TMI Blog2019 (9) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... Court Receiver - royalty or payments under a different head paid by a defendant (or in a given case by the plaintiff or third party) to the Court Receiver in respect of properties over which a Court Receiver has been appointed - scope of 'supply of services' - payment of royalty for remaining in possession of the Suit Premises, either during the pendency of the Suit, or at the time of passing of the decree - whether payment made to the Receiver to be held in custody by it in relation to the underlying dispute between the parties attract GST? - HELD THAT:- The Learned Amicus Curiae is correct in submitting that the legislature has, in Section 92 of the CGST Act, provided that a receiver would be a convenient point for the revenue to determine and collect GST. If Section 92 of the CGST Act is applicable in a given case, GST may be determined and recovered from the Court Receiver by reason of the Court Receiver being akin to a 'representative assessee'. However, whether or not GST is applicable depends on the nature of the cause of action pleaded by the Plaintiff or the order of the Court directing payment and which sets out the terms of receivership. This is because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make the transaction a supply. Therefore, in the present case, where the Plaintiff has made out a strong prima facie case and the Defendant has not been able to demonstrate any semblance of right to occupy the Suit Premises, it cannot be said that the Defendant's occupation pursuant to an Order of the Court is a contract involving a 'supply' for consideration. In the absence of reciprocal enforceable obligations, it would not be correct to characterise the Defendant's occupation of the Suit Premises against payment of royalty as a 'supply' for 'consideration' on which GST is payable by the Court Receiver. - court receivers report no. 213 of 2017 And commercial suit (l) no. 236 of 2017 - - - Dated:- 13-9-2019 - MR S. J. KATHAWALLA, J. For The Plaintif : Mr V. Sreedharan, Sr. Adv. Anil C. Singh, Ashutosh Kumbhakoni and M.K. Tanna, Advs. For The Respondent : Ms. Kanchan Agarwal, Sharan Jagtiani, Priyank Kapadia, D.R. Shetty and K.Y. Ambekar JUDGMENT 1. By an Order dated 24th November 2017 (Coram: S.C. Gupte, J.), this Court appointed Mr. V. Sreedharan, Senior Advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Defendant/party in occupation directly, or by the Court Receiver ? 5. In addressing these questions, reference is made to the provisions of the Central Goods and Services Act, 2017 ( CGST Act ). It may be noted that the provisions of the Maharashtra Goods and Services Tax Act, 2017 ( MGST Act ) are in pari-materia with those of the CGST Act. As pointed out by the Learned Advocate General the provisions also have the same numbering and appear in the same sequence, with the only exception being the transitional provisions and repeal and savings provisions, which are not relevant to the issues presently under consideration. As such, the Court has considered the issues raised with reference to the CGST Act. FACTUAL BACKGROUND ARISING FROM THE COURT RECEIVER'S REPORT 6. The Plaintiff has filed the present Suit seeking to recover possession of three shops, which together constitute a restaurant, where the Plaintiff trust is carrying on business in the name and style of Manranjana Hotel ( Suit Premises ). The Suit proceeds on the cause of action of trespass/unauthorized occupation. 7. The Plaintiff filed Notice of Mot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Defendant of the suit property; (IV) The Defendant shall be appointed as an agent of the Court Receiver under an agency agreement on payment of monthly royalty of ₹ 45,000/- to the Court Receiver but without any security; 8. As per the said Order dated 12th/20th July 2017, the Court Receiver was directed to take formal possession of the Suit Premises and was directed not to disturb the physical possession of the Defendant. The Defendant was permitted to remain in possession of the Suit Premises as an agent of the Court Receiver under an agency agreement to be executed with the Court Receiver, on payment of monthly ad-hoc royalty of ₹ 45,000/. The amount deposited by the Defendant with the Court Receiver was directed to be invested by the Court Receiver in fixed deposits of Nationalised Bank/s. DISPUTE WITH RESPECT TO PAYMENT OF GST 9. The Plaintiff raised certain concerns regarding the applicability of GST on the royalty amounts to be paid by the Defendant pursuant to the Court's Order dated 12th/20th July 2017. 10. The Plaintiff moved an application before the Court for speaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court Receiver should take regarding the issue of G.S.T. (b) Whether the defendant/agent be directed to pay the G.S.T. at applicable rate at Reverse Charge Mechanism (RCM) and challan of payment of G.S.T. should be produced before the Court Receiver. (c) Any other direction this Hon'ble Court deems fit and proper. RELEVANT PROVISIONS OF LAW 13. Before dealing with the submissions advanced by the respective parties, it would be appropriate to set out certain provisions of applicable law which will have a bearing on the issues to be decided by this Court. 