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TMI Blog2019 (9) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... as GST is shared between the Centre and the State. Accordingly, the papers were directed to be forwarded to the Learned Advocate General as well. ISSUES CONSIDERED IN THIS JUDGMENT 3. Broadly stated, the issues to be considered by this Court is the applicability of Goods and Services Tax ("GST") and the mode of discharge of this statutory liability (where it arises) in matters where the Court Receiver is appointed by the Bombay High Court ("Court") under Order XL of the Code of Civil Procedure, 1908 ("CPC"). 4. The following principal questions arise for consideration in this Court Receiver's Report: i. Whether GST is liable to be paid on services or assistance rendered by the Court Receiver appointed by this Court under Order XL of the CPC ? 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsation. Considering the overwhelming prima facie case of the Plaintiffs in the present suit and also considering the fact that the litigation under the Rent Control Act has finally been disposed of in favour of the Plaintiffs by the Small Causes Court, this is a fit case for appointment of Court Receiver, though the Receiver may not disturb the possession of the Defendant during the pendency of the present suit subject to payment of compensation by the Defendant. 7. Considering the nature of the suit premises, namely, the original suit premises in respect of which the conducting license was granted in favour of the predecessor of the Defendant, and the present condition of the premises revealed by photographs tendered before this court (the photographs indicate that the Defendant is actually using a much larger area than what originally formed part of the suit business, the area currently stated to be of about 872 sq.ft.), this court is of the view that Rs. 45,000/ per month would be an adequate adhoc royalty/compensation to be paid by the Defendant to the Court Receiver to remain in possession of the suit property as the Receiver's agent. 8. Accordingly, the following ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Income from letting out and use of a shop/commercial premises'. The Plaintiff submits that GST will also be liable to be paid on the royalty. The Plaintiff submits that it comes within the GST net and that it is registered, having GST Registration No. 27AAATV1937B1ZO. Hence, GST will be payable on the amount finally transferred to the Plaintiff. It is the Plaintiff's case that if GST is not recovered from the Defendant from time to time, it will be very difficult to recover the same from the Defendant at the time of recovering possession. 12. The Court Receiver filed Court Receiver's Report No. 213 of 2017 dated 3rd November 2017. The Court Receiver reported that it had oral discussions with a Panel Chartered Accountant regarding the issue of GST. The Report states that: "8. The office of Court Receiver has a oral discussion with Panel chartered Accountant regarding the issue of G.S.T. His opinion is as follows: The person paying royalty (i.e. the Defendant) should pay the GST at applicable rate at RCM (Reverse Charge Mechanism) and challan of payment of GST should be produced before the Court Receiver. Court Receiver cannot get GST number being part of Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. Explanation.-The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from the date recommended by the Goods and Services Tax Council." 17. Parliament enacted the CGST Act which came into force on 1st July 2017. The CGST 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 matters connected therewith or incidental thereto.' 18. Section 9 of the CGST Act, which is the charging provision thereunder, provides as follows: "9. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-state supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration for the said supply; " 21. Schedule II and Schedule III referred to in Section 7 of the CGST Act is set out below: "SCHEDULE II[See section 7] ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES 1. [...] 2. Land and Building (a) any lease, tenancy, easement, licence to occupy land is a supply of services; (b) any lease or letting out of the building including a commercial, 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 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 transfer pursuant to sanction of a scheme or an arrangement for amalgamation or, as the case may be, demerger of two or more companies pursuant to an order of a High Court) Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of this Act or the rules made thereunder shall apply accordingly." 24. Section 161 of the Income Tax Act, 1961, which was referred to during the course of submissions is also reproduced below: "Liability of representative assessee. 