KERALA INFRASTRUCTURE AND TECHNOLOGY FOR EDUCATION, V. UNION OF INDIA,

WP(C)/41710/2023

AI Insights

The case involves the Kerala Infrastructure and Technology for Education (KITE), a state government entity, challenging a show cause notice issued by the Central Goods and Services Tax (CGST) authority. The notice alleged that KITE had evaded GST payments amounting to approximately INR 99.05 crore by not assessing the value of goods and services supplied to the General Education Department, Government of Kerala, from October 2017 to August 2020. KITE argued that it was exempt from GST under specific notifications due to its status as a government entity and the nature of its activities, which included upgrading IT infrastructure in government schools. The court considered the submissions and evidence from both parties and decided not to interfere with the ongoing assessment proceedings, directing the assessing authority to consider the petitioner's claims for exemption thoroughly.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 724601 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 17-01-2024
• Assessment Year: misc
• Other Referred Cases: Siemens Ltd. v. State of Maharashtra And Others [(2006) 12 SCC 33]
• Laws Referred To: Section 8 of the Companies Act, 2013, Section 12AA of the Income Tax Act, 1961, Goods and Services Tax Act, 2017, KIIFB Act, 1999
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: P G JAYASHANKAR; S MANU
• Assessee Lawyers: V A HARITHA; NAVEEN RAVEENDRANATH; DEEPAK PRAKASH
• Keywords: Charitable Activities; Government Entity; GST Exemption; IT Infrastructure; Show cause notice; Education Rejuvenation Mission
• Section: 12AA; 73; 8

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH WEDNESDAY, THE 17TH DAY OF JANUARY 2024 / 27TH POUSHA, 1945 WP(C) NO. 41710 OF 2023 PETITIONER/S: KERALA INFRASTRUCTURE AND TECHNOLOGY FOR EDUCATION, SCERT BUILDING, POOJAPPURA, KARAMANA - POOJAPPURA ROAD, THIRUVANANTHAPURAM-695012 THROUGH ITS VICE CHAIRMAN & EXECUTIVE DIRECTOR MR. ANVAR SADATH. K BY ADV V.A.HARITHA, SRI.NAVEEN RAVEENDRANATH (SR.), SRI.DEEPAK PRAKASH RESPONDENT/S: 1 UNION OF INDIA, THROUGH THE SECRETARY, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, NORTH BLOCK, NEW DELHI, PIN - 110001 2 THE COMMISSIONER OF CGST & CENTRAL EXCISE, HAVING ITS OFFICE AT: P.B. NO.13, GST BHAVAN, PRESS CLUB ROAD, THIRUVANANTHAPURAM, PIN - 695001 3 ADDITIONAL / JOINT COMMISSIONER OF CGST & CENTRAL EXCISE, HAVING ITS OFFICE AT: GST BHAVAN, PRESS CLUB ROAD, THIRUVANANTHAPURAM, PIN - 695001 BY ADV ADV. P.G. JAYASHANKAR, SR.SC FOR R2 & R3, SRI.S.MANU, DSGI FOR R1 OTHER PRESENT: P.G. JAYASHANKAR-SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 17.01.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 41710 OF 2023 2 J U D G M E N T Heard Sri.Naveen Raveendranath, learned Senior Counsel assisted by Sri.Deepak Prakash, appearing for the petitioner and Sri.P.G.Jayasankar, learned Senior Standing Counsel for the respondent Nos.2 & 3. 2. The petitioner is a State Government entity registered under Section 8 of the Companies Act, 2013 and has been granted certificate under Section 12AA of the Income Tax Act, 1961. As per the averments in the writ petition, 99.9998% shares of the petitioner are held by the State Government. The petitioner is controlled by the State Government, inasmuch as the Secretary of the General Education Department is the Chairperson of petitioner's Board of Directors. In fact, it is a Special Purpose Vehicle, which has been set up for providing IT infrastructure in the Government owned and aided Schools in the State of Kerala. It is also said that the petitioner's source of funding is in the form of grants received from the WP(C) NO. 41710 OF 2023 3 State Government through M/s.Kerala Infrastructure Investment Fund Board ('KIIFB', for short) through budgetary announcements. 