14. Order XL of the CPC provides for the appointment of receivers. 1. Appointment of receivers (1) Where it appears to the Court to be just and convenient, the Court may by order- (a) appoint a receiver of any property, whether before or after decree; (b) remove any person from the possession or custody of the property; (c) commit the same to the possession, custody or management of the receiver, and (d) confer upon the receiver all such powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. (2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council. (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mendations 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. 20. Section 7(l)(a) refers to a supply 'made or agreed to be made for a consideration by a person in the course or furtherance of business' Section 2(17) of the CGST Act defines 'business' and Section 2(31) of the CGST Act defines 'consideration' as follows: 2. (17) business includes- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. 3. [ ] 4. [ ] 5. Supply of services The following shall be treated as supply of services, namely:- (a) renting of immovable property; SCHEDULE III [See section 7] ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES 1. [ ] ** ** 2. Services by any court or Tribunal established under any law for the time being in force. 22. Other important provisions of the CGST Act are set out below: 2. (84) person includes- (a) an individual; (b) a Hindu Undivided Family; (c) a company; (d) a firm; (e) a Limited Liability Partnership; (f) an association of persons or a body of individual whether incorporated or not, in India or outside India; (g) any corporation established by or under any Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees: Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees. (2) Every person who, on the day immediately preceding the appointed day, is registered or holds a licence under an existing law, shall be liable to be registered under this Act with effect from the appointed day. (3) Where a business carried on by a taxable person registered under this Act is transferred, whether on account of succession or otherwise) to another person as a going concern) the transferee or the successor) as the case may be} shall be liable to be registered with effect from the date of such transfer or succession. (4) Notwithstanding anything contained in sub-sections (1) and (3) in a case of tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e information and database access or retrieval services from a place outside India to a person in India, other than a registered person; and (xii) such other person or class of persons as may be notified by the Government on the recommendations of the Council. 23. Section 92 provides for the levy and recovery of GST from a Court of Wards, Administrator General, Official Trustee, receiver or manager. 92. Where the estate or any portion of the estate of a taxable person owning a business in respect of which any tax, interest or penalty is payable under this Act is under the control of the Court of Wards, the Administrator General, the Official Trustee or any receiver or manager (including any person, whatever be his designation, who in fact manages the business) appointed by or under any order of a court, the tax, interest or penalty shall be levied upon and be recoverable from such Court of Wards, Administrator General, Official Trustee, receiver or manager in like manner and to the same extent as it would be determined and be recoverable from the taxable person as if he were conducting the business himself, and all the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as a supply of goods or a supply of services. Therefore, GST should not be levied on amounts directed to be paid by litigants to the office of the Court Receiver for deputing its resources and completing the mandate given to it by this Court as these services are 'Services by any court or Tribunal established under any law for the time being in force'. ii. If the Court Receiver is in control of an estate or portion thereof of a taxable person owning a business in respect of which GST is payable, such tax, penalty, and interest thereon may be determined and recovered from the Court Receiver under Section 92 of the CGST Act in like manner and to the same extent as it would be determined and recovered from the taxable person as if he were conducting the business himself. iii. Section 92 of the CGST Act provides for the collection of GST from the Court Receiver. The Court Receiver would be a convenient point for the revenue to collect its tax being the person who is in direct receipt of the consideration/royalty where such payment itself is liable to be taxed under the provisions of the CGST Act. iv. Whilst a transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orth of the plaintiff's claim, rather than consideration for an alleged supply, and as such will be outside the scope of VAT/GST. In such cases, compensation may be considered to be repatriation or restitution in respect of loss or damage. Any compensatory payment made would not be consideration for a supply. viii. However, a payment made under a court's order or an out of court settlement will attract VAT/GST where