GST — annuity payments under NHAI works contracts · F2J-C-2930
M/s Nagaur Mukundgarh Highways Pvt. Ltd. v. Central Board of Indirect Taxes and Customs & Ors. and connected petitions
VALIDATED · ACTUAL COURT DOCUMENTSource transparency: The local PDF is an actual court document retained from the complete public source. The official court portal is recorded separately. Verify the official record and subsequent history before reliance.
Holding (ratio)
Deferred annuity instalments remain consideration for taxable works-contract services; the payment label and an earlier erroneous advance ruling do not create an exemption absent clear notification language.
Operative order (extract)
The batch of writ petitions and pending applications was dismissed, and the GST levy on the deferred annuity payments was upheld.
Scope limits
The holding is confined to the issues actually decided in the retained judgment; no view is attributed to the court on questions expressly left open or remanded.
Sources and completeness
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- Complete searchable public court copy, retained unchanged
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Complete searchable judgment text
[2026:RJ-JP:38336-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN
AT JODHPUR
D.B. Civil Writ Petition No. 10055/2024
CNR: RJHC010453722024 | URN: CW / 20214U / 2024
M/s Nagaur Mukundgarh Highways Pvt. Ltd., 80A, Shahi
Complex, Hiran Magri, Sector 11, Udaipur, Rajasthan 313002.
Through Authorised Person Mr. Sharad Pancholy S/o Mr.
Surendra Kumar Pancholy, Aged 54 Years, R/o A 25, Jda, A
Block, Near Calgary Hospital Malviya Nagar Jaipur, Rajasthan
302017.
----Petitioner
Versus
1. Central Board Of Indirect Taxes And Customs, Through
Chairman, Government Of India, Ministry Of Finance,
Department Of Revenue, North Block, New Delhi.
2. State Of Rajasthan, Through Additional Chief Secretary
(Finance) To Government, Finance Department (Tax
Division), Government Of Rajasthan, 1St Floor, Main
Building, Government Secretariat, Jaipur Rajasthan,
302005
3. Chief Commissioner Of State Tax, Commercial Taxes
Department, Rajasthan, Kar Bhawan, Jaipur
4. The Joint Commissioner State Tax, Commercial Taxes
Department, Rajasthan, Circle - C, Ew - Iii, Rajasthan,
Jaipur
5. Shri Tara Chand Megwal, Joint Commissioner State Tax,
Circle - C, Ew - Iii, Rajasthan, Jaipur
6. Union Of India, Through Its Secretary Department Of
Revenue, Ministry Of Finance North Block, New Delhi.
----Respondents
Connected With
D.B. Civil Writ Petition No. 10057/2024
CNR: RJHC010453772024 | URN: CW / 20223U / 2024
M/s Nagaur Mukundgarh Highways Pvt. Ltd., 80A, Shahi
Complex, Hiran Magri, Sector 11, Udaipur, Rajasthan 313002.
Through Authorised Person Mr. Sharad Pancholy S/o Mr.
Surendra Kumar Pancholy, Aged 54 Years, R/o A 25, Jda, A
Block, Near Calgary Hospital Malviya Nagar Jaipur, Rajasthan
302017.
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----Petitioner
Versus
1. Central Board Of Indirect Taxes And Customs, Through
Chairman, Government Of India, Ministry Of Finance,
Department Of Revenue, North Block, New Delhi.
2. State Of Rajasthan, Through Additional Chief Secretary
(Finance) To Government, Finance Department (Tax
Division), Government Of Rajasthan, 1St Floor, Main
Building, Government Secretariat, Jaipur Rajasthan,
302005
3. Chief Commissioner Of State Tax, Commercial Taxes
Department, Rajasthan, Kar Bhawan, Jaipur
4. The Joint Commissioner State Tax, Commercial Taxes
Department, Rajasthan, Circle - C, Ew - Iii, Rajasthan,
Jaipur
5. Shri Tara Chand Megwal, Joint Commissioner State Tax,
Circle - C, Ew - Iii, Rajasthan, Jaipur
6. Union Of India, Through Its Secretary Department Of
Revenue, Ministry Of Finance North Block, New Delhi.