3. The petitioner is responsible for implementation of State Government's Public Education Rejuvenation Mission with initiatives such as Samagra Content Portal, ‘Sampoorna’ School Management software and ‘SchoolWiki’, which connects schools for collaborative content development process. According to the petitioner, the role of the petitioner is of a facilitator to procure materials for modernising the education and of an implementation agency. The petitioner approves invoices in respect of supply of goods and services for payment by the KIIFB. The petitioner only gets centage charges towards the expenditure borne by the petitioner for project implementation. 4. It is submitted that the petitioner is exempted from payment of Goods and Services Tax ('GST', for short), in view of notification No.12/2017 - Central Tax (Rates) dated 28.6.2017, WP(C) NO. 41710 OF 2023 4 wherein it is provided that an entity registered under Section 12AA of the Income Tax Act, 1961 for charitable activities is exempted from payment of GST. It is also submitted that the petitioner had entered into a tri-partite agreement with the General Education Department and KIIFB for the purposes of carrying out its activities in relation to upgradation of information technology infrastructure in classes VIII to XII in 4752 Government Schools with 45000 class rooms and hi- tech lab project in 9941 primary schools. The petitioner received funds in the form of grants from KIIFB under the mandate of Section 3(2) r/w Section 3(4) of the KIIFB Act, 1999. Such grants are utilised by the petitioner for purchasing goods for the purposes of upgrading infrastructure in Government schools at no cost to the public. The petitioner is a registered dealer under the provisions of the Central Goods and Services Tax Act/State Goods and Services Tax Act, 2017 ('CGST/SGST Act', for short). WP(C) NO. 41710 OF 2023 5 5. The petitioner has approached this Court in the present writ petition impugning the show cause notice bearing No.5/2023-24 GST (ADC) dated 18.9.2023 in Ext.P13 on the ground that the petitioner entity is exempted from payment of GST in view of Entry 150 inserted vide notification No.35/2017 - Central Tax (Rate) dated 13.10.2017 and also notification No.12/2017 - Central Tax (Rate) dated 28.6.2017, and therefore, the petitioner is not liable for assessment and payment of GST under the provisions of CGST/SGST Act and the Rules made thereunder. 6. It appears that some investigation was carried out by the Anti-Evasion Wing of the Central Goods and Services Department, Trivandrum Commissionerate. The intelligence gathered by the Anti-Evasion Wing would suggest that the petitioner was supplying services as well as goods to the General Education Department, Government of Kerala, but was not paying applicable GST on the actual supply by way of not assessing the value of the goods supplied, and for the period from WP(C) NO. 41710 OF 2023 6 October, 2017 to August, 2020, the petitioner had shown exempted supply for Rs.27,58,00,055/-. The detailed facts collected by the Anti-Evasion Wing of the CGST, including the evidence and materials, were mentioned in the show cause notice. The petitioner has been asked to show cause as to why action should not be taken under the provisions of Section 73 of the CGST Act and Kerala SGST Act, 2017 and the Rules made thereunder for alleged evasion of CGST and SGST amounting to Rs.49,52,87,130/- each, totalling to Rs.99,05,74,260/-. The petitioner had submitted detailed reply to the said show cause notice in Ext.P14. It appears that they had also appeared for personal hearing, and thereafter, the present writ petition has been filed. 