it amounts to consideration for one or more taxable supplies effected in terms of the court or terms of settlement. ix. As an illustration, where the plaintiff grants future rights (for example rights to exploit copyrighted material in the future) any payment received for such right will be treated as consideration for a new supply and is subject to levy of tax under GST laws. However, the portion of the payment which is related to past infringement will not be taxable as the same will not constitute a consideration for any supply made but it will be in the nature of damages for the alleged wrong. x. However, a distinction between future supplies and prospective damages for a continuing wrong should also be note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt debt created by an order of court and not for any supply made by the party in whose favour the suit is decided. Whether such payment is towards a supply or is compensation for violation of a legal right is to be seen in the facts of a given case. xvi. In the facts of the present Suit, there is no agreement or contract for supply by the Plaintiff to the Defendant. Rather, the Plaintiff's grievance is that the Defendant is a trespasser/illegal occupier of the Suit Premises. Whilst the royalty/monthly amount may be calculated in accordance with prevailing rate of market rent, the transaction itself will not constitute a supply, as the reference to prevailing rent is only a means to arrive at the amount of damages. xvii. Even the language of Paragraph 5(e) of Schedule II to the CGST Act will not result in the present activity to be a supply. Paragraph 5(e) of Schedule II to the CGST Act provides: SCHEDULE II [See section 7] ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES 1. [ ] 5. Supply of services The following shall be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly, services provided by the Court Receiver fall under Sr. No. 2 of Schedule III read with Section 7 of the CGST Act, namely, 'Services by any court or Tribunal established under any law for the time being in force' which transaction or activity is not to be considered a supply of goods or services under the CGST Act. iv. With respect to monies paid to the Court Receiver which are not towards the Court Receiver's fees or remuneration, but paid in the course of litigation pursuant to an order of the Court, it must be seen if the underlying relationship between the parties, or claims made in that regard fall within the ambit of the CGST Act. If they do not, the taxable event of 'supply' cannot be any alleged or notional contract between either of the parties and the Court Receiver. v. Relying on the decision of this Court in Humayun Dhanrajgir v. Ezra Aboody [2008] Bom C.R. 862, Mr. Jagtiani submitted that the true nature of the payments made by one party to another/the Court Receiver for use and occupation of property is to be decided by the Court looking to the circumstances of the case and evidence on record. If, upon ascert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irect the Court Receiver to apply for registration for the payments relatable to a particular matter. At any rate it is preferable from an audit and administrative perspective for there to be separate GST registration for each matter, where the same is paid for by the Court Receiver. SUBMISSIONS ON BEHALF OF THE STATE OF MAHARASHTRA 27. The Learned Advocate General, on behalf of the State of Maharashtra, has submitted written submissions with respect to the issue of levy of GST on royalty paid by a litigant to the office of the Court Receiver. 28. It is submitted on behalf of the State (with reference to the provisions of the MGST Act the relevant provisions whereof are in pari materia with the CGST Act) that: i. As per the language of Section 92 of the MGST Act, the receiver will be liable to levy and collection of GST only if the taxable person whose estate is under the control of the receiver is conducting a 'business'. ii. GST may be recovered from the Court Receiver under Section 92 only if it is conducting a business of a taxable person. In the facts of the present case, the Plaintiff&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the Court Receiver to enter into contracts, a contract has come into existence whereby the Defendant is permitted to occupy the Suit Premises. The offer in this contract is the option available to the Defendant to pay royalty and remain in possession of the Suit Premises. The Defendant elected to accept the offer, and therefore the royalty amount represents the consideration paid by the Defendant to the Court Receiver (who is in possession of the Suit Premises on behalf of the Court). The Learned Advocate General relied on a judgment of the Supreme Court in Assistant Commissioner, Ernakulam v. Hindustan Urban Infrastructure Ltd. [2015] 3 SCC 745(which considers Rule 54 of the Kerala Sales Tax Rules which is in pari materia with Section 92 of the MGST Act) in this regard to contend that the act of permitting the Defendant to remain in possession of the Suit Premises is a contract and the transaction in question is a supply, even if the same is pursuant to an order of the Court. Relying on Assistant Commissioner, Ernakulam (supra) the Learned Advocate General