Madras High Court: In the present case, the batch of five writ petitions challenged the impugned orders for the assessment years 2018-19, 2019-20, 2020-21, 2021-22 and 2022-23, whereby the petitioner’s claim for concessional rate of 12% on works contract services of original works executed pursuant to a contract entered with Rail Vikas Nigam Limited (‘RVNL’) was rejected, instead the impugned order’s levied tax at 18%.
Mohammed Shaffiq, J., set aside the impugned orders and the contract for doubling of track between Vanchi Maniyachchi to Nagercoil, construction of roadbed, minor bridges, platforms, buildings, water and effluent treatment facilities, wagon / coaching maintenance infrastructure, supply of ballast, installation of tracks and other electrical, signalling and telecommunication infrastructure in Madurai and Thiruvananthapuram Divisions of Southern Railway, between the petitioner and RVNL would be covered by the Notification dated 28-06-2017 (‘the notification’) issued by Central Government and liable to tax at 12%.
Background
Since the issue that arises for consideration in all these writ petitions were same, they were disposed of by way of a common order.
The petitioner was a joint venture of Stroytechservice LLC, Russia and KEC International Limited, formed for executing various railway projects in India. The petitioner was assigned the works contract vide letter dated 11-10-2018, for a total contract value of Rs. 712.48 Crores by RVNL. During the period April 2018 to March 2019, the petitioner paid GST at the rate of 12%, on the above contract. The petitioner had discharged taxes at the rate of 12% on the premise that the said contract constituted works contract services of original works pertaining to Railways covered under Serial No.3(v)(a) of the notification issued by Central Government.
Thereafter, the petitioner was served with a notice on the premise that the subject contract between the petitioner and RVNL was liable to tax at 18%, instead the petitioner had erroneously discharged taxes at lower/concessional rate of 12% on the works contract executed by the petitioner. The said intimation also extracted the definition of ‘railways’ as provided under the Railways Act, 1989 (‘Railways Act’), while stating that the petitioner was liable to tax at 18%.
Respondent 1 passed an impugned order dated 12-12-2023, confirming the proposal rejecting the petitioner’s claim for concessional rate of 12%, on the same grounds as was set out in the show cause notice.
Petitioner contended that its services would clearly fall within the scope of Serial No.3(v)(a) of the notification, thus the levy of the higher rate of tax at 18% was arbitrary. Further, the impugned orders were contrary to the rulings delivered by AAR of other States, wherein it was held that the GST on services similar, if not identical, to those rendered by the petitioner, would be entitled to the concessional rate of 12%.
Whereas respondents contended that the petitioner was not entitled rate for concessional rate of tax because RVNL did not function under the direct control of Railways and was a subsidiary of Indian Railways incorporated under the Companies Act, 1956. Further, employees working in RVNL were not considered as employees and RVNL undertook corporate social responsibility initiatives.
Analysis, Law, and Decision
The Court stated that ‘Railways’ had not been defined under the Central Goods and Services Tax Act, 2017 (‘GST Act’). Thus, the expression ‘railway’ employed in the above notification, ought to be understood applying the common parlance test. The Court stated that definition contained in a particular enactment could not be incorporated into another enactment, unless the enactments were pari materia. The definition in one statute might not afford a guide to construction of the same words or expressions in another statute unless the same were pari materia legislations or specifically provided or incorporated in the other statute.
After referring to various definitions under the GST Act, the Court stated that whenever the legislature intended to incorporate the definitions contained in other enactments, it had provided those expressly. The Court stated that the attempt by the respondent to understand the scope of the notification by looking to the expression ‘railways’, as defined under the Railways Act appeared to be in conflict with the legislative intent in the absence of incorporation of the above definition under the GST Act. Thus, the Court stated that insofar the impugned order looked to the definition of Railways as defined under the Railways Act, to construe the scope and width of the notification was wholly misdirected.
Thereafter, the Court examined the consequences that followed assuming the definition of ‘Railways’ under Railways Act applicable to the notification. The Court stated that on applying the definition of Railway, it appeared that the contract between the petitioner and RVNL for doubling of track between Vanchi Maniyachchi to Nagercoil, construction of roadbed, minor bridges, platforms, buildings, water and effluent treatment facilities, wagon / coaching maintenance infrastructure, supply of ballast, installation of tracks and other electrical, signalling and telecommunication infrastructure in Madurai and Thiruvananthapuram Divisions of Southern Railway, would constitute ‘Railway’ even under the definition of Railways Act.
The Court further stated that if one reads the relevant entry to the notification, it would be clear that the expression ‘Railway’ was not employed with reference to an entity viz., Indian Railway, as conceived by the respondent. This assumption by the respondent overlooked the fact that the expression ‘Railway’ employed in the said notification was with reference to an industry / utility. As, the notification was not confined to original work pertaining to railway, but also original work pertaining to monorail and metro rail.
The Court stated that the definition of ‘Railway’ under the Railways Act, might not be relevant in construing the notification. But, even applying the definition of Railway as defined under the Railways Act to the contract between the petitioner and RVNL, it would still constitute original work pertaining to Railway for the purpose of the subject notification and thus covered under Serial No. 3(v)(a) of the said notification.
Thus, the Court set aside the impugned orders and the contract for doubling of track between Vanchi Maniyachchi to Nagercoil, construction of roadbed, minor bridges, platforms, buildings, water and effluent treatment facilities, wagon / coaching maintenance infrastructure, supply of ballast, installation of tracks and other electrical, signalling and telecommunication infrastructure in Madurai and Thiruvananthapuram Divisions of Southern Railway, between the petitioner and RVNL would be covered by the notification and liable to tax at 12%.
[STS-KEC(JV) v. State Tax Officer, W.P.(MD) No. 3938 of 2024, decided on 28-01-2025]
Advocates who appeared in this case:
For the Petitioner: Abishek A.Rastogi, Advocate.
For the Respondents: R.Sureshkumar, Additional Government Pleader; V.Malaiyendran, Central Government Standing Counsel