161. (1) Every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 which is not in the course or furtherance of 'business' may otherwise attract GST, but the Court Receiver will not be liable to pay tax on such a transaction under Section 92 of the CGST Act. It is submitted that the language of Section 92 of the CGST Act is consciously and considerably narrow than Section 161 of the Income Tax Act, 1961, which is the corresponding section under the Income Tax Act which may require the Court Receiver to pay Income Tax as a representative assessee. The use of specific language in Section 92 of the CGST Act namely 'taxable person owning a business' and 'tax, interest or penalty shall be levied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 noted. In cases where prospective damages are awarded for a continuing wrong, instead of granting an injunction or specific performance, the payment received will not be a consideration for any supplies made but a payment of damages in lieu of the court's refusal to enforce the plaintiff's rights via an injunction. The court does not, in such cases, require the plaintiff to make any supply to the defendant, only that the plaintiff accepts the payment in return for non-enforcement of its property rights. xi. The method adopted for quantifying the damages i.e. value of goods or services purportedly supplied should not confuse the issue. Citing Senairam Doongarmall v. Commissioner of Income Tax [1962] SCR 1 257 it is submitted that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 treated as supply of services, namely:- [...] (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and [...]" Thus, an activity will be a supply if it is agreeing to the obligation to: i. refrain from an act, or ii. to tolerate an act or a situation, or iii. to do an act. An award of damages for trespass/illegal occupation is not an agreement to the obligation to refrain from an act, to tolerate an act or situation, or to do an act as contemplated by Paragraph 5(e) of Schedule II to the CGST Act. SUBMISSIONS ON BEHALF OF THE COURT RECEIVER 26. Mr. Jagtiani, Learned Counsel for the Court Receiver submits as follows: i. There is a distinction between fees or remuneration of the Receiver (charged as per Rule 591 of the Bombay High Court (Original Side) Rules, 1980) and moneys which may be paid to or deposited with the Court Receiver by a litigant/third person d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case and evidence on record. If, upon ascertaining the true nature of the payment the Court is of the view that the transaction or activity is a supply, GST is payable. For example, during the tenure of permissive use of a property, what is paid by the occupier to the right owner is the contractual consideration. If such permissive use or occupation is terminated or comes to an end and the occupation becomes unlawful, the nature of payment to be paid to the right owner changes from contractual consideration to damages or mesne profits for unauthorised use and occupation of the property. GST is payable on the former contractual consideration, but not on damages payable for unauthorised use and occupation of the property. The fact that the measure of damages is to be based on market rent should not conflate the nature of the payment being made i.e. a payment to compensate the right owner for violation of his legal right. vi. In the facts of the present Suit, where royalty is to be paid by the Defendant as 'compensation' for prima facie unauthorised occupation of the Suit Premises, the royalty is in the nature of compensation for violation of the Plaintiff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intiff is registered under both Central and State GST laws. Hence, the Plaintiff is liable to pay GST on supplies. iii. In the present case, a binding contract under the authority or with the imprimatur of the Court (albeit with hardly any liberty to the parties except to accept the offer or vacate the premises) has come into existence. iv. The order permitting the Defendant to remain in possession of the Suit Premises is essentially a contract, and payment of royalty is 'consideration' for this 'supply' of premises to the Defendant pursuant to an order of Court. GST will be liable to be paid under the MGST Act. v. Since the payment of royalty is towards a 'supply', GST may be recovered from the Court Receiver under Section 92 of the MGST Act. In other words, the transaction in question is the renting of immovable property for consideration as contemplated by Paragraph 5(a) of Schedule II to the MGST Act. vi. The definition of 'supply' under Section 7 of the MGST Act and the definition of 'business' under Section 2(17) of the MGST Act is an inclusive definition and very wide in it's ambit. vii. The transaction in question is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is equivalent to, if not equal to, the market rent payable to the Plaintiff. Hence, the ad-hoc royalty amount of Rs. 45,000/- is covered within the definition of 'consideration' under Section 2(31) of the MGST Act for supply of services. The nomenclature of the amount will not affect the taxation under GST laws. xi. Alternatively, even if the transaction in the present dispute is not to be considered a 'supply', the Court Receiver is nevertheless liable to be registered under the CGST Act inasmuch as there may be a situation where the Court Receiver is liable to pay GST under Section 92. xii. Separately, it is submitted on behalf of the State that the meaning of the word 'Court' as per the provisions of the Court Fees Act, 1870 and