submits that sales tax was levied on sale of properties by the Official Liquidator under Rule 54 of the Kerala Sales Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rajgir v. Ezra Aboody (supra), royalty is a compensation payable by the occupier to the right owner in the property. It is submitted that the royalty is meant to compensate the right owner who permits or allows others to use his rights in his property. ii. To this extent, there is a clear supply of service of notionally providing premises (subject of course to the final determination of the rights of the parties to the suit). Such letting or providing of premises is clearly covered in the scope of 'supply' under Section 7 of the CGST Act as also under the definition of 'services' under Section 2(102) of the CGST Act. iii. The Plaintiff is providing, or is deemed to be providing a service. The act of supplying these services i.e. permitting the Defendant to occupy the premises in consideration of payment of royalty is clearly a business as understood under the CGST Act. The broad definition of business aids such interpretation. iv. That the Court Receiver acts as the agent of the Plaintiff who is liable to be taxed under the CGST Act and is therefore liable to make payment of GST on monies received by him as royalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er stood appointed prior to 16th July, 1999, i.e., the date on which the Central Government by notification established the Debt Recovery Tribunal under Section 3 of the RDB Act; and (b) If not, whether the High Court was empowered to give directions to the Court Receiver regarding the properties which were in custody of the Court Receiver till such time as the Debt Recovery Tribunal/Central Government set up an alternative office/machinery with a proper infrastructure. 18. The Court at paragraph 5 (pages 215-216) set out a brief history, status and functioning of the Office of the Court Receiver as follows: .....prelude Before 1929, Receivership was granted to private persons. Gradually, the business in the hands of the private Receiver increased and it was thought it had grown too big to be entrusted to a single private individual. It was, therefore, decided that the work should be assigned to a salaried office on the establishment of the High Court. As a result, in 1929 the Government created the post of the Court Receiver, who took over all the pending Receiverships from the private Receiver. The system sanct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of Additional Prothonotary and Senior Master. The Court Receiver has to enter into agency agreements after the properties become custodial legis. As a Court Receiver, she has to sign bills/vouchers. At this stage, it is important to note that after deducting costs, charges and expenses as also the commission by the Court Receiver, Banks and Financial Institutions are required to be paid the net royalty amount even during the pendency of the suit pursuant to the orders of the Court. These payments are made by the Court Receiver by cheques. Hence, the Court Receiver is required to sign cheques and payment vouchers by which net royalty amount is remitted to the parties to the suit. The Court Receiver is also required to sign daily vouchers to meet office expenses. The Court Receiver is also required to pay expenses to the officers, who visit the site by way of daily allowances. These officers are also required to go out of Bombay. The Court Receiver is also required to sign salary bills. The Court Receiver is also required to pay security guards who are appointed to protect plants, machinery and immovable properties all over India. The Court Receiver is also required to pay fees t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal. Detailed reasons in that regard have been given. Some of the reasons have been mentioned hereinabove. It may be once again stated that in the past Court Receiver's services have not been lent to the Small Causes Court. In any event, in the light of this judgment, the question of lending services of the Court Receiver to Debt Recovery Tribunal does not arise. 22. In Bank of Tokyo-Mitsubishi Ltd. v. M/s. Chembra Estates and others (supra), this Court (R.J. Kochar, J.) once again considered the issue of whether this Court could direct the Court Receiver to sell the suit property in proceedings that were before the Debt Recovery Tribunal. The Court discussed the aforementioned judgment in I.CI.CI Ltd. v. Patheja Brothers Forgings and Stampings Ltd. (supra). 24. Due to the conflict between the Judgments in ICICI Ltd. (supra), and Bank of Tokyo - Mitsubishi Ltd. (supra), as to whether this Court can continue to issue directions to the Court Receiver appointed by it, in bank suits transferred to the Debt Recovery Tribunal, the matter was referred to a larger bench of this Court. 