TMI Blog2021 (8) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of business as per the Government lateral whereas it was for the person who is running a business, here the appellant. Accordingly the levy of GST is appropriately applicable on the appellant as per sub-section (3) of Section 9 of the CGST Act, 2017 read with Notification No. 13/2017-Central Tax (Rate), dated 28 June, 2017 - Further, if there was any doubt regarding taxability of service then the appellant was free to approach the Authority for Advance Ruling as per sub-section (2) of Section 97 of CGST Act, 2017, because question of law about determination of the liability to pay tax on any service may be sought for advance ruling to AAR as per GST law, but the same was not opted by the appellant. Whether issuance of license and allotment of spectrum as a Statutory fee attract any levy of tax as per GST law? - HELD THAT:- On reading the decree it emerges that Price of a privilege was affirmed by the Constitution Bench in the case where fee is fixed but not in the cases where fee is fluctuating as per percentage share (LF SUC) of revenue (AGR) like in the instant case. Therefore, the permission of granting of License by DoT for business activities of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant was there. Historically, LC and SUC was taxable under Service Tax regime, it clearly shows that this activities falls under the ambit of Service . Quoting the circular of Service Tax regime was only for the sake of defining these activities as Service . However, in the instant case ample statutory provisions are available to fasten liability to pay GST on the appellant. Whether issue can be decided where the issue is under litigation (writ petition filed by the appellant in the Hon ble High Court, Delhi), whether it would be appropriate to grant/sanction refund at this juncture of time? - HELD THAT:- It is well settled law that if any issue is under litigation in Higher Court, then no matter can be finalized till the decision of the Higher Court. Further, the appellant is one hand filing refund for granting the same, whereas on other hand they are under litigation for taxability of the issue before High Court simultaneously. In this juncture of time, when the matter is sub judice, hence it would not be appropriate to grant refund and filing of refund application on the litigated issue itself becomes premature. Whether principle of natural justice has been properl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April, 2018 Refund rejected ₹ 1,18,49,147/- (CGST) + ₹ 1,18,49,147/- (SGST) Total ₹ 2,36,98,294/- 5 C. No. APPL/ JPR/CGST/JP/63/VIII/2020/ ZT0806200005406, dated 1-6-2020 March, 2018 Refund rejected ₹ 3,65,98,608/- (CGST) + ₹ 3,65,98,608/- (SGST) Total ₹ 7,31,97,216/- 2. Brief facts of the case : 2.1 The appellant having GSTIN No. 08AAACHI766P1Z5 in State of Rajasthan is engaged in the business of providing telecommunication services in India having their principal place of business at K-21, Sunny House, Malviya Marg, C-Scheme, Jaipur, Rajasthan, 302001 has filed refund claims under Section 54 of CGST Act, 2017 in respect of CGST and SGST wrongly paid on License Fee and Spectrum Uses Charges. 2.2 On examination of refund claims filed by the appellant the adjudicating authority observed and has issued a show cause notices in Form GST-RFD-08, dated 20-9-2019, 28-11-2019, 24-2-2020, 18-5-2020, and 20-4-2020 respectively were liable to be rejected on account of the following reasons and directed to the appellant to furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presentative does not appear for hearing, the matter will be decided ex parte on the basis of documents, facts and evidences available on the record. 4. Further, the adjudicating authority vide impugned Orders-in-Original in Form RFD-06, dated 6-11-2019, 24-12-2019, 11-3-2020, 1-6-2020, and 1-6-2020 respectively has passed the orders-in-original and rejected the refund claims for the period and amount mentioned at above in Para-1 in column No. (4) and (5) filed by the appellant. 5. Being aggrieved with the impugned orders dated 6-11-2019, 24-12-2019, 11-3-2020, 1-6-2020, and 1-6-2020, the appellant has filed these appeals on the following grounds which are summarized as under :- that the Appellant is engaged in the business of providing telecommunication services in India. The Appellant has been granted a telecom license under Section 4 of the Telegraph Act, 1885 ( the Telegraph Act ) by the Government for the provision of telecommunication services. As per the terms and conditions of licensing agreement, the Appellant is required to pay License Fee to the Government, which is paid as a share of Adjusted Gross Revenue ( AGR ) every quarter as per the terms of the unifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of spectrum. that the Appellant believes that no GST is leviable on LF and SUC charges paid to the Government and accordingly, the Appellant had filed a refund of tax paid on LF and SUC paid in the return for the month of July, 2017. The Appellant has also filed a writ before the Delhi High Court in this regard. that the Appellant accordingly had filed a refund claim under Section 54 of the CGST Act, 2017 read with Rule 89 of Central Goods and Services Tax Rules, 2017 (hereinafter referred to as CGST Rules, 2017 ) to seek refund of CGST and SGST wrongly paid on LF and SUC for the month of July, 2017, amounting to ₹ 16,42,35,952/- vide Refund ARN No. AA080819019895H, dated 15th August, 2019. that a copy of application along with relevant documents was physically submitted with the Office of the Asstt. Commissioner of Central Tax, the respondent on 9th September, 2019. that pursuant to the filing of refund application, show cause notice dated 20 September, 2019 ( SCN ) was issued by the respondent seeking explanation on the following : that License Fee and Spectrum Usage Charges are supply under Section 7 of the Goods and Services Tax Act, 2017 and services pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. Thus, for the charge to be attracted it is essential that the following conditions are cumulatively satisfied : (a) there is a supply (b) supply is of goods or service (c) supply is for consideration and in course