2021 (6) TMI 1105 - HC - GST

Levy of GST - onboard catering services provided by the respondent under a temporary license - requirement of serving welcome drink to the passengers who boarded the subject trains - Entitlement to claim Goods and Services Tax (GST) on production charges/supply of meals after 01.07.2017 when the Goods and Services Tax Act 2017 GST Act came into force - who to face financial burden concerning the food which got wasted due to cancellation or the failure of the passengers to turn up - claim for interest as well. Whether onboard catering services provided by the respondent under a temporary license issued to it also obliged the respondent to serve a welcome drink to the passengers who boarded the subject trains? - HELD THAT - It is only on 06.04.2017 when IRCTC indicated to the respondent that unless it gave its unconditional acceptance to the policy framework captured in its communication dated 07.02.2017 its temporary license which was expiring on 18.06.2017 would not be extended that the respondent agreed to provide a welcome drink and bear the financial burden qua the same - Faced with this difficult choice and having regard to the fact that it had already invested funds in the contractual arrangement arrived at with IRCTC on 12.04.2017 the respondent accepted the terms indicated in the communication dated 07.02.2017 concerning the supply of welcome drink for the period that was to extend beyond 18.06.2017 The claim of the respondent qua welcome drink was restricted to the period spanning between 19.12.2016 and 18.06.2017. To be noted the temporary license was extended by IRCTC till 04.07.2018 - The learned arbitrator to our minds correctly concluded that IRCTC could not have deducted the amounts expended by them towards serving welcome drink to the passengers from the bills of the respondent. Whether IRCTC is obliged to reimburse the amount deposited by the respondent towards GST levied with effect from 01.07.2017 on production charges? - HELD THAT - GST is a central tax whereas VAT is a local tax which various states would have levied at the relevant time when the 2017 Act had not been enacted. It appears that because the VAT rates varied from state to state production charges were made inclusive of tax at the relevant point in time. Since VAT amongst other taxes stands repealed the respondent rightly claims that it should be reimbursed GST upon proof of payment of the same - as correctly concluded by the arbitrator GST from 01.07.2017 would have to be reimbursed to the respondent by IRCTC upon the proof of deposit of the same with the concerned statutory authority. Given the fact that IRCTC has already factored GST in the train fare lends heft to the stand taken by the respondent that it should be reimbursed - Whether the respondent was entitled to claim Goods and Services Tax (GST) on production charges/supply of meals after 01.07.2017 when the Goods and Services Tax Act 2017 (GST Act) came into force? - HELD THAT - GST deposited by it with the concerned statutory authority. Furthermore as noticed hereinabove IRCTC was in a position to in fact perhaps claim ITC at least for the period spanning between 01.07.2017 and 31.03.2018. As regards other issues it is not required to deal with the same as the respondent has neither made any submissions nor filed any cross appeal qua the same. Appeal dismissed.

Summary

Issues Involved:
1. Obligation to serve a welcome drink.
2. Entitlement to claim Goods and Services Tax (GST) on production charges/supply of meals.
3. Financial burden for wasted food due to cancellation or no-show of passengers.
4. Entitlement to relief, including interest.

Issue-wise Detailed Analysis:

1. Obligation to Serve a Welcome Drink:

The appellant (IRCTC) argued that the respondent was required to provide a welcome drink based on clause 2.1 of the tender and Commercial Circular 32/2014 (CC 32/2014). However, the respondent contended that the obligation to serve a welcome drink was not part of the tender document or the Letter of Award (LOA) and was introduced only after the license period commenced. The learned arbitrator found that the decision to impose the welcome drink obligation was taken on 07.02.2017, after the contract had started, and thus, the deductions made by IRCTC for the welcome drink were unjustified. The court agreed with the arbitrator's interpretation that the welcome drink was not part of the initial contract and that the respondent was not obligated to provide it without additional compensation.

2. Entitlement to Claim GST on Production Charges/Supply of Meals:

The appellant contended that the charges for meals were inclusive of all taxes, including GST, and thus, the respondent was not entitled to additional GST reimbursement. The respondent argued that after the GST Act came into force on 01.07.2017, GST on production charges should be reimbursed separately upon proof of payment. The arbitrator and the court referred to Commercial Circular 44/2017 (CC 44/2017) and CC 32/2014, which mandated reimbursement of applicable taxes upon proof of payment. The court upheld the arbitrator's decision that GST was to be reimbursed to the respondent, as IRCTC had already factored GST into the train fare and could claim Input Tax Credit (ITC) for the period when GST was at 18%.

3. Financial Burden for Wasted Food:

The arbitrator ruled against the respondent on this issue, and since the respondent did not file a cross-appeal or make submissions regarding this aspect, the court did not address it further.

4. Entitlement to Relief, Including Interest:

This issue was not dealt with in the partial/interim award as it was still pending consideration by the arbitrator.

Conclusion:

The court found no reason to interfere with the impugned judgment dated 05.07.2021, and the partial/interim award dated 15.12.2020 was upheld as neither patently illegal nor perverse. The appeal was dismissed, and the parties were directed to bear their own costs.