----Respondents
D.B. Civil Writ Petition No. 10058/2024
CNR: RJHC010453862024 | URN: CW / 20224U / 2024
M/s Nagaur Mukundgarh Highways Pvt. Ltd., 80A, Shahi
Complex, Hiran Magri, Sector 11, Udaipur, Rajasthan 313002.
Through Authorised Person Mr. Sharad Pancholy S/o Mr.
Surendra Kumar Pancholy, Aged 54 Years, R/o A 25, Jda, A
Block, Near Calgary Hospital Malviya Nagar Jaipur, Rajasthan
302017.
----Petitioner
Versus
1. Central Board Of Indirect Taxes And Customs, Through
Chairman, Government Of India, Ministry Of Finance,
Department Of Revenue, North Block, New Delhi.
2. State Of Rajasthan, Through Additional Chief Secretary
(Finance) To Government, Finance Department (Tax
Division), Government Of Rajasthan, 1St Floor, Main
Building, Government Secretariat, Jaipur Rajasthan,
302005
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3. Chief Commissioner Of State Tax, Commercial Taxes
Department, Rajasthan, Kar Bhawan, Jaipur
4. The Joint Commissioner State Tax, Commercial Taxes
Department, Rajasthan, Circle - C, Ew - Iii, Rajasthan,
Jaipur
5. Shri Tara Chand Megwal, Joint Commissioner State Tax,
Circle - C, Ew - Iii, Rajasthan, Jaipur
6. Union Of India, Through Its Secretary Department Of
Revenue, Ministry Of Finance North Block, New Delhi.
----Respondents
D.B. Civil Writ Petition No. 10062/2024
CNR: RJHC010453652024 | URN: CW / 20229U / 2024
M/s Nagaur Mukundgarh Highways Pvt. Ltd., 80A, Shahi
Complex, Hiran Magri, Sector 11, Udaipur, Rajasthan 313002.
Through Authorised Person Mr. Sharad Pancholy S/o Mr.
Surendra Kumar Pancholy, Aged 54 Years, R/o A 25, Jda, A
Block, Near Calgary Hospital Malviya Nagar Jaipur, Rajasthan
302017.
----Petitioner
Versus
1. Central Board Of Indirect Taxes And Customs, Through
Chairman, Government Of India, Ministry Of Finance,
Department Of Revenue, North Block, New Delhi.
2. State Of Rajasthan, Through Additional Chief Secretary
(Finance) To Government, Finance Department (Tax
Division), Government Of Rajasthan, 1St Floor, Main
Building, Government Secretariat, Jaipur Rajasthan,
302005
3. Chief Commissioner State Tax, Commercial Taxes
Department, Rajasthan, Kar Bhawan, Jaipur
4. The Joint Commissioner State Tax, Commercial Taxes
Department, Rajasthan, Circle - C, Ew - Iii, Rajasthan,
Jaipur
5. Shri Tara Chand Megwal, Joint Commissioner State Tax,
Circle - C, Ew - Iii, Rajasthan, Jaipur
6. Union Of India, Through Its Secretary Department Of
Revenue, Ministry Of Finance North Block, New Delhi.
----Respondents
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D.B. Civil Writ Petition No. 10067/2024
CNR: RJHC010453882024 | URN: CW / 20240U / 2024
M/s Nagaur Mukundgarh Highways Pvt. Ltd., 80A, Shahi
Complex, Hiran Magri, Sector 11, Udaipur, Rajasthan 313002
Through Authorised Person Mr. Sharad Pancholy S/o Mr.
Surendra Kumar Pancholy, Aged 54 Years, R/o A 25, Jda, A
Block, Near Calgary Hospital Malviya Nagar Jaipur, Rajasthan
302017.
----Petitioner
Versus
The Joint Commissioner, State Tax Circle - C, Ew-Iii, Rajasthan,
Jaipur.
----Respondent
For Petitioner(s) : Mr. Jatin Harjai
For Respondent(s) : Mr. Mahaveer Bishnoi, AAG with
Mr. Harshwardhan Singh
Mr. Rajat Arora
HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI
HON'BLE MR. JUSTICE PRAVEER BHATNAGAR
Judgment
Date of conclusion of arguments:- 06.08.2026
Date on which the judgment was Reserved:- 06.08.2026
Whether the full judgment or only the operative part is
pronounced:- Full Judgment
Date of pronouncement:- 17.08.2026
Per: Praveer Bhatnagar, J.