or furtherance of business (d) the rate has been notified for levy of tax that in absence of any of the aforesaid requirements, the charge of tax under the CGST Act would not be attracted. It is submitted that there is neither any supply of goods nor supply of services in the present case. that there is no supply of goods or services that it is submitted that the grant of license and allocation/use of spectrum under Section 4 of the Indian Telegraph Act does not constitute supply of goods or supply of service inasmuch as there are no goods that are provided/supplied by the Government. The license and allocation and usage of spectrum so granted are neither goods nor immovable property. The Government merely grants/delegates permission of carrying out the establishing, maintaining and working telegraphs under Section 4 of the Telegraph Act. that it is further submitted that the grant of license or allocation of sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of telecommunication service and grant of license and allocation of spectrum cannot be construed as any 'business' carried out by the Government. The grant of license by the DoT is not akin to providing any goods or services and no business is carried out by the Government when it grants license or allocates spectrum under Section 4 of the Telegraph Act so as to be subjected to levy of GST. In view of the above submissions, it is clear that there is no supply of goods or service which is in course or furtherance of business. Accordingly, Section 9 of the CGST Act read with Notification No 13/2017-Central Tax (Rate), dated 28 June, 2017 is not applicable in the present case as alleged by the authorities. Therefore, Impugned Order is liable to be set aside on this ground alone. that clarifications or circular cannot bring a levy or exempt a levy. that in the Impugned Order it has been observed that in para 9 of the Circular No. 192/02/2016-S.T., dated 13 April, 2016, it has been clarified that Service tax is payable on yearly instalments due after 1 April, 2016 in respect of spectrum assigned before 1 April, 2016 in view of Rule 7 of Point of Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce although exact arithmetical equivalence is not expected. However, this is not the only kind of fee which can be charged. License fees can also be regulatory when the activities for which a license is given require to be regulated or controlled. The fee which is charged for regulation for such activity would be validly classifiable as a fee and not a tax although no service is rendered. An element of quid pro quo for the levy of such fees is not required although such fees cannot be excessive. In view of the above submissions, the grant of license and allocation of spectrum by the Government under the Telegraph Act, which is in exercise of its statutory powers, does not fulfil the elements of service for the purposes of the charging provisions of the CGST Act and does not constitute supply of goods or service under GST regulations. Therefore, no GST is applicable on price for parting the privilege by the Government. that issuance of license and allotment/use of spectrum does not attract any charge. that without prejudice to the above submissions, in the following paragraphs the Appellant humbly submits that even if it is assumed without admitting that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y covers public administration services provided to community as whole. In this regard, the grand of license to use spectrum is not a service provided to community as whole but is a mere contract entered into between DoT and the Appellant. Accordingly, the grant of license is not covered by the Service Codes under Heading 9991 in Annexure to the Service Rate Notification and can at best be covered under Heading 9973. that for ease of reference, the relevant extract of the relevant Scheme of Classification of Heading 9973 is reproduced as under : that as submitted earlier, the GST rates are prescribed under the Service Rate Notification at 4 digits level whereas service descriptions under the scheme of classification are sub-classified up to 6 digits level. It thus become imperative for the purpose of determining GST rate as to what all services prescribed at 6 digits level are covered under the Service Rate Notification. that the point to note is that GST will not be applicable for the description of services classified under the classification scheme at 6 digits level for which no corresponding GST rate is prescribed under the Service Rate Notification. The following subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for HSN 9973 pertaining to leasing or rental services, with or without operator, which are not covered under any other specific entries provided therein [Entry (i) to (vii)]. The scope of services covered under Entry (viii) is limited to those situations for which GST of goods has been defined under goods notification. that it is submitted that all the services falling under entry (viii) of Sl. No. 17 of the Service Rate Notification shall be taxable at the rate of tax which is applicable on supply of like goods underlying such services. Thus the residuary entry (viii) covers within its ambit only those services which are provided in relation to goods which are prescribed under the Goods Rate Notification read with Customs Tariff Act, as mentioned in Para 4 of the Service Rate Notification and Explanation No. (iii) of the Goods Rate Notification. Thus, during the relevant period, there was no rate prescribed for the arrangement in question. Notwithstanding the above submission and without conceding the fact that grant of telecommunication license and assignment/use of Spectrum by Government under Section 4 of the Telegraph Act, is supply of goods or service unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Principles of Natural Justice It is humbly submitted that the respondent did not provide any opportunity of being heard to the Appellant and the refund application was rejected without seeking any explanation from the Appellant. The Appellant had submitted a letter on 30 September, 2019 for Adjournment of Personal Hearing scheduled by the respondent on 30 September, 2019 to any date after 15 October, 2019 