25. The decision of the Division Bench (Larger Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factor which is also required to be considered is that as and by way of usual features and regular guidelines, r. 591 specifically prescribes the rates of charges and commission which has to be paid in each of the matters on the percentage basis. These provisions are provided for under the High Court (Original Side) Rules with an intention that there is a non-arbitrary yard stick in respect of the amount to be recovered by the Court Receiver for the services rendered by him. The High Court (Original Side) Rules are framed in exercise of power conferred on the High Court under the provisions of the Civil Procedure Code. On the Original Side of the High Court it is not the case like in the other cases where private receivers are appointed as the Court Receiver and thus his remuneration of the amount charged by him for fees and commission is to be regulated by the Court. It is undoubtedly true that even under r. 591 ultimate control is vested with the Court and under the Rules a discretion is conferred on the Chamber Judge to reduce the amount chargeable by the Court Receiver. However, the issue which is to be determined is whether the case has been made out by the defendant No. 1 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. [ ] 29. From a reading and consideration of the above Judgments, I am of the view that it has been clearly held that the Court Receiver, High Court, Bombay, is an employee or a Department of the Bombay High Court and that it is this Court that has the powers to direct its duties and responsibilities. 36. [...] The appointment, functioning and discharge of the Court Receiver is governed by Chapter XXX of the Bombay High Court (Original Side) Rules in addition to the provisions of Order XL of the CPC These rules further establish that the Office of the Court Receiver, High Court, Bombay, functions only under the supervision and control of this Court. These Rules institutionalise the manner of functioning of the Office of the Court Receiver, High Court, Bombay. (Emphasis Supplied). 34. As held in Shakti International Private Limited (supra), the status of the Court Receiver, High Court, Bombay is that of an employee or a department of the High Court, Bombay who is subject to the administrative control of the Hon'ble Chief Justice. The office of the Court Receiver is 'an establishment of the High Court' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court thinks fit, duly to account for what he shall receive in respect of the property; (b) submit his accounts at such periods and in such form as the Court directs; (c) pay the amount due from him as the Court directs; and (d) be responsible for any loss occasioned to the property by his wilful default or gross negligence. 4. Enforcement of receiver's duties Where a receiver- (a) fails to submit his accounts at such periods and in such form as the Court directs, or (b) fails to pay the amount due from him as the Court directs, or (c) occasions loss to the property by his wilful default or gross negligence, the Court may direct his property to be attached and may sell such property, and may apply the proceeds to make good any amount found to be due from him or any loss occasioned by him, and shall pay the balance (if any) to the receiver. 5. When Collector may be appointed receiver Where the property is land paying revenue to the Government, or land of which the revenue has been assigned or redeemed, and the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the first ₹ 25,000 or fraction thereof 2% On the next ₹ 25,000 or fraction thereof 2 On the next ₹ 50,000 or fraction thereof 1 On any sum above ₹ 1,00,000 (5) For taking charge of movable property which is not sold on the estimated value 1 (6) For taking custody of moneys 1 (7) For taking custody of Government Securities or Stocks, Shares, Debentures, Debenture-Stock or other Securities which are not sold on the estimated value. 1 (8) On the interest earned by investment of funds in the Custody of the Court Receiver 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the District Magistrate functioning as the Returning Officer was a 'court' from whose order an appeal would lie under Section 476B of the Criminal Procedure Code. In the facts of the matter, the Supreme Court held that the Returning Officer is not a 'Court'. The relevant findings of the Supreme Court are as under: 6. There has been much difference of opinion as to the precise character of the office of a Returning Officer viz. as to whether he is a judicial or ministerial officer , says Parker in Election Agent and Returning Officer, Fifth Edn.p. 30. The true view, according to him, is that he partakes of both characters, and that in determining objections to nomination papers, he is a judicial officer. That is also the view taken in Indian decisions. But before we can hold that the proceedings before a Returning Officer resulting in the acceptance or rejection of a nomination paper fall within Section 195(1)(b) of the Code of Criminal Procedure, it must be shown not merely that they are judicial in character but that further he is acting as a Court in respect thereof. It is a familiar feature of modern legislation to set up bodies and tribunals, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Judge of the Supreme Court, who was appointed as Chairman, Commission of Inquiry under the Commissions of Inquiry Act, 1952 to probe into alleged acts of omissions and commissions by a former Chief Minister of Karnataka. The Supreme Court held: 25. Though the 1971 Act does not define the term court but in our opinion, the court under that Act means the authority which has the legal power to give a judgment which, if confirmed by some other authority, would be definitive. The court is an institution which has power to regulate legal rights by the delivery of definitive judgments, and to enforce its orders by legal sanctions and if its procedure is judicial in character in such matters as the taking of evidence and the administration of oath, then it is a court. The Commission constituted under the 1952 Act does not meet these pre-eminent tests of a court. 