1. Since the issue involved in the present bunch of writ
petitions is common and the questions of law and facts arising
therein are akin to each other, all these petitions are being heard
and decided together by this common order. However, for the sake
of convenience and brevity, the facts are being noticed from D.B.
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Civil Writ Petition No. 10055/2024, which may be treated as the
lead matter.
2. By way of the instant writ petition, the petitioner has
assailed the validity and applicability of Circular No. 150/6/2021
dated 17.06.2021 (Annexure-P/24) issued by Respondent No.1-
Central Board of Indirect Taxes and Customs, inter alia, on the
ground that the said circular is not binding upon the petitioner and
cannot override or dilute the statutory exemption granted under
the notification issued in exercise of powers conferred by Section
11 of the CGST Act, particularly Notification No.12/2017. The
petitioner has further challenged the show cause notice dated
09.12.2022 (Annexure-P/7), contending that the provisions
contained in Chapter XVII of the CGST Act/RGST Act expressly
provide for the binding effect of an advance ruling upon the
applicant as well as the concerned departmental authorities and
that, vide advance ruling dated 12.02.2019, Entry-23A was
specifically held to be exempted from levy of tax.
2.1 Further, the petitioner has also challenged the recovery order
dated 07.07.2023, which has been passed contrary to the
statutory exemption available to the petitioner and the binding
effect of the advance ruling dated 12.02.2019. The petitioner has,
therefore, prayed for quashing and setting aside of the impugned
recovery order dated 07.07.2023 and for consequential
reversal/refund of the amount recovered from the petitioner
pursuant thereto, along with such other reliefs as may be deemed
just and proper in the facts and circumstances of the case.
3. Before adverting to the rival submissions and the
controversy involved in the present petition, it would be apposite
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to notice the statutory framework governing the exemption
claimed by the petitioner. It is not in dispute that, in exercise of
the powers conferred under Section 11 of the CGST Act read with
Section 164 thereof, the Central Government issued Notification
No.12/2017-Central Tax (Rate) dated 28.06.2017, whereby
exemption was granted in respect of specified services. Entry 23A
of the said Notification, as relevant for the present controversy,
specifically provides for exemption in respect of “Service by way of
access to a road or a bridge on payment of annuity”, falling under
Heading 9967, with the applicable rate of tax being “Nil” and the
corresponding condition being “Nil”. The relevant extract of the
said Notification reads as under:-
“NOTIFICATION NO. 12/2017-CENTRAL TAX (RATE), DATED 28-6-
2017;
In exercise of the powers conferred by 1[sub-section (3) and sub-
section (4) of section 9, sub-section (1) of section 11, sub-section (5) of
section 15 and section 148] of the Central Goods and Services Tax Act, 2017
(12 of 2017), the Central Government, on being satisfied that it is necessary
in the public interest so to do, on the recommendations of the Council,
hereby exempts the intra-State supply of services of description as specified
in column (3) of the Table below from so much of the central tax leviable
thereon under sub-section (1) of section 9 of the said Act, as is in excess of
the said tax calculated at the rate as specified in the corresponding entry in
column (4) of the said Table, unless specified otherwise, subject to the
relevant conditions as specified in the corresponding entry in column (5) of
the said Table, namely:-
Sr. No. Chapter, Description of Rate (Per Condition
Section, Services cent)
Heading,
Group or
Service
Code
(Tariff)
(1) (2) (3) (4) (5)
“23A Heading Service by way of Nil Nil”;
9967 access to a road
or a bridge on
payment of
annuity.
Explanation. For the purposes of this notification,-
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(i) Reference to "Chapter", "Section" or "Heading", wherever they occur,
unless the context otherwise requires, shall mean respectively as "Chapter,
"Section" and "Heading" in the scheme of classification of services.
