The Madras High Court while quashing the demand order held that the service provided on HAM basis can’t be compared to EPC Contract.
The bench observed that the Circular is clarificatory. In the Circular, the CBIC noticed that a HAM contract is a single contract for construction and operation and maintenance. The Circular also draws reference to sub-section (5) of Section 31 of the CGST Act which deals with continuous supply of service.
The bench stated that on closely examining the Circular, especially in view of such circular being labelled and characterized as clarificatory, it could have a bearing on the adjudication of this dispute. Consequently, the matters requires re-consideration.
The Court set aside the demand order and remitted the matter back for reconsideration. It held: (i) services provided on HAM basis cannot be compared with EPC contracts; (ii) as per circular dated 26.06.2024 issued by CBIC, it has been clarified that HAM contract is a continuous supply of service; the circular is issued under section 168 of the Act and is clarificatory in nature; (iii) the matter requires reconsideration in light of the circular as it was issued after the impugned order came to be passed; (iv) lifts the bank attachment.
Facts
The petitioner was awarded a concession by the National Highways Authority of India on Hybrid Annuity Model (HAM). The petitioner, in turn, had awarded EPC contracts. In relation to supplies made by the petitioner, an intimation was issued in November 2023.
The petitioner replied thereto in December 2023. This was followed by a show cause notice issued in December 2023.
By such show cause notice, the petitioner was called upon to show cause in respect of defects pertaining to the value of supplies made by the EPC contractor in comparison to the outward supply values indicated by the petitioner.
The petitioner replied to such show cause notice in January 2024. The order was issued thereafter.
Counsel for the petitioner submitted that a contract awarded on HAM cannot be equated with an EPC contract.
He submitted that the obligations of the petitioner extend not only to designing, building and transferring, but also to operation and maintenance.
Therefore, he urged that there is continuous supply of services and that liability cannot be imposed on the petitioner on the basis of the supply value indicated by the EPC contractor.
He relied upon Circular No.221/15/2024-GST dated 26.06.2024 (Circular No.221/24). By pointing out that the said Circular was issued by the Central Board of Indirect taxes and Customs (CBIC) pursuant to representations from concessionaires, such as the petitioner, he submitted that the matter requires re-consideration in light of such Circular.
V. Prashanth Kiran, Government Advocate, contended that the time of supply is the time of provision of services under Section 31 and other applicable provisions of GST statutes. When the EPC contractor has indicated a higher value of outward supply, he submitted that it constitutes clear evidence that construction was completed to that extent.
Without prejudice, he submits that the matter may require re-consideration in light of Circular No.221/2024.
Case Information
Case Name: Tvl.DBL Villuppuram Highways Limited V/S Union of India and Ors.
Judicial Level & Location : High Court Of Madras
Case Number : W.P. N o.16969 of 2024 and W.M.P.Nos.18689 & 18693 of 2024
Date of Ruling : 23/07/2024
Ruling in favor of: Petitioner
Judges: Justice Senthilkumar Ramamoorthy
Counsel for Petitioner: Mr.Bharat Raichandhani for Mr.Varun Pandian
For Respondents : Mr.V.Prasanth Kiran, GA (T), Mr.Ramesh Kutty, Sr. SC
