In Bai Mamubai Trust v. Suchitra, the High Court of Bombay delivered a judgment on the question whether GST is leviable on the services provided by the Court Receiver appointed under Order XL of the Code of Civil Procedure, 1908. The judgment was rendered by Justice S.J. Kathawalla.
In the said case the court had appointed Mr. V. Sreedharan, Senior Advocate, as Amicus Curiae.
The following issues were decided by the court:
As per the facts of the case, the Plaintiff had filed a suit seeking to recover possession of three shops, which as per the Plaintiff is under the illegal possession of the Defendant. The court appointed a Court Receiver who was directed to take formal possession of the Suit Premises and the Defendant was permitted to remain in possession of the Suit Premises as an agent of the Court Receiver under an agency agreement to be executed with the Court Receiver, on payment of monthly ad-hoc royalty of Rs. 45,000 but without any security alongwith GST at the applicable rate.
According to the Plaintiff, if and when the royalty amount is paid over by the Court Receiver to the Plaintiff, the same would be treated as 'Income' of the Plaintiff falling under the category of 'Income from letting out and use of a shop / commercial premises'. Further, as per the Plaintiff, GST will also be liable to be paid on the royalty amount finally transferred to the Plaintiff.
Findings of Court:
Issue No. i:
It was held by the court that GST cannot be levied or recovered on services provided by the Court Receiver. Relying on the precedents, the court held that the office of the Court Receiver is 'an establishment of the High Court' and 'a permanent department of the High Court'. Therefore, the services, being charged by a permanent department of the Court, pursuant to orders passed by the Court from time to time, are to be considered as 'Services by any court or Tribunal established under any law for the time being in force' which is Item No. 2 of Schedule III to the CGST Act and to be treated neither as a supply of goods nor a supply of services. It was also clarified that the Court has not considered the issue in the context of a private receiver who may be appointed by the Court under Order XL of the CPC.
Issue No. ii and iii:
Relying on Section 92 of the CGST Act, the court held that GST may be determined and recovered from the Court Receiver by reason of the Court Receiver being akin to a 'representative assessee'. However, the court held that whether or not GST is applicable depends on the nature of the cause of action pleaded by the Plaintiff or the order of the Court directing payment and which sets out the terms of receivership.
"On a reading of Section 92 of the CGST Act it is clear that GST may be determined and levied from the receiver if:
a. The receiver is in control of the business of a taxable person
b. A taxable event of supply has taken place with respect to such business on account of which the estate of the taxable person would be liable to tax, interest or penalty under the CGST Act.
Section 92 of the CGST Act clearly contemplates that GST may be levied on and collected from the Court Receiver with respect to a business under its control provided that the taxable event of 'supply' for such levy of GST has taken place.
50. The requirement of a 'supply' is essential. It is the taxable event under the CGST Act. If there is no supply, there can be no liability for payment of tax (or any interest or penalty thereon).", held the court.
With respect to the case at hand, the court found that the royalty is paid towards damages or compensation or securing any future determination of compensation or damages for a prima facie violation of the Plaintiff's legal right in the Suit Premises. This is because as per the prima facie finding of the court, the Defendant had no semblance of right to be in occupation of the Suit Premises. As the basis of payment to the court receiver is the alleged illegal occupation or trespass by the Defendant, the court found that the payment lacks the necessary quality of reciprocity to make it a 'supply' and held that no GST is payable.
Elaborating on the types of situations that GST may be attracted on the payments made to a court receiver, the court held:
"84. There may be instances where payments received by the Court Receiver may attract GST. For instance: (i) Where the Court Receiver is appointed to run the business of a partnership firm in dissolution, the business of the firm under the control of receivership may generate taxable revenues. (ii) Where the Court authorises the Court Receiver to let out the suit property on leave and license, the license fees paid may attract GST. (iii) Where the Court Receiver collects rents or profits from occupants of properties under receivership, the same will be liable to payment of GST. (iv) Consideration received for assignment, license or permitted use of intellectual property.
85. Obviously, this is not an exhaustive list but the principles applicable for answering the question of law raised in this Court Receiver's Report may be relevant to address issues that may otherwise arise. These instances are illustrative of the cases where the GST laws may apply. In such cases, GST may be collected from the Court Receiver as a representative assessee under Section 92 and as such the Court Receiver may be required to obtain registration under the relevant GST laws.
86. 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.", held the court.
Issue No. iv:
On issue no. iv, the High Court held that the office of the Court Receiver may be directed to include a clause in the standard form of the agency agreement to the effect that where any payment to be made under an order of the Court attracts GST, the agent appointed by the Court Receiver must have or must obtain CGST registration and make such payment on behalf of the Receiver and indemnify the Receiver for any liability that may fall upon the Receiver under Section 92 of the concerned GST Act. The court held that 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. Also, where no agent is appointed, the Court Receiver will have to obtain registration.
Hence after deciding all the issues, the court modified its earlier order and directed that GST, if any, deposited by the Defendant with the Court Receiver but not paid to the concerned authority shall be adjusted against royalty amounts to be paid by the Defendant to the Court Receiver for the future period.
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