Case Note & Summary
The Bombay High Court dealt with a batch of writ petitions challenging show cause notices issued under the Central Goods and Services Tax Act, 2017 (CGST Act), Integrated Goods and Services Tax Act, 2017 (IGST Act), and Maharashtra Goods and Services Tax Act, 2017 (MGST Act). The petitioners, including Oberoi Constructions Ltd., K. Raheja Private Ltd., and others, were developers who had entered into agreements with the Municipal Corporation of Greater Mumbai (MCGM) for development projects. The show cause notices demanded service tax on services rendered by MCGM in relation to functions entrusted to the municipality under Article 243W of the Constitution. The petitioners argued that such services were exempt from tax under Notification No.12/2017-Central Tax (Rate) dated 28 June 2017, which provides for nil rate of tax for services by Central Government, State Government, Union Territories, Local Authorities, or Governmental Authority by way of any activity in relation to any function entrusted to a municipality under Article 243W. The respondents contended that the petitions should not be entertained as the petitioners could respond to the show cause notices and avail alternate remedies. The court, however, held that the show cause notices were without jurisdiction because the services in question were clearly covered by the exemption notification. The court noted that there were no disputed questions of fact and that the challenge was purely on a point of law. Consequently, the court quashed the show cause notices and the consequential order dated 30 April 2024 in one of the petitions. The court also allowed the interim application for amendment in Writ Petition No.3624/2024. The judgment emphasized that where a show cause notice is ex facie without jurisdiction, a writ petition is maintainable despite the existence of alternate remedies.
Headnote
A) Constitutional Law - Article 243W - Functions of Municipality - Services by Municipal Corporation under Article 243W attract nil rate of tax under Notification No.12/2017-Central Tax (Rate) - The court held that the show cause notices demanding service tax on such services were without jurisdiction as the services are exempted. (Paras 1-28)
B) Goods and Services Tax - Show Cause Notice - Jurisdiction - Writ Petition Maintainability - The court held that where a show cause notice is ex facie without jurisdiction, a writ petition is maintainable despite alternate remedies. (Paras 6-28)
C) Goods and Services Tax - Notification No.12/2017-Central Tax (Rate) - Nil Rate of Tax - Services by Local Authorities - The court interpreted that services by Municipal Corporation in relation to functions under Article 243W are covered by the notification and thus no tax is payable. (Paras 8-28)
Issue of Consideration
Whether the impugned show cause notices issued under the CGST Act, IGST Act, and MGST Act demanding service tax on services rendered by the Municipal Corporation of Greater Mumbai (MCGM) in relation to functions entrusted under Article 243W of the Constitution are without jurisdiction, given the Notification No.12/2017-Central Tax (Rate) providing for nil rate of tax on such services.
Final Decision
The court quashed the impugned show cause notices and the order dated 30 April 2024 in Writ Petition No.3624/2024. The interim application for amendment was allowed. The petitions were disposed of accordingly.
Law Points
- Jurisdiction of show cause notice
- Nil rate of tax for services by local authorities under Article 243W
- Exhaustion of alternate remedies
- Maintainability of writ petition against show cause notice
Case Details
2024 LawText (BOM) (11) 119
Writ Petition (L) No.33260 of 2023 and batch
M.S. Sonak, Jitendra Jain
Mr. V. Sridharan, Mr. Prakash Shah, Mr. Jas Sanghavi, Mr. Mohit Raval, Mr. Shamik Gupte, Ms. Anuja Tirmali, Mr. Karan Adik, Ms. Maya Majumdar, Smt. Jaymala Ostwal, Mr. Subir Kumar, Ms. P. H. Kantharia
Oberoi Constructions Ltd., K. Raheja Private Ltd., M/s Bridgeview Real Estate Development LLP, Neepa Real Estates Private Limited, Roma Builders Private Limited, Glider Buildcon Realtors Private Limited
Union of India, Joint Commissioner CGST & CEx, Commissioner of CGST & CEx, Additional Commissioner CGST CX, Joint Commissioner CGST CX, State of Maharashtra, Municipal Commissioner MCGM
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Nature of Litigation
Writ petitions challenging show cause notices and orders under GST laws demanding service tax on services rendered by Municipal Corporation of Greater Mumbai.
Remedy Sought
Quashing of show cause notices and consequential orders on the ground that the services are exempt from tax under Notification No.12/2017-Central Tax (Rate).
Filing Reason
The petitioners received show cause notices demanding service tax on services provided by MCGM in relation to functions under Article 243W, which they argue are exempt.
Previous Decisions
In Writ Petition No.3624/2024, the show cause notice was disposed of by order dated 30 April 2024, which is also challenged.
Issues
Whether the show cause notices demanding service tax on services rendered by MCGM under Article 243W are without jurisdiction given the exemption notification.
Whether the writ petitions are maintainable despite the availability of alternate remedies.
Submissions/Arguments
Petitioners: The show cause notices are without jurisdiction as the services are exempt under Notification No.12/2017-Central Tax (Rate). There are no disputed facts, so writ petitions are maintainable.
Respondents: The petitions should not be entertained as petitioners can respond to notices and avail alternate remedies. No exceptional circumstances exist to bypass the rule of exhaustion.
Ratio Decidendi
Services rendered by a Municipal Corporation in relation to functions entrusted under Article 243W of the Constitution are exempt from service tax under Notification No.12/2017-Central Tax (Rate). Show cause notices demanding tax on such services are without jurisdiction, and writ petitions are maintainable despite alternate remedies when the notice is ex facie without jurisdiction.
Judgment Excerpts
Learned Counsel for the parties agree that a common judgment and order can dispose of these petitions.
In effect, therefore, the challenges in these petitions are mainly to the show cause notices issued to the petitioners, giving them an opportunity to show cause as to why the potential demands towards goods and service tax be not enforced against them.
Mr Sridharan relied on Notification No.12/2017 - Central Tax (Rate) dated 28 June 2017 to submit that this Notification provides for nil rate of tax for services by Central Government, State Government, Union Territories, Local Authorities or Governmental Authority by way of any activity in relation to any function entrusted to the Municipality under Article 243W of the Constitution.
Procedural History
The petitions were filed challenging show cause notices. In WP No.3624/2024, the notice was disposed of by order dated 30 April 2024, leading to an interim application to amend. The court heard all matters together and reserved judgment on 22 October 2024, pronouncing on 11 November 2024.
Acts & Sections
- Central Goods and Services Tax Act, 2017:
- Integrated Goods and Services Tax Act, 2017:
- Maharashtra Goods and Services Tax Act, 2017:
- Constitution of India: Article 243W