as determined by the Supreme Court in Virindar Kumar Satyawadi v. The State of Punjab AIR 1956 SC 153 and Dr. Subramanian Swamy v. Arun Shourie [2014] 12 SCC 344 does not include the office of the Court Receiver. Therefore, services rendered by the Court Receiver are not entitled to the exemption under Paragraph 2 of Schedule III of the MGST Act namely the exemption from payment of GST on services by any court or tribunal es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her as an agent of the Plaintiff on whose application he is appointed. Tax is only levied on the services rendered by the Court Receiver as an agent/on behalf of the Plaintiff. FINDINGS AND REASONING STATUS OF THE COURT RECEIVER 31. In order to answer the issues raised and appreciate the various submissions advanced by the Learned Amicus Curiae, the Union of India, the State of Maharashtra, the Court Receiver, and the respective parties to the Suit, it would first be relevant to appreciate the status and nature of the office of the Court Receiver. 32. This Court has considered the status of the Court Receiver (albeit in a different context i.e. whether an arbitral tribunal may appoint the Court Receiver attached to the Bombay High Court under Section 17 of the Arbitration and Conciliation Act, 1996) in Shakti International Private Limited v. Excel Metal Processors Private Limited (supra). 33. In Shakti International Private Limited (supra), this Court observed as follows: "STATUS OF THE COURT RECEIVER - HIGH COURT, BOMBAY 16. To appreciate whether the Court Receiver, High Court, Bombay, is liable to be appointed by a private forum like an arbitral tribunal, it would be rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. Accordingly', Rule 592 of the O.S. Rules, inter alia, provides that the Court Receiver shall charge to the estates under his management a sum towards the expenses of his office including his salary. Under Rule 591, the Court Receiver is directed to charge fees according to a prescribed scale. Under Rule 595, a Receiver is required to file accounts in the office of the Commissioner. In appropriate cases, this Court is also empowered to appoint a Receiver other than the Court Receiver. Such Receiver is also required to file accounts in the office of the Commissioner [See Rule 594 (a)]. When the Court Receiver is discharged, he is required to file his accounts upto the date of his discharge. Similarly, under Rule 924, the accounts of the Court Receiver are required to be audited by Accountant General and if any question between the auditor and the Court Receiver relating to accounts arises for determination, the question is required to be referred to the Chief Justice. This is under Rule 926. As stated in my order dated 4th February, 2000, properties worth Rs. 2000 crores are in possession of the Court Receiver, High Court, Bombay. These consist of shares, fixed deposits, je ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court Receiver remits the balance amounts to the State Government. In the last Financial Year ending on 31st March, 1999, the office of the Court Receiver, High Court, Bombay earned net revenue for the State Government of about Rs. 2 crores. These facts are required to be mentioned also for a different reason. With the coming up of the DRT, all suits, in which the claim is below Rs. 10 lakhs, remained within the jurisdiction of this Court. Apart from the Bank suits, we have private suits. In thousands of these suits Court Receiver's office still continues to have jurisdiction. As stated hereinabove, the office of the Court Receiver, High Court, Bombay is a department of the High Court. In last 60 years, this office has worked only for the High Court and not for any other Court like Small Causes Court. It is made clear once again that the Court Receiver has not worked for Small Causes Court or any other judicial forum." 19. [...] 20. [...] 21. The point that the Court Receiver, High Court, Bombay functions only under the control and supervision of this Court, is again apparent from paragraph 11 (at pages 226-227) of the judgment, which states: "In this matter, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l either suo moto or on application by the parties. The Division Bench held that the Debt Recovery Tribunal or its Appellate Tribunal would have jurisdiction to issue all appropriate directions to the Court Receiver which were hitherto given by this Court, where the Court Receiver had been appointed in respect of proceedings pending before the Debt Recovery Tribunal. The relevant conclusions of the Division Bench at paragraph 15 are as follows: [...] 