST-RFD-06 for the tax period June 2018 dated 20.10.2020 herein marked as Annexure – B4.

vi) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the refund rejection order passed by the Respondent No.2 rejecting the refund claim of the petitioner in Form GST-RFD-06 for the tax period August 2018 dated 20.10.2020 herein marked as Annexure B5.

vii) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the refund rejection order passed by the Respondent No.2 rejecting the refund claim of the petitioner in Form GST-RFD-06 for the tax period September 2018 dated 02.11.2020 herein marked as Annexure-B6.

viii) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the refund rejection order passed by the Respondent No.2 rejecting the refund claim of the petitioner in Form GST-RFD-06 for the tax period October 2018 dated 02.11.2020 herein marked as Annexure -B7.

ix) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the refund rejection order passed by the Respondent No.2 rejecting the refund claim of the petitioner in Form GST-RFD-06 for the tax period January 2019 dated 26.02.2021 herein marked as Annexure – B8.

x) Issue a writ of Certiorari or direction in the nature of a writ or certiorari quashing the refund rejection order passed by the Respondent No.2 rejecting the refund claim of the petitioner in Form GST-RFD-06 for the tax period July 2019 dated 13.11.2021 herein marked as Annexure – B9

xi) Issue a writ of a writ of mandamus or direction in the nature of writ of mandamus directing the Respondent No.2 to issue the refund claimed by the petitioner for the March 2018, April 2018, May 2018, June 2018, August 2018, September 2018, October 2018, January 2019 and July 2019 aggregating to a sum of Rs. 20,22,19,265/- as per the substituted formula provided in Notification No. 14/2022-Central Tax dated 05.07.2022, together with interest.

xii) And pass such other orders as this Hon’ble Court deems fit and proper in the interest of justice and equity.”

2. Heard learned Senior counsel for the petitioner and learned counsel for the revenue and perused the material on record.

3. A perusal of the material on record will indicate that the petitioner is a joint venture between M/s. ITD Cementation India Limited and M/s. Italian-Thai Development Public Company Limited formed vide Agreement dated 15.05.2017. The petitioner was awarded a contract by Bangalore Metro Rail Corporation (hereinafter referred to as “BMRCL”) for construction of elevated structures (including viaduct and stations) measuring approximately 28.11 kms in length.

4. The petitioner applied for refund under Section 54(3) of the CGST Act on account of Income Tax Credit (ITC) accumulated due to inverted tax structure for the period from March, 2018 to July, 2019, pursuant to which, the respondent No.2 issued Notices in Form RFD-08, to which, the petitioner submitted replies and the same culminated in the impugned refund rejection orders at Annexure-B1 to Annexure-B9 during the period 23.05.2020 to 13.11.2020 passed by the 2nd respondent. Aggrieved by the same, the petitioner preferred appeals before the 1st respondent, who proceeded to pass the impugned order at Annexure-A dated 15.12.2022 dismissing the appeals filed by the petitioner. Aggrieved by the impugned orders passed by the 2nd respondent and 1st respondent, petitioner is before this Court by way of the present petition.

5. The details of the refund claimed by the petitioner for the aforesaid various tax periods are as under:

6. Before adverting to the rival submissions, it is relevant to extract the relevant entries contained in Schedule-II to the CGST Act and statutory provisions, which are as under:-

“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

Section 2 (119) of the CGST Act defines ‘Works Contract’ 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.”

7. A perusal of the impugned orders passed by the respondents will indicate that the refund claim of the petitioner has been rejected on two grounds, viz., firstly, that the business / activity being carried on by the petitioner was supply of services being construction within the meaning of Clause/Entry 5(b) of Schedule II to the CGST Act and not a composite supply in relation to a works contract as contemplated under Clause/Entry 6(a) of Schedule II to the Act and stood excluded from the refund mechanism in terms of Notification 15/2017-28.6.2017 and secondly, by virtue of Notification No.20/2017-Central Tax(Rate) dated 22.08.2017, works contract relating to Metro which is the subject matter of the present petition was excluded by the respondents.