(ii) Chapter, Section, Heading, Group, or Service Code mentioned in
Column (2) of the Table are only indicative”
4. Subsequently, the Respondent-Board issued Circular
No.150/06/2021-GST dated 17.06.2021, purporting to clarify the
applicability of GST in respect of annuity payments received for
construction of roads. The circular records that GST is exempt in
respect of services falling under Heading 9967, namely, services
by way of access to a road or a bridge on payment of annuity, as
covered by Entry 23A of Notification No.12/2017-Central Tax
(Rate). However, the circular proceeds to draw a distinction
between services falling under Heading 9967 and services relating
to construction of roads falling under Heading 9954. It accordingly
clarifies that, where the underlying service is construction of a
road falling under Heading 9954 and the consideration for such
construction is paid partly upfront and partly through deferred
annual payments described as annuities, Entry 23A would not be
applicable and such annuity payments would not be exempt from
GST. The relevant portion of the impugned circular reads as
under:-
“Circular No.150/06/2021-GST CBIC-190354/36/2021-TRU Section-CBEC
Government of India Ministry of Finance Department of Revenue *****
North Block, New Delhi, Dated the 17th June, 2021 To, The Principal Chief
Commissioners/ Chief Commissioners/ Principal Commissioners/
Commissioner of Central Tax (All) / The Principal Director Generals/
Director Generals (All) Madam/Sir, Sub–Clarification regarding
applicability of GST on the activity of construction of road where
considerations are received in deferred payment (annuity)-reg. Certain
representations have been received requesting for a clarification regarding
applicability of GST on annuities paid for construction of road where certain
portion of consideration is received upfront while remaining payment is
made through deferred payment (annuity) spread over years. 2. This issue
has been examined by the GST Council in its 43rd meeting held on 28th
May, 2021. 2.1 GST is exempt on service, falling under heading 9967
(service code), by way of access to a road or a bridge on payment of annuity
[entry 23A of notification No. 12/2017-Central Tax]. Heading 9967 covers
“supporting services in transport” under which code 996742 covers
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“operation services of National Highways, State Highways, Expressways,
Roads & streets; bridges and tunnel operation services”. Entry 23 of said
notification exempts “service by way of access to a road or a bridge on
payment of toll”. Together the entries 23 and 23A exempt access to road or
bridge, whether the consideration are in the form of toll or annuity [heading
9967]. Circular No.150/06/2021-GST 2.2 Services by way of construction of
road fall under heading 9954. This heading inter alia covers general
construction services of highways, streets, roads railways, airfield runways,
bridges and tunnels. Consideration for construction of road service may be
paid partially upfront and partially in deferred annual payments (and may
be called annuities). Said entry 23A does not apply to services falling under
heading 9954 (it specifically covers heading 9967 only). Therefore, plain
reading of entry 23A makes it clear that it does not cover construction of
road services (falling under heading 9954), even if deferred payment is
made by way of instalments (annuities). 3. Accordingly, as recommended by
the GST Council, it is hereby clarified that Entry 23A of notification No.
12/2017-CT(R) does not exempt GST on the annuity (deferred payments)
paid for construction of roads. 4. Difficulty if any, in the implementation of
this circular may be brought to the notice of the Board.”
5. Learned counsel appearing for the petitioner assailed the
validity and applicability of the impugned circular on the ground
that the same is neither binding upon the petitioner nor can it
override, modify or dilute the statutory exemption granted under
the notification issued in exercise of powers conferred under
Section 11 of the CGST Act. It was submitted that the statutory
notification expressly exempts the services rendered by the
petitioner from payment of tax on the annuity and, therefore, a
subsequent circular issued by the Board cannot be relied upon to
impose a tax liability contrary to the express language and effect
of the statutory notification.
5.1 Learned counsel further submitted that although the Board is
empowered under the Act to issue instructions, orders or circulars
for the purpose of implementing and ensuring uniformity in the
provisions of the Act, such administrative instructions cannot
override the substantive provisions of the statute or the
exemption granted under a statutory notification. It was
contended that the power to issue instructions is essentially
administrative in nature and cannot be exercised so as to curtail,
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negate or retrospectively withdraw a statutory exemption,
particularly when no corresponding amendment has been made in
the statutory notification itself.