42. Neither of the above cited decisions are in the context of tax legislations. They also do not deal with the status of the Court Receiver attached to the High Court, Bombay. The aforesaid judgments undoubtedly state that in order for an authority to be considered a 'Court', there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LIABILITY FOR PAYMENT OF GST ON ESTATES UNDER THE CONTROL OF THE COURT RECEIVER 46. The next question to be considered by this Court is whether payment made to the Receiver to be held in custody by it in relation to the underlying dispute between the parties attract GST. Issue Nos. (ii) and (iii) have arisen in this regard, namely: ii. Whether GST is liable to be paid on royalty or payments under a different head paid by a defendant (or in a given case by the plaintiff or third party) to the Court Receiver in respect of properties over which a Court Receiver has been appointed. iii. Specifically, in the facts of the present Suit, where the Plaintiff alleges that the Defendant is in illegal occupation of the Suit Premises: Whether there is any 'supply' of services within the meaning of the CGST Act? Whether payment of royalty for remaining in possession of the Suit Premises, either during the pendency of the Suit, or at the time of passing of the decree, falls within the definition of 'consideration' for a 'supply 'chargeable to payment of GST under Section 9 of the CGST Act. 47. Section 92 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the taxable event of 'supply' for such levy of GST has taken place. 50. The requirement of a 'supply' is essential. It is the taxable event under the CGST Act. If there is no supply, there can be no liability for payment of tax (or any interest or penalty thereon). This is clear from Article 246A of the Constitution of India which deals with the legislative competence of the Union and the States to make laws with respect to goods and services tax imposed by the Union or such State and Article 366(12A) of the Constitution of India which defines 'goods and services tax' as 'any tax on Supply of Goods or Services or both except taxes on the supply of the alcoholic liquor for human consumption'. This is also evident from the charging provision i.e. Section 9 of the CGST Act. 51. If these requirements are met with, Section 92 of the CGST Act provides that GST may be determined and recovered from the receiver in the like manner and to the same extent as it would be determined and be recoverable from a taxable person as if the receiver were conducting the business himself. 52. Therefore, the real issue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming consideration for the supply. The order/decree of the court links the payment to the taxable supply and the requisite element of reciprocity between supply and consideration is present. 57. However, where no reciprocal relationship exists, and the plaintiff alleges violation of a legal right and seeks damages or compensation from a Court to make good the said violation (in closest possible monetary terms) it cannot be said that a 'supply' has taken place. 58. The Learned Amicus Curiae correctly submits that enforceable reciprocal obligations are essential to a supply. The supply doctrine does not contemplate or encompass a wrongful unilateral act or any resulting payment of damages. For example, in a money suit where the plaintiff seeks a money decree for unpaid consideration for letting out the premises to the defendant, the reciprocity of the enforceable obligations is present. The plaintiff in such a situation has permitted the defendant to occupy the premises for consideration which is not paid. The monies are payable as consideration towards an earlier taxable supply. However, in a suit, where the cause of action involves illegal occu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Kerala General Sales Tax Act, 1963 (for short the 1963 Act ), and therefore would be required to collect sales tax in respect of the sales effected by him pursuant to winding-up proceedings of a company in liquidation? 63. The Supreme Court held as follows: 46. Before delving into whether the Official Liquidator could also be treated as a dealer under the 1963 Act, it would be apposite to take into account the powers of the Official Liquidator, as provided under the 1956 Act. The Official Liquidator, in generic terms, is an officer appointed to conduct the proceedings and to assist the court in the winding up of a company. 