and seeking additional time to furnish reply to the SCN. Thereafter, the respondent proceeded to reject the application without giving an opportunity of being heard to the Appellant and giving time to furnish the reply to the SCN. Thus, the Impugned order is liable to be set aside for being passed in violation of the principle of audi alteram partem causing severe prejudice to the rights of the appellant. Further the appellant has cited various case laws in their defence are as under :- Jagatjit Industries v. Union of India, W.P. (C) No. 3277/ 2017 [2019 (22) G.S.T.L. 350 (Del.)] and the Punjab and Haryana High Court order dated 27 August, 2018 in case of Divya Singla v. Union of India - 2018 (16) G.S.T.L. 530 (P H) Union of India v. Kerala State Insu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified under Section 54 of the CGST Act, 2017 read with Rule 89 of CGST Rules, 2017? (e) whether License fee and Spectrum usage charges paid by the Appellant are covered in Service Rate Notification and are leviable to tax or not? (f) whether clarifications or circulars can bring a levy or exempt a levy? (g) whether issue can be decided where the issue is under litigation (writ petition filed by the appellant in the Hon ble High Court, Delhi), whether it would be appropriate to grant/sanction refund at this juncture of time? (h) whether principle of natural justice has been properly followed in the instant case? (a) In respect of issue at S. No. (a) I find that :- As per Section 2(83), Section 7 of the CGST Act, 2017, which reads as under :- (83) - outward supply in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business; 7. Supply includes - (a) all forms of supply of goods or services or both such as sale, transfer, barter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (3) of Section 9 of the CGST Act, 2017 read with Notification No. 13/2017-Central Tax (Rate), dated 28 June, 2017. Further, if there was any doubt regarding taxability of service then the appellant was free to approach the Authority for Advance Ruling as per sub-section (2) of Section 97 of CGST Act, 2017, because question of law about determination of the liability to pay tax on any service may be sought for advance ruling to AAR as per GST law, but the same was not opted by the appellant. (a) In respect of issue at S. No. (b) I find that : As per decision of the Constitution Bench of the Hon ble Supreme Court in the case of Har Shankar v. Dy. Excise and Taxation Commr., (1975) 1 SCC 737) - The word license fee or fixed fee is meant the price of consideration which the Government charges to the licenses for parting with its privilege and granting them to the licenses.... On reading the decree it emerges that Price of a privilege was affirmed by the Constitution Bench in the case where fee is fixed but not in the cases where fee is fluctuating as per percentage share (LF SUC) of revenue (AGR) like in the instant case. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (b) of telegraphs other than wireless telegraphs within any part of [India]. [Explanation. - The payments made for the grant of a licence under this sub-section shall include such sum attributable to the Universal Service Obligation as may be determined by the Central Government after considering the recommendation made in this behalf by the Telecom Regulatory Authority of India established under sub-section (1) of section 3 of the Telecom Regulatory Authority of India Act, 1997.] (2) The Central Government may, by notification in the Official Gazette, delegate to the telegraph authority all or any of it its powers under the first proviso to sub-section (l). Definition of LF SUC :- Further, the telecom sector was liberalised under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee. To provide relief from the steep fixed license fee, the Government in 1999 gave an option to the licensees to migrate to the revenue sharing fee model. Under this, mobile telephone operators were required to share a percentage of their AGR with the Government as annual License Fee (LF) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related charges, including payment for allotment and use of spectrum, as per provisions specified in the relevant NIA document of the auction of spectrum or conditions of spectrum allotment/LoI/directions/instructions of the Licensor/WPC Wing in this regard. The spectrum related charges shall be payable in addition to the License fee. 20. Schedule of payment of ANNUAL LICENSE FEE and other dues : 20.1 License Fee shall be payable in four quarterly installments during each financial year (FY) commencing 1st of April. In view of the above, it is concluded that consideration in the form of LF and SUC paid by the appellant to the Government is consideration as per clause (31) of Section 2 of CGST Act which cover all the elements specified under ibid section of the Act. There are service provider as well as service recipient and the element of consideration is also involved in the instant case. Hence, the taxability is fasten on these payments as per GST Act. (c) In respect of issue at S. No. (d) I find that : With regard to the contention of the adjudication authority that the refund in the instant case is not covered under the any other catego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same rate of central tax as applicable on supply of like goods involving transfer of title in goods at the period in question. (e) In respect of issue at S. No. (f) I find that : As per Section 2(83), Section 7 of the CGST Act, 2017, which reads as under :- (83) - outward supply in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business; 7. supply includes - (a) all forms of supply of goods or services or both such as sale, transfer, 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; The term licence is specifically covered under both aforesaid sections of the CGST Act, 2017. Hence, there is no ambiguity that it is a Supply . As per Entry No. 62 of Notification No. 25/2012-S.T., dated 20-6-2012 (as amended) w.e.f. 1-4-2016 services, provided by Government by way of allowing a business entity to operate as a telecom service p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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