5.2 Learned counsel further contended that the issue involved in
the present case had already been considered and conclusively
determined by the Advance Ruling Authority vide its order dated
12.02.2019, whereby the relevant Entry-23A was held to be
exempted. It was submitted that the said advance ruling was not
challenged by the Revenue and, therefore, attained finality and
continued to bind the petitioner as well as the concerned
departmental authorities in terms of Section 103 of the CGST Act.
5.3 He states that in the absence of any challenge to or setting
aside of the advance ruling, the Revenue could not subsequently
take a contrary view and fasten a tax liability upon the petitioner
merely on the strength of the impugned circular.
5.4 Learned counsel for the petitioner, while elaborating his
submissions, placed reliance upon Sections 11, 103, 164 and 168
of the CGST Act and submitted that the power vested in the Board
under Section 168 to issue instructions or directions for securing
uniformity in the implementation of the Act cannot be construed
as a power to nullify or render ineffective a statutory exemption
granted under Section 11. It was urged that the Board cannot,
under the guise of issuing a circular, legislate upon the subject or
interpret an exemption entry in a manner contrary to its plain and
unambiguous language.
5.5 Learned counsel submitted that the impugned circular,
insofar as it seeks to fasten a tax liability upon the petitioner
despite the statutory exemption and the binding advance ruling,
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travels beyond the scope of the powers conferred upon the Board.
In support of his submissions, he placed reliance upon the
judgment rendered by Karnataka High Court in DPJ Bidar-
Chincholi (Annuity) Road Project Private Limited & Anr. Vs.
Union of India & Ors., reported in 2022 SCC OnLine Kar
1829.
6. Per contra, learned counsel appearing for the Union GST and
State GST authorities supported and justified the action of the
respondents and submitted that the Board is duly empowered
under Section 168 of the CGST Act to issue orders, instructions
and directions for the purpose of securing uniformity in the
implementation of the provisions of the Act. It was contended that
the impugned circular has merely clarified the correct position of
law and has been issued in exercise of the statutory powers
vested in the Board. He submits that Section 168 specifically
authorises the Board, wherever it considers it necessary or
expedient for securing uniformity in the implementation of the Act,
to issue such orders, instructions or directions to the central tax
officers as it may deem fit, which are required to be observed and
followed by the officers and other persons employed in the
implementation of the Act. Reliance was placed upon the
judgment rendered by a Coordinate Bench of this Hon'ble Court in
D.B. Writ Petition No.15048/2025, titled CG Tollway Ltd. Vs.
Union of India & Ors., the judgment rendered by Meghalaya
High Court in Jorabat Shillong Expressway Ltd. Vs. Union of
India; (2026:MLHC:518-DB) and the judgment rendered by
Telangana High Court in GMR Pochanpalli Expreessways
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Limited Vs. Additional Director, Directorate General of GST
Intelligence & Ors., reported in 2024 SCC OnLine TS 3988.
6.1 Learned counsel for the respondents further submitted that
the advance ruling relied upon by the petitioner cannot be treated
as binding in perpetuity and that, in view of the subsequent
change in circumstances and the issuance of the impugned
circular clarifying the applicable legal position, the said advance
ruling no longer operates as an impediment to the Revenue in
determining the tax liability in accordance with the prevailing
position of law. It was argued that an interpretation adopted by
the departmental authorities at an earlier point of time, or any
misunderstanding of the existing legal position, cannot create a
binding precedent against the Revenue or prevent the competent
authority from applying the correct position of law subsequently.
6.2 Learned counsel for the respondents placed reliance upon
Section 103(2) of the CGST Act and submitted that an advance
ruling remains binding only so long as the law, facts or
circumstances supporting the original advance ruling remain
unchanged. Once there is a change in the law, facts or
circumstances forming the foundation of the advance ruling, the
binding effect contemplated under Section 103 ceases to operate.
6.3 He argued that the petitioner cannot seek to rely upon the
advance ruling dated 12.02.2019 as an absolute bar against the
respondents, particularly in view of the subsequent developments
and the clarification issued by the Board through the impugned
circular.
7. In the aforesaid backdrop, we have heard the rival
contentions and perused the material available on record.