26. In ICICI Bank Ltd. v. J.K. Synthetics Ltd. & Anr. (supra), this Court (Coram: S.U. Kamdar, J.) also had an occasion to comment on the status of the Court Receiver, High Court, Bombay. The question before the Court related to the powers of the Chamber Judge to vary the charges/fees for services rendered by the Court Receiver, fixed by the Bombay High Court (Original Side) Rules. In this context, it was observed that: "10. I have considered the rival submissions between the parties. There are two factors which are required to be set out at the outset before I deal with the issue at hand. Firstly, on the Original Side of High Court of Mumbai. the office of the Court Receiver is maintained by the High Court in its regular dischar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no provision either in the Original Side Rules or in the Rules framed under the City Civil Courts Act which empowers the City Civil Court to appoint the Court Receiver, High Court, Bombay as a Receiver in the suits and proceedings filed in the City Civil Court at Bombay.... ** ** ** 5. In the report of the Court Receiver various orders passed by the City Civil Court have been pointed out. The office of the Court Receiver is already under enormous pressure as by virtue of orders passed by this Court in various suits and proceedings including the arbitration petitions under section 9 of the Arbitration and Conciliation Act, 1946, the Court Receiver is required to look after very large and valuable immovable properties in the City of Bombay and at other places. In fact, by virtue of appointment as of the Court Receiver in suits filed in this Court, the Receiver has to look after properties which are situated even outside the State of Maharashtra. Considering the enormous pressure on the office of the Court Receiver, High Court, Bombay, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffice of the Court Receiver, High Court, Bombay. 36. It is also relevant to note the language of Order XL of the CPC which empowers the Court to appoint a Receiver as an interim measure of protection. "ORDER XL APPOINTMENT OF RECEIVER 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, as to bringing and defending suits and for the realization, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has, or such of those powers as the Court thinks fit. (2) Nothing in this rule shall authorize the Court to remove from the possession or custody of property any person whom any party to the suit has not a present right so to remove. 2. Remuneration The Court may by general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided in item 3 below:- On the first Rs. 25,000 or fraction thereof... 5 On the next Rs. 25,000 or fraction thereof... 3 On the next Rs. 50,000 or fraction thereof... 2 On any further sum over Rs. 1,00,000... 1 (3) On outstanding recovered from a Bank or from a public Servant without filing a suit..... 1 (4) On sale of properties movable or immovable calculated on the total value realized in any one estate:- 3 On the first Rs. 25,000 or fraction thereof 2% On the next Rs. 25,000 or fraction thereof 2 On the next Rs. 50,000 or fraction thereof 1 On any sum above Rs. 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 (9) For any special work, not provided for above, such remuneration as the Court on the application of the Receiver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, and entrust to them work of a judicial character, but they are not Courts in the accepted sense of that term, though they may possess, as observed by Lord Sankey, L.C. in Shell Company of Australia v. Federal Commissioner of Taxation [(1931) AC 275, 296] some of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 must be a discharge of judicial functions. It must have the power to regulate legal rights by the delivery of definitive judgments and to enforce its orders by legal sanctions. 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 Bombay High Court, in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the CGST Act provides that: "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, inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution 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 be determined in the facts of the present case is the effect of payment of royalty by the Defendant to the Court Receiver as a condition for remaining in possession of the Suit Premises. 53. The State of Maharashtra and the Union of India submit that pursuant to the Court's order directing payment of royalty, notionally, a contract having the authority or with the imprimatur of the Court has come into existence between the Defendant and the Plaintiff (at whose instance the Court Receiver is appointed). The Court Receiver acts as an agent of the Plaintiff and collects roya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pass 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 occupation of immovable property or trespass (either by a party who was never authorised to occupy the premises or by a party whose authorization to occupy the premises is determined) the plaintiff's claim is one in damages. 59. McGregor on Damages defines 'Damages' 'quite simply as an award in money for a civil wrong'.1The commentary goes on to state that: '[...] Therefore, the preliminary question to be answered; before any issue of damages can arise, is whether a wrong has been committed.' 2 60. Damages may arise in an action in tort, or one in breach of contract as they both entail civil wrongs. Damages represent the compensati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 matters and to apply the proceeds on the payments of the company's debts and liabilities in due course of administration, and having done that, to divide the surplus amongst the contributories and to adjust their rights." 