7. The learned Senior Counsel for the petitioner submits that the show cause notice would show that the assessing authority has pre- determined the issue of levying tax as stated in the show cause notice without considering the reply to the show cause notice and exemption WP(C) NO. 41710 OF 2023 7 notifications. He submits that though the petitioner do not supply the goods and services as alleged to the General Education Department of the State Government, they retain the ownership and in fact, they only maintain the computers and other hardwares installed in Government Schools and take insurance for the same and receive only maintenance charges for the same. It is also submitted without prejudice to the aforesaid that even if it is considered to be as supply, it is supplied from one Government Entity to another Government Entity and such supply is exempted under the notifications from payment of the GST. It is submitted that the petitioner has approached this Court sensing the mood of the assessing authority that they are going to restrict to their pre-determined position in the show cause notice and adjudication would be a futile exercise as the notice has been issued with pre-determined motion. Learned Senior counsel for the petitioner has place reliance on the judgment of the Hon'ble Supreme Court in the case of Siemens Ltd. v. State WP(C) NO. 41710 OF 2023 8 of Maharashtra And Others [(2006) 12 SCC 33] to submit that when the assessing authority has issued show cause notice with pre-determined motion and the adjudication proceedings would be a futile exercise, the assessee instead of participating in the assessment proceedings can approach the writ court by filing a writ petition against the show cause notice. He, therefore, submits that the writ petition is maintainable and the petitioner should not be relegated for assessment before the assessing authority when the alleged supply of goods and services is exempted from payment of GST. 8. Sri.P.G.Jayasankar, learned Senior Standing Counsel for respondent Nos.2 & 3, submitted that the accusation against the respondents/assessing authority is ill founded. The petitioner did not disclose the supplies and the nature of funds received by it. A detailed investigation was carried out and on the basis of the evidence and materials collected during the investigation, the petitioner has been issued show cause notice. WP(C) NO. 41710 OF 2023 9 Every material adverse to the petitioner has been supplied to it to enable the petitioner to file its detailed reply, which the petitioner has filed. The assessing authority will consider the reply and will afford adequate opportunity of hearing to the petitioner. If the petitioner's supplies are exempted, the show cause notice would be dropped, but the assessing authority is to be satisfied on all aspects that the petitioner's supplies are exempted from payment of GST. At this stage when the adjudication proceedings are going on, the petitioner's approach rushing to this Court cannot be justified. He therefore, prays that the petitioner would be asked to appear before the assessing authority with all details, including the profit and loss account, balance sheet and all notifications in their favour claiming exemption from payment of GST on the supply received or made by them, as the case may be. 9. I have considered the submissions and perused the show cause notice as well as the reply WP(C) NO. 41710 OF 2023 10 submitted by the petitioner to the show cause notice. 10. It is not in doubt that the petitioner is a Government Company registered under Section 8 of the Companies Act, 2013. Almost all the shares of the petitioner are held by the State Government. The question whether the supply of goods and services received by the petitioner or supply made by them are exempted from payment of GST is the question which needs to be decided by the assessing authority itself. The petitioner has been issued with show cause notice to which they have filed their reply and the petitioner had also availed one opportunity of hearing before the assessing authority. 