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8. We may first examine the controversy in the light of the
judgment rendered by the Division Bench of this Court in D.B. Civil
Writ Petition No.15048/2025, titled CG Tollway Ltd. v. The Union
of India & Others, decided on 22.05.2026. In the said case, the
Division Bench considered the scope and effect of Sections 2(31),
2(119) and 7 of the CGST Act, along with Schedule II thereto and
Rules 27 and 28 of the CGST Rules, 2017, in the context of a
concession agreement entered into between the petitioner therein
and NHAI. Upon examination of the contractual arrangement and
the reciprocal obligations undertaken by the parties, the Division
Bench held as under:
32:- The definition of “works contract” as provided under Section 2(119)
of the Act of 2017, and as included in Schedule II, Entry 6, would apply to
the present case. Inasmuch as the petitioner supplies the works contract
services to the NHAI and, in return, receives the right to demand and
collect fees from the users, licence of the site, and right of way, thus all the
ingredients of ‘barter’ are clearly available in the contract at hand.
Moreover, the right to receive premium, as specified supra, itself shows
that consideration forms part of the contract. Thus, the agreement in hand
would fall within the definition of “supply” as defined under Section 7 of
the Act of 2017. 34:- It is further relevant to note that, as per the terms of
the agreement itself, the valuation of toll collection rights undertaken by
the petitioner has been assessed at around Rs. 2590 million, and as
rightlly quoted by the Deputy Commissioner, the petitioner has been
awarded the right to collect the toll by the NHAI in consideration of the
construction services rendered by the petitioner on a DBFOT basis. The
service encompasses direct and indirect expenses related to construction
of roads, bridges, infrastructure, etc. and other assets at the toll plaza.
Thus, the agreement in question falls within the definition of “works
contract services” and has rightly been treated as taxable.
34:- Since, as there is a promise of fulfilling the obligation on the part of
the petitioner to construct and maintain the road, vis-à-vis the
corresponding promise of NHAI to permit the petitioner to collect toll for
the road in question during the subsistence of the contract, the transaction
squarely falls within the statutory framework of ‘supply’ and
“consideration. 39. A comparative analysis of both the circular and the
clarification reveals that the work undertaken for construction of roads
falls under Heading 9954 and not under Heading 9967, as tried to be
claimed by the learned counsel for the petitioner. Only Entry No. 9967,
with regard to collection of toll, has been exempted. However, where
construction of roads is undertaken and, pursuant thereto, as a reciprocal
arrangement
under the agreement, the toll is being collected, there is no exemption
under that heading whatsoever. This is further clarified by the Circular
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dated 17.06.2021 issued by the Ministry of Finance. More particularly,
when the payment for construction of roads is made in deferred annual
instalments, it may be called an annuity. In the present case, the collection
of toll is essentially one of the consideration, which is being received by
the petitioner and essentially amounts to annuity. Thus, the same does not
fall within the ambit of the exemption clause in this
regard.
40. Even otherwise, as far as the exemption notifications are concerned,
in case of any ambiguity the same are to be interpreted in favour of the
revenue and not in favour of the assessee. The law in this regard is no
longer res integra, in view of the judgment pronounced by the Hon’ble
Apex Court in Commr. of Customs v. Dilip Kumar & Co.; ( 2018) 9 SCC
1, followed in Commr. (CGST) v. Safari Retreats (P) Ltd.;(2025) 2 SCC
523.”
9. Thus, the Court clarified that the concession agreement
constituted a taxable supply of works-contract services. Section 7
of the CGST Act broadens the definition of 'supply' to include
barter, licensing, and exchange transactions, emphasising the
expansive scope of taxable activities. The court found that the
petitioner undertook construction, maintenance, and operation
duties in exchange for toll collection rights, land licenses, and
highway management responsibilities. Toll collection rights qualify
as 'consideration' under Section 2(31) of the CGST Act, which
encompasses payment in the form of money or other valuable
considerations. Entry 23 of Notification No. 12/2017-Central Tax
(CG) exempts certain services related to toll roads under Heading
9967; however, the petitioner’s activities fall under Heading 9954,
which pertains specifically to construction services.
10. In the present case also, the contractual arrangement
between the petitioner and NHAI is contained in Annexure-P/2.