8. In this context, it is relevant to state that in the pre-GST regime, while dealing with Sections 65, 66 and 67 of the Finance Act, 1994, the Apex Court in the case of Commissioner of Central Excise and Customs vs. Larsen and Toubro Ltd., – 2015 (39) STR 913(SC) brought out the difference between service contracts simpliciter and composite works contracts and held as under:-

“24. A close look at the Finance Act, 1994 would show that the five taxable services to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines “ taxable service” as “any service provided”. All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the values of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract.”

9. The said judgment has been followed and reiterated by the Apex Court in the case of Total Environment Building Systems Pvt. Ltd., & The Deputy Commissioner of Commercial Taxes & others – Civil Appeal Nos.8673-8684/2013 & connected matters dated 02.08.2022.

10. A perusal of the material on record including the contract agreement dated 23.05.2017 entered into between the petitioner and BMRCL is sufficient to come to the conclusion that the same was a ‘works contract’ within the meaning of Item / Entry / Clause 6(a) of Schedule II to the CGST Act and not item / Entry / Clause 5(b) which was not applicable to the supply of services by the petitioner and consequently, the said findings recorded by the respondents for the purpose of rejecting the refund claim of the petitioner deserve to be set aside and the refund claim of the petitioner deserves to be allowed.

11. Insofar as the rejection of the refund claim of the petitioner by the respondents by placing reliance upon the Notification No.20/2017 dated 22.08.2017 is concerned, it is relevant to state that earlier, the revenue had issued a Notification bearing No.15/2017 dated 28.06.2017 which specifically stated that no refund of unutilized ITC shall be allowed under sub-section (3) of Section 54 of the CGST Act in case of supply of services specified in sub-item (b) of Item 5 of Schedule – II of the CGST Act; it is pertinent to note that as per this Notification, only supply of services specified in Item 5(b) were excluded and services contemplated in Item 6(a) were not excluded from claim for refund; it followed therefrom that works contract provided in Item / Entry / Clause 6(a) were not excluded from the claim for refund and consequently, the petitioner would be entitled to refund as claimed in its refund application, which was erroneously rejected by the respondents by passing the impugned orders, which deserve to be set aside on this ground alone.

12. As stated supra, instead of placing reliance on the aforesaid Notification No.15/2017, the respondents placed reliance upon Notification No.20/2017 dated 22.08.2017 on the ground that works contract relating to Metro and Monorail were excluded from refund claims; in this regard, the respondents failed to consider and appreciate that the said Notification No.20/2017 was preceded by Notification No.11/2017 dated 28.06.2017, which included works contract relating to Metro and even the said Notification No.20/2017 was subsequently substituted vide Notification No.1/2018 dated 25.01.2018 by including works contract relating to Metro; it is therefore clear that in the light of the undisputed fact that the refund claims of the petitioner related to the period from March 2018 onwards, it was the Notification No.1/2018 which was applicable and the same undisputedly including works contract relating to Metro also and since the aforesaid Notification No.20/2017 dated 22.08.2017 ceased to exist from 25.01.2018 upon its substitution by Notification No.1/2018 dated 25.08.2018, the petitioner was entitled to claim refund for the subject period from March, 2018 to July, 2019 and consequently, the impugned orders passed by the respondents deserve to be set aside and the refund claim of the petitioner deserves to be allowed on this ground also.

13. During the pendency of the present petition, the revenue issued a Notification No. 15/2023-Union Territory Tax (Rate) dated 19-10-2023 w.e.f. 20-10-2023, thereby substituting the aforesaid Notification No.15/2017 dated 28.06.2017; the said Notification dated 15/2023 reads as under:-

Notification – GST – Union Territory GST (UTGST) Rate

Government of India
Ministry of Finance
(Department of Revenue)

Notification No. 15/2017-Union Territory Tax (Rate) New Delhi, the 28th June, 2017

G.S.R. 706(E).- In exercise of the powers conferred by clause (xiv) of section 21 of the Union Territory Goods and Services Tax, 2017 (14 of 2017), read with sub­section (3) of section 54 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council hereby notifies that no refund of unutilized input tax credit shall be allowed under clause (xiv) of section 21  of the said Union Territory Goods and Services Tax Act, read with sub-section (3) of section 54  of the said Central Goods and Services Tax Act, in case of supply of services 1 [of construction of a complex, building or a part thereof, intended for sale to a buyer, wholly or partly, where the amount charged from the recipient of service includes the value of land or undivided share of land, as the case may be, 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], 2017.