47. In A. Ramaiya, Guide to the Companies Act, 16th Edn. (2004), while interpreting the powers of the Official Liquidator under Section 457 of the 1956 Act observed as follows: A liquidator is an agent employed for the purpose of winding up of the company. His principal duties are to take possession of assets, to make out the requisite lists of contributors and of creditors, to have disputed cases adjudicated upon, to realise the assets subject to the control of the court in certain matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as an agent or administrator for and on behalf of the company. 50. In Ajay G. Podar v. Official Liquidator [(2008) 14 SCC17], this Court considered the question pertaining to bar of limitation under the 1956 Act for misfeasance proceedings filed by the Official Liquidator. While discussing the powers of the Official Liquidator under Section 457(1) of the 1956 Act, the Court was of the view that the Official Liquidator must be authorised to take steps for recovery of assets by the Company Court under the winding-up order and the said proceedings must be initiated in the name of the company and on behalf of the company to be wound up. This Court had further opined that the Official Liquidator derives his authority from the provisions of the 1956 Act. 51. It would be beneficial to notice the views of Courts in England insofar as powers of the Official Liquidator during winding-up proceedings. In Mesco Properties Ltd., In re [Mesco Properties Ltd., In re, (1980) 1 WLR 96: (1980) 1 All ER 117 (CA)], the Court of Appeal was ascertaining as to whether a company could incur tax liability in consequence of the realisation of its assets after a winding-up o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceeds of realisation of the assets. The House of Lords elaborately discussed the role of the Official Liquidator in this regard and observed, at AC p. 177 D-F, as follows: The functions of the liquidator are thus similar to those of a trustee (formerly official assignee) in bankruptcy or an executor in the administration of an estate of a deceased person. There is, however, this difference: that whereas the legal title in the property of the bankrupt vests in the trustee and the legal title to property of the deceased vests in the executor, a winding-up order does not of itself divest the company of the legal title to any of its assets. Though this is not expressly stated in the Act it is implicit in the language used throughout Part V, particularly in Sections 243 to 246 which relate to the powers of liquidators and refer to 'property ...to which the company is... entitled' to 'property... belonging to the company' to 'assets... of the company' and to acts to be done by the liquidator 'in the name and on behalf of the company ' 53. In light of the aforesaid, we would conclude that an Official Liquidator: (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the 1963 Rules contemplates a situation where a business owned by a dealer, is under the control of a receiver or manager or any other person, irrespective of his designation, who manages the business on behalf of the said dealer. In the said scenario, the said person, in-charge of the business on behalf of the dealer, would be exigible to sales tax in the same manner as it would have been leviable upon and recoverable from the dealer itself Therefore, it can be concluded that the liability to pay sales tax, in the present case, would be on the Official Liquidator in the same manner as the dealer, that is, the Company in liquidation. (Emphasis supplied) 64. The decision in Assistant Commissioner, Ernakulam (supra) acknowledges that where tax is required to be collected from a company in liquidation in respect of its business, the Official Liquidator would be the proper officer to pay the same under Rule 54 of the Kerala Sales Tax Rules (which rule is similarly worded as Section 92 of the CGST Act). The liability incurred by the Official Liquidator will be equivalent to the liability which would be levied upon the dealer if he were conducting such b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dlord is the contractual rent. After quit notice from the date of termination of tenancy, the characteristics of the subject matter is changed to damages for use and occupation of the premises and after filing of the suit for eviction till the possession is handed over, if the decree of possession is passed in favour of the landlord, the characteristic is changed to mesne profits. To what extent the quantum changes with the change of such characteristics is for the Courts to decide which the Courts do mould according to the facts and circumstances of the case to do justice between the parties. 18. One may use different words like compensation, licence, royalty and mesne profits, all in one form or another are diverse forms of rents in generic sense and what is the true colour of the payments made by one party to another for use and occupation of the property is to be decided by the Court looking to the circumstances of the case and evidence on record. Rent in English Law is said to be a profit from the property demised. It may assume the form of rent service or rent charge. It is described in generic sense as compensation for use and occupation and in legal sense, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en passed in favour of the landlord still the tenant/occupier holds over the property for a specified period before handing over the possession to the rightful owner. Though the tenant had a rightful possession when he entered the immovable property but it is the decree of possession which makes his possession wrongful'. The decision supports the submissions of the Learned Amicus Curiae and Mr. Jagtiani. 