The relevant provisions of the agreement, which govern the
payment of the Project Cost and the subsequent annuity
payments, read as under:-
23.3 Payment of Project Cost
23.3.1 50% (fifty per cent) of the Project Cost, adjusted for the
Price Index Multiple, shall be due and payable to the
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Concessionaire in 5(five) equal instalments of 10% (Ten per cent)
each during the Construction Period in accordance with the
provisions of Clause 23.4.
23.3.2 The remaining 50% (fifty per cent) of the Project Cost, shall
be due and payable in 20 (twenty) biannual instalments
commencing from the 180th (one hundred and eightieth) day of
COD in accordance with the provisions of Clause 23.6.
23.4 Payment during Construction Period
Upon receiving a report from the Independent Engineer certifying
the achievement of the below mentioned payment milestones
("Payment Milestones"), the Authority shall disburse, within 15
(fifteen) days of the receipt of each such report, an instalment equal
to 10% (ten per cent) of the Project Cost, adjusted for the Price
Index Multiple as applicable on the Reference Index Date preceding
the date of that report.
For the purpose of this clause 23.4, the Payment Milestones for
release of payment during Construction Period shall be as under:
a) I (first) Payment Milestone - On achievement of 20%
physical progress
b) II (second) Payment Milestone - On achievement of 40%
physical progress
c) III (third) Payment Milestone - On achievement of 60%
physical progress
d) IV (fourth) Payment Milestone - On achievement of 75%
physical progress
e) V (fifth) Payment Milestone - On achievement of 90%
physical progress
Provided that in case of Change of Scope, the physical
progress shall be recalculated to account for the changed scope.
23.5 Bonus on early completion
In the event that the Concessionaire shall achieve COD more than
30 (thirty) days prior to the Scheduled Completion Date, the
Authority shall pay to the Concessionaire a bonus equal to 1/30%
(one by thirty per cent) of the Completion Cost for every day by
which COD shall precede the Scheduled Completion Date.
23.6 Annuity Payments during Operation Period
23.6.1 An amount equal to the product of the Project Cost and the
Price Index Multipl applicable as on COD shall be deemed to be the
cost of the Project as on COD (th "Completion Cost"). The Parties
agree that 50% (fifty per cent) of the Completion Cost shall be
deemed to have been paid during the Construction Period and th
balance remaining shall be due and payable during the Operation
Period accordance with the provisions of Clause 23.6.2.
23.6.2 The Completion Cost remaining to be paid in pursuance of
the provisions of Clause 23.6.1 shall be due and payable in
biannual instalments over a period of 10 (ten) years commencing
from COD, along with interest thereon (the "Annuity Payments").
The 1" (first) instalment of Annuity Payments shall be due and
payable within 15 (fifteen) days of the 180th (one hundred and
eightieth) day of COD and the remaining instalments shall be due
and payable within 15 (fifteen) days of completion of each of the
successive six months.
21.6.3 Each of the Annuity Payments due and payable during (a) the
1st (first), 2nd (second) and 3rd (third) years following the COD
shall be equal to 1.5% (one point five per cent) of the Completion
Cost;(b) the 4th (fourth), 5th (fifth), 6th (sixth) and 7th (seventh)
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years following the COD shall be equal to 2.5% (two point five per
cent) of the Completion Cost; and (c) the 8th (eighth), 9th (ninth)
and 10th (tenth) years following the COD shall be equal to 3.5%
(three point five per cent) of the Completion Cost.Each of the
biannual instalments payable hereunder shall be paid along with
interest as specified in Clause 23.6.4.
23.6.4 Interest shall be due and payable on the reducing balance of
Completion Cost at an interest rate equal to the applicable Bank
Rate plus 2% (two per cent) Such interest shall be due and payable
biannually along with each instalment specified in Clause 23.6.3.
For the avoidance of doubt and by way of illustration, the Parties
agree that interest on 50% (fifty per cent) of the Completion Cost,
calculated from COD and until the 180th (one hundred and
eightieth) day of COD, shall be due and payable to the
Concessionaire along with the first Annuity Payment and interest on
48.5% (forty eight point five per cent)of the Completion Cost,
calculated for the period commencing from the 181" (one hundred
and eighty first) day from COD and until the 1st (first) anniversary
of COD, shall be due and payable along with the second Annuity
Payment due and payable under this Agreement. The Parties further
agree that interest shall be calculated at monthly rests in
accordance with the normal practice followed by banks for
calculation of interest on outstanding loans.