2. This notification shall come into force with effect from the 1st day of July, 2017.

[F. No.334/1/2017 -TRU] (Ruchi Bisht)

Under Secretary to the Government of India

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NOTES:-

1. Substituted vide Notification No.15/2023-Union Territory Tax (Rate) dated 19-10-2023 w.e.f. 20-10­2023 before it was read as,

“specified in sub-item (b) of item 5 of Schedule II of the Central Goods and Services Tax Act”

14. The aforesaid Notification No.15/2023 clarifies and elucidates the fact that refund of unutilized ITC is disallowed / excluded only in relation to construction activity intended for the purpose of sale in the real estate sector; in fact, this Notification clearly reinforces and reiterates that works contract are neither disallowed nor excluded from refund claims. This is amply evident from the GST council recommendations in its 52^nd meeting which led to the issuance of the notification which states in agenda item 3(ix) that refund on account of inverted duty structure is denied only for construction services rendered for sale of building in real estate sector and not to other construction or works contract services. In the light of this subsequent event also that has transpired / occurred during the pendency of the present petition, the impugned orders deserve to be quashed and the refund claim of the petitioner deserves to be allowed.

15. In view of the aforesaid facts and circumstances, I am of the considered opinion that the impugned orders passed by the respondents deserve to be set aside and the refund claim of the petitioner deserves to be allowed with a direction to the respondents to make the refund together with applicable interest within a stipulated timeframe.

16. In the result, I pass the following:-

ORDER

(i) Petition is hereby allowed.

(ii) The impugned order at Annexure-A dated 15.12.2022 passed by the 1^st respondent is hereby quashed.

(iii) The impugned orders at Annexure-B1 dated 08.10.2020, Annexure-B2 dated 08.10.2020, Annexure-B3 dated 20.10.2020, Annexure-B4 dated 20.10.2020, Annexure-B5 dated 20.10.2020, Annexure-B6 dated 02.11.2020, Annexure-B7 dated 02.11.2020, Annexure-B8 dated 26.02.2021 and Annexure-B9 dated 13.11.2021 are hereby quashed.

(iv) The respondents are directed to consider the subject refund claims / applications of the petitioner and make payment together with applicable interest to the petitioner within a period of four weeks from the date of receipt of a copy of this order.”

6. Subsequently, insofar as the tax period May-2020, the petitioner once again approached this Court in W.P.No.2817/2025, which was also allowed in favour of the petitioner vide order dated 12.03.2025.

7. The aforesaid orders were passed in favour of the petitioner herein in two different writ petitions and in different tax periods, directing refund have attained finality and become conclusive and binding upon the petitioner. In the light of the aforesaid orders passed by the respondent in relation to the very same petitioner in respect of the aforesaid tax periods, the present petition seeking setting aside of the refund rejection orders and confirmed by the Appellate Authority in respect of the tax periods September-2019, December-2019, September-2020 and October-2020 also deserves to be set aside and the respondents are to be directed to refund the amounts back to the petitioner within a stipulated timeframe.

8. In the result, I pass the following:

ORDER  

(i) The petition is allowed.

(ii) The impugned order at dated 14.08.2023 at Annexure-A and the impugned refund rejection orders dated 30.11.2022 at Annexures-B1, B2, B3 and B4 respectively, are hereby quashed.

(iii) Respondents are directed to consider the subject refund claims / applications of the petitioner and make payment together with applicable interest to the petitioner within a period of six weeks from the date of receipt of a copy of this order.