48. Section 457(3) of the 1956 Act expressly states that the powers of the liquidator are subject to control by the court. The powers conferred upon the liquidator can be exercised by him alone and he cannot authorise any other person to exercise those powers. The expression "control by court" was discussed by this Court in Navalkha & Sons v. Ramanya Das [(1969) 3 SCC 537]. wherein it was observed that when the liquidator exercises or proposes to exercise any of the powers, a creditor or contributory may apply to the court with respect of such exercise. It is the duty of the court t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficial 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 order was passed and whether the Official Liquidator was the proper officer to incur such liability. The Court, in Mesco Properties Ltd., In re [Mesco Properties Ltd., In re, (1980) 1 WLR 96: (1980)1 All ER 117 (CA)] case, at All ER p. 120, observed as follows: (WLR p. 100 B-E) "... It must, in my view, be open to a liquidator to apply to the court for guidance upon the question whether, if he discharges a certain liability of the company in liquidation, the payment will be a necessary disbursement within the meaning of Rule 195. That is what the liquidator is doing in this case. The company is liable for the tax which is due. The tax ought to be paid. The liquidator is the proper officer to pay it. When he pays it, he will clearly make a disbursement. In my judgment it will be a necessary disbursement within the meaning of the rule. Moreover, common sense and justice seem t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty... 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) derives his authority from the provisions of the 1956 Act; (ii) acts on behalf of the company in liquidation for the purposes prescribed by the 1956 Act; (iii) is appointed by and is under the control and supervision of the court while discharging his duties. 54. Having determined the status of an Official Liquidator under the 1963 Act, it would now be appropriate for this Court to look into the nature of liability, if any, imposed on the Official Liquidator for the purposes of taxation. For this purpose, we require to consider Rule 54 of the 1963 Rules which imposes liability, inter alia, on a receiver or manager or other person appointed by an order of the court, in the event that a business owned by a dealer, is under the control of the said receiver or manager or person, whatever be his designation, who in fact manages the business on behalf of the dealer. The aforesaid Rule expressly provides that tax shall be levied upon and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 business. This is on account of the fact that the business which is under the control of the receiver is liable to levy of tax. 65. There is no dispute on the proposition that if the business of an estate under the control of the Court Receiver is liable to tax, such tax may be recovered from the Court Receiver under Section 92 of the CGST Act (which is similar to Rule 54 of the Kerala General Sales Tax Rules, 1963). In the facts of Assistant Commissioner, Ernakulam (supra)it was held that the sale of properties of the company in liquidation by the Official Liquidator would attract sales tax in the hands of the company in liquidation who is a 'dealer' under the said rules. Since the business of the dealer is under the control of the Official Liquidator, the Supreme Court held that the Official Liquidator is liable to be taxed in the same manner as a dealer. 66. Both Mr. Jagtiani on behalf of the Court Receiver and Mr. Singh, on behalf of the Union of India refer to a judgment of this Court in Humq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in generic sense as compensation for use and occupation and in legal sense, it is recompense paid by the tenant to his landlord for exclusive possession of the premises enjoyed by him. However, rent flows by virtue of the contract express or implied and after the contract of tenancy is terminated it will be damages or compensation. After the suit for possession is filed, monetary payments for use and occupation against the wish of the landlord assume the format of 'mesne profits' CONCEPTS OF MESNE PROFITS: 19. The term 'mesne profit' is used for damages for trespass, a wrongful act relating to immovable property and the said wrongful act forms one of the torts affecting realty i.e. immovable property. The enlarged scope of this term is meant to claim profit from one whose possession did not originate in trespass but is nevertheless wrong, as for example when the tenant or occupier of a property is dispossessed legally and decree of possession has been 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (supra), the Supreme Court held that: The compensation which was paid in the two years was no doubt paid as an equivalent of the likely profits in those years; but, as pointed out by Lord Buckmaster in Glenboig Union Fireclay Co. Ltd. v. Commissioners of Inland Revenue (1922) 12 Tax Cas. 427 and affirmed by Lord Macmillan in Van Den Berghs Ltd. v. Clark (1935) 3 ITR (Eng.Cas.) 17, "there is no relation between the measure that is used for the purpose of calculating a particular result and the