11. In view of the above, at this stage, I do not deem it proper to interrupt the ongoing proceedings before the assessing authority. However, it is made clear that the assessing authority will examine each and every argument of the petitioner against the show cause notice and also examine the evidences/documents submitted by WP(C) NO. 41710 OF 2023 11 them, including the notifications, to come to a conclusion whether the petitioner is entitled for exemption from payment of GST or not. Once the assessing authority comes to its conclusion that the petitioner is exempted from payment of GST, the show cause notice should be dropped. The assessing authority is directed to issue a fresh notice for personal hearing of the petitioner and the petitioner should appear in pursuance to the said notice before the assessing authority with all relevant evidences/documents to satisfy its claim that the petitioner is exempted from payment of GST. With the aforesaid observations and direction, the present writ petition stands finally disposed of. Pending interlocutory application, if any, in the writ petition stands dismissed. Sd/- DINESH KUMAR SINGH JUDGE jg WP(C) NO. 41710 OF 2023 12 APPENDIX OF WP(C) 41710/2023 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE LETTER TO GENERAL EDUCATION DEPARTMENT REGARDING FORMATION OF SPV DATED 05/09/2016 Exhibit P2 TRUE COPY OF THE NOTIFICATION NO.12/2017 - CENTRAL TAX (RATES) DATED 28TH JUNE, 2017 Exhibit P3 TRUE COPY OF THE ORDER FOR REGISTRATION U/S. 12AA OF INCOME TAX ACT, 1961 Exhibit P4 TRUE COPY OF THE TRIPARTITE AGREEMENT BETWEEN THE PETITIONER AND THE GENERAL EDUCATION DEPARTMENT DATED 17TH JULY 2017 Exhibit P5 TRUE COPY OF THE NOTIFICATION NO.35/2017 CENTRAL TAX (RATE) DATED 13TH OCTOBER 2017 ISSUED BY THE MINISTRY OF FINANCE Exhibit P6 TRUE COPY OF THE PETITIONER'S PROJECT REPORT FOR THE HI-TECH UPGRADATION OF SCHOOLS Exhibit P7 TRUE COPY OF THE MINUTES OF MEETING OF THE BOARD DIRECTORS OF THE PETITIONER DATED 28/09/2022 Exhibit P8 TRUE COPY OF THE INSURANCE AGREEMENT OF THE PETITIONER DATED 20.11.2020 Exhibit P9 TRUE COPY OF THE LEDGER ACCOUNT OF THE PETITIONER FOR \"HI-TECH SCHOOL PROGRAMME (ASSET)\" FOR THE PERIOD 1/4/17 TO 31/3/2021 Exhibit P10 TRUE COPY OF THE EXTRACT FROM THE ASSET REGISTER DATED NIL MAINTAINED BY PETITIONER WP(C) NO. 41710 OF 2023 13 Exhibit P11 TRUE COPY OF THE G.O.(P) NO.61/2017/FIN DATED 09/05/2017 ISSUED BY THE FINANCE (INFRSTRUCTURE) DEPARTMENT, KERALA Exhibit P12 TRUE COPY OF THE INCOME SUMMARY OF THE PETITIONER FOR THE PERIOD 2017-21 Exhibit P13 TRUE COPY OF THE SHOW CAUSE NOTICE DATED 18TH SEPTEMBER 2023 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER Exhibit P14 TRUE COPY OF THE WRITTEN REPLY DATED 13TH NOVEMBER 2023 SUBMITTED BY THE PETITIONER HEREIN BEFORE THE 3RD RESPONDENT Exhibit P15 TRUE COPY OF THE AUDITED FINANCIAL STATEMENTS OF THE PETITIONER (F.Y.2017-18, 2018-19, 2019-20 AND 2020-21) Exhibit P16 TRUE COPY OF THE INCOME TAX RETURN ACKNOWLEDGMENTS (FOR A.Y.2018-19, 2019-20, 2020-21 AND 2021-22) FILED BY THE PETITIONER Exhibit P17 ]\", TRUE COPY OF THE JUDGEMENT IN IN RE: KOCHI METRO RAIL LTD. [(2020) 40 GSTL 408 Exhibit P18 TRUE COPY OF THE JUDGEMENT IN RAJCOMP INFO SERVICE LTD. VERSUS COMMISSIONER OF C. EX. COMMISSIONERATE, JAIPUR 2022 (65) G.S.T.L. 103 (TRI.-DEL)\" Exhibit P19 TRUE COPY OF THE CIRCULAR F.NO B1/4/2006- TRU DATED 19-04-2006 Exhibit P20 TRUE COPY OF CHART DEPICTING \"TOTAL ITC PAID BY THE PETITIONER TO THE SUPPLIER ON PROCUREMENT OF GOODS FOR THE PERIOD FROM SEPTEMBER 2017 TO MARCH 2021\" "