Patna High Court: In a case wherein a writ petition was filed by the Petitioner, Mahavir Sharmik and Nirman Swalambi Sahkari Samiti Limited, challenging an assessment order, as confirmed by the first Appellate Authority under the Bihar Goods and Services Tax Act, 2017 (‘BGST Act’), the Division Bench of K. Vinod Chandran, C.J.*, and Partha Sarthy, J., held that the solid waste management activity undertaken by the petitioner was exempted from payment of tax under the BGST Act.
Background
The Petitioner, a co-operative society registered under the BGST Act, had been assigned with the work of collection and disposal of waste materials from each household, shop, and commercial centers and also sanitation work of drainages and road in the specified seventeen wards of the Municipality. The Petitioner was issued with the notice under Section 74 of the BGST Act quantifying the demand of tax and penalty for the Assessment Year 2019-2020; specifically, from November 2019 to February 2020. The tax levy to the Petitioner was proposed based on the deductions made by the Nagar Parisad, Jamalpur under the Income Tax Act, 1961 (‘IT Act’). The petitioner filed an appeal specifically pointing out Notification No. 12 of 2017 issued by the Government of India granting exemption from payment at tax in relation to a function entrusted to a Municipality under Article 243-W of the Constitution. It was submitted that the invocation of jurisdiction under Section 74 of the BGST Act was illegal, without authority and wholly improper. The appeal, however, was dismissed.
The Petitioner contended that the mere deduction of tax on income, a direct tax, could not lead to the levy under BGST Act, which was an indirect tax. The Respondents contended that the work carried out by the Petitioner was a works contract for which the tax was levied under the BGST Act.
Analysis and Decision
The Court referred to the exemptions granted between the period 01-07-2012 to 10-07-2014 and 11-07-2014 to 30-06-2017 as provided in circular dated 30-05-2018 which exempted services provided to government, a local authority, or a government authority such as water supply sanitation conservancy, solid waste management, etc. from payment of tax under BGST Act. The Court observed that the definition of ‘works contract’ under the BGST Act excluded the work which was carried out by the Petitioner. The Court opined that there was no supply of goods in the solid waste management work provided to the Petitioner so, the same would be exempted from the BGST Act.
The Court noted that the Appellate Authority wherein the appeal of a different assessee who was carrying out the same work of solid waste disposal in the same municipality, was allowed.
The Court thus set aside the assessment orders, demand notices and orders in appeals. The Court directed the Petitioner to produce tax deduction details made by the Municipality under the IT Act and to provide the evidence based on which the income tax deduction was made for the solid waste disposal work.
The Court allowed the writ petition and directed the Assessing officer to pass orders in accordance with law after noting the declaration made herein regarding the non-exigibility of tax on solid waste management activities and sanitation workcarried on at the instance of the State or local authorities.
[Mahavir Sharmik and Nirman Swalambi Sahkari Samiti Ltd. v. State of Bihar, 2023 SCC OnLine Pat 5724, decided on 04-12-2023]
*Judgment authored by: Chief Justice K. Vinod Chandran
Advocates who appeared in this case :
For the Petitioner: D.V. Pathy and Hiren Karan, Advocates
For the Respondents: Raghwanand, GA-11; Pratik Kumar, AC to GA-11