70. This view is also supported from the decision of the Supreme Court passed in Senairam Doongarmall v. Commissioner of Income Tax (supra) cited by the Learned Amicus Curiae. As a matter of illustration, the Amicus Curiae submits that in a cause of action of trespass or illegal occupation, the computation of damages will involve the determination of rental income payable in surrounding areas to determine mesne profits. The Amicus Curiae submits that as held in Senairam Doongarmall vs. Commissioner of Income Tax (supra) it is the quality of the payment and not the method used to determine its measure that determines its character namely whether it is 'consideration' or damages. The method of computation is not material. 71. In Senairam Doon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property; I find that the definition relied upon by the State uses the terms 'allowing, permitting or granting access, entry, occupation, use' which connotes that there must be a positive act by the property or right owner to permit the occupier to use the property in question. As discussed above, an act of illegal occupation, which may be compensated in damages by mesne profits, does not amount to a voluntary act of allowing, permitting, or granting access, entry, occupation or use of the property. The submission made by the State of Maharashtra as well as the Union of India that the Order of the Court permitting the Defendant to occupy the Suit Premises is notionally a contract between the Court Receiver and the Defendant overlooks the nature and meaning of a contract and ignores the character of damages and the circumstances necessitating the same to be paid under a decree of the Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plaintiff's allegation is that of illegal occupation. 78. Even the broad and inclusive definition of 'supply' does not assist the State and the Union. 'Supply' as defined in Section 7 of the CGST Act, includes, inter alia: i. A supply of goods or services (including a licence) or both; ii. Made or agreed to be made for a consideration by a person in the course or furtherance of business, iii. Import of services for a consideration whether or not in the course or furtherance of business; iv. The activities specified in Schedule I, made or agreed to be made without a consideration; v. The activities to be treated as supply of goods or supply of services as referred to in Schedule II to the CGST Act. 79. On a perusal of Section 7 of the CGST Act, it is clear that for a supply to fall under Section 7(a), 7(b) or 7(d) of the CGST Act there must be a contemplated consideration. Only activities specified in Schedule I to the CGST Act are considered a supply, even if made without consideration. It is not the contention of any of the parties before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents as the owner himself has, or such of those powers as the Court thinks fit. Undoubtedly, there may be instances where a taxable supply has taken place by the Court Receiver in exercising the aforesaid powers. Section 92 of the CGST Act specifically provides for the taxation of the estate of a taxable person under the control of the receiver. 84. There may be instances where payments received by the Court Receiver may attract GST. For instance: (i) Where the Court Receiver is appointed to run the business of a partnership firm in dissolution, the business of the firm under the control of receivership may generate taxable revenues, (ii) Where the Court authorises the Court Receiver to let out the suit property on leave and license, the license fees paid may attract GST. (iii) Where the Court Receiver collects rents or profits from occupants of properties under receivership, the same will be liable to payment of GST. (iv) Consideration received for assignment, license or permitted use of intellectual property. 85. Obviously, this is not an exhaustive list but the principles appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was submitted by Mr. Jagtiani for the Court Receiver and the Learned Amicus Curiae that where Section 92 of the concerned GST Act may apply, the agent of the Court Receiver, wherever one is appointed, may be directed to pay GST after obtaining registration on behalf of the Court Receiver or (if permissible) under a pre-existing registration. In such a situation, such payment will be made on behalf of the Receiver and would discharge the Receiver's statutory obligations under Section 92 of the Act. Mr. Jagtiani submits that this is in line with Section 2(105) of the CGST Act which provides as follows: 2. (105) supplier in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied; 91. Although in the present case the Court Receiver is not the 'supplier', since under an order of the Court the payment towards 'supply' is being made to the Court Receiver, the person making payment may be entitled or permitted to pay the component of CGST by the statutory a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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