The terms of the concession agreement clearly indicate that the
contract between the petitioner and NHAI is essentially a design,
build, operate, and transfer project. It is partially funded by the
petitioner (the Concessionaire), who has the right to recover costs
from NHAI through annuity payments, as outlined above.”
11. The only distinction in the case of CG Tollway (supra) was
that the petitioner held a Build-Operate-Transfer (BOT) contract
bearing full traffic and revenue risk, including toll collection
responsibilities. The fundamental difference between BOT and the
present contract is the investment burden: in a BOT contract, the
entire investment risk—100%—is borne by the concessionaire,
whereas in the instant matter, the concessionaire has invested
approximately 50 % of the required funds, with the remaining
50% payable by NHAI on an annuity basis.
12. Thus, it is apparent that the nature of the concession
agreement between the parties in the present matter is also a
“works contract services”, hence taxable. It's not the case of the
petitioner that his services were confined only to access to a road
or a bridge, by way of payment of an annuity; rather, the terms of
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the contract essentially include construction, design, and
maintenance of the roads, with payments at intervals.
13. The Court in a matter of CG Tollway (Supra) specifically held
that the scope of works for construction services is distinct from
that of transport contracts, and that Entry 23 of the Notification
pertains exclusively to transport services. Therefore, the
petitioner's services in the present case do not qualify for
exemption and are taxable under the works contract category. The
services provided by the petitioner, as described in the contract,
constitute a works contract, and Entry 23A of the Notification
relates to transport services, establishing that the same principles
and analogy applied by the Division Bench in the CG Tollway
(Supra) case are directly applicable here. There is no justified
reason for this Bench to adopt a differing view. The Single Bench
of the Telangana High Court in the matter of GMR Pochanpalli
Expreessways Limited (Supra) struck down the impugned Circular,
but the Division Bench in the matter of CG Tollway (Supra)
distinguished this decision. In its judgment, the Division Bench
provided a detailed interpretation of the issues at hand. It reached
a different conclusion from the analogy adopted by the Telangana
High Court and we see no strong or convincing reasons to
disagree with the view taken by the Coordinate Bench.
14. Likewise, if works contracts services were intended to be
exempt from tax, the notification would have explicitly included
this exemption.
15. Additionally, the challenge to the impugned circular's
authority to amend the notification is unfounded, as the circular’s
purpose is to clarify terminology and prevent misinterpretations by
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the authorities responsible for implementing the Act. It is in the
domain of the Board to issue such instructions under section 168
of the CGST Act. Lastly, it is worth noting the submission of
learned petitioners' counsel that Revenue should not have acted
against its own advance ruling is also not tenable & suffices to say
that the Notification itself is binding & If revenue officers have
misunderstood the existing law, their interpretation does not bind
the implementing authority once the Board issues clarification.
Section 168 of the Act authorises the Board to issue such
instructions, orders or circulars to ensure the proper
implementation of the law, especially when the advance ruling
authority has misread the legal provisions. If such a
misinterpretation results in significant revenue loss for the state,
the Board has every right to step in and set things straight, as
allowing the error to go unchecked would be unacceptable.
Moreover, the revenue's actions following the circular in question
are justified, as Section 103 of the Act clearly grants the
authorities the power to take such measures when the law does
not specifically prohibit them.
16. For the aforesaid reasons, we find no merit in the challenge
laid by the petitioner to the impugned circular(s) or in the
consequential challenge to the levy of GST on the annuity
payments received under the concession agreement(s). The
challenge based upon the earlier advance ruling also does not
alter the position, since the taxability has to be determined with
reference to the statutory exemption and the true nature of the
services rendered under the contract.
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17. In view of the foregoing discussion, we find no substance in
the instant bunch of writ petitions. The same is, accordingly,
dismissed.
18. All pending applications stand disposed of.
(PRAVEER BHATNAGAR),J (DR.PUSHPENDRA SINGH BHATI),J
67/KP Singh Dewasi / Dhananjay Sharma
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