quality of the figure that is arrived at by means of the application of that test". This proposition is as sound as it is well-expressed, and has been followed in numerous cases under the Indian Income- tax Act and also by this Court. It is the quality of the payment that is decisive of the character of the payment and not the method of the payment or its measure and makes it full within capital or revenue'. (Emphasis supplied) 72. I am of the view that although the measure for quantifying a payment of royalty to the Court Receiver may be determined by looking at consideration payable under a contract or arising out of a business relationship, the royalty may still be in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Receiver and a litigation arising from an order of the Court. The role of the Court Receiver is only to give effect to an order of the Court. If, in giving effect to an order of the Court, the Court Receiver receives payments that would otherwise attract CGST, then, and to that extent, the CGST may be conveniently collected from the Court Receiver under the provisions of Section 92. But the effect of appointing the receiver cannot mean that payments which do not attract CGST are now brought within the fold of the Act by notionally importing a contract between the Court Receiver and the Defendant. As I have already held above, the payment of royalty as compensation for unauthorized occupation of the Suit Premises is to remedy the violation of a legal right, and not as payment of consideration for a supply. The Court Receiver is merely the officer of the court to whom the payment is made. 76. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hedule I thereto. Therefore, it must be seen whether the activity in question falls within Section 7(a), 7(b) or 7(d) of the CGST Act. 80. Section 7(a) of the CGST Act requires the supply to be made 'in the course or furtherance of business'. It is submitted on behalf of the State that the Plaintiff is in the business of letting out immovable properties above the threshold requirement of Rs. 20,00,000/-. This position is not disputed by the Plaintiff. In fact, the Plaintiff itself submits that GST is to be levied on the royalty to be paid by the Defendant. In fact, such was the Plaintiff's apprehension, that it sought to modify the Order dated 12th/20th July 2017 by making an application for speaking to the Minutes of the Order, which was application was allowed and the words 'alongmth GST at the applicable rate' were added to Paragraph IV of the Order dated 12th/20th July 2017. 81. Section 7(b) of the CGST Act deals with import of services for a consideration whether or not in the course or furtherance of business, which is not applicable to the present dispute. Similarly, Section 7(c) refers to Schedule I to the CGST Act which prescribes activities which wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, if the Court Receiver is deputed to make an inventory of goods, collect rents with respect to immovable property in dispute or where the property has to be sealed, or the Receiver is appointed to call bids for letting out the premises on leave and license, the fees or charges of the Court Receiver are exempt. In providing these services, the Office of the Court Receiver is acting as a department of the Court and therefore no GST is payable. 87. In light of the preceding discussion, Issue No. (ii) viz. 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, is answered in the affirmative, subject to the payment towards royalty or the payment to the Court Receiver (described by whatever name) is towards or in relation to a 'supply' within the meaning of the CGST Act. 88. In light of the preceding discussion, Issue No. (iii) i.e. Specifically, in the facts of the present Suit, where the Plaintiff alleges that the Defendant is in illegal occupation of the Suit Premises: Whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I am in agreement that such a clause may be added in the draft agency agreement and should be suitably worded. This may obviate the requirement of the Receiver having to obtain separate GST Registration for each matter or transaction in respect of which it is appointed to act by the Court, without resulting in any harm or prejudice to the revenue. Needless to state, in the facts of a given case if the court deems fit, the Court may vary this standard clause. If the statutory authorities do not recognize or accept payment from the agent, then the Court Receiver should obtain separate CGST/MGST registration for each matter. 92. Such a clause will ensure that the agent of the Court Receiver continues to discharge any GST liability which may arise. Where no agent is appointed, naturally the Court Receiver will have to obtain registration. In cases where GST has to be paid by the Court Receiver, it is certainly advisable that the Court Receiver obtain CGST/MGST registration for each matter as opposed to a general registration under which CGST/MGST is paid in all matters. A separate registration will be preferable from both an accounting, audit and administration standpoint. This will ..... X X X X Extracts X X X X X X X X Extracts X X X X
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