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2021 Supreme(Bom) 975
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
G.S. Patel, J.
Shanklesha Constructions - Appellant
Versus
Shanklesha Constructions - Respondent
Interim Application (L) No. 5946 of 2020; Comm Arbitration Petition No. 1060 of 2019; Review Petition (L) No. 4687 of 2020
Decided On : 31-03-2021
Zal Andhyarujina, Advocate, Nishi Abuwala, Advocate, Z. Jariwala, Advocate, S. Jariwala, Advocate, Dua Associates, Advocate, Mayur Khandeparkar, Advocate, Ativ Patel, Advocate, A.V.P. Partners, Advocate
The main legal point established in the judgment is that the GST liability arises at the time of payment, as per Section 13(2)(b) of the GST Act, and that commitments made by parties must be upheld.
Headnote:
GST Liability - Interpretation of Section 13 of GST Act - Saifee Developers - Section 13 of the GST Act 2017 - The court dismissed the Review Petition and allowed the Interim Application by Shanklesha Constructions. The court held that the commitment to pay GST by Saifee Developers was valid and that the GST liability arose at the time of payment, as per Section 13(2)(b) of the GST Act. The court also ordered Saifee Developers to pay the remaining GST and interest within 15 days, failing which Shanklesha Constructions would not be required to register any additional flat purchase agreements.
Fact of the Case:
The case involved a dispute between Saifee Developers and Shanklesha Constructions regarding the liability to pay GST on the purchase of flats. Saifee Developers claimed it invested Rs. 15 crores in Shanklesha Constructions' development project and exercised an option to purchase flats. The dispute centered around the interpretation of the GST Act and the timing of the GST liability.
Finding of the Court:
The court found that the commitment to pay GST by Saifee Developers was valid and that the GST liability arose at the time of payment, as per Section 13(2)(b) of the GST Act. The court dismissed the Review Petition and allowed the Interim Application by Shanklesha Constructions. The court also ordered Saifee Developers to pay the remaining GST and interest within 15 days, failing which Shanklesha Constructions would not be required to register any additional flat purchase agreements.
Issues: The main issue was whether Saifee Developers was liable to pay GST on the balance payment made to Shanklesha Constructions for the purchase of flats, and the interpretation of Section 13 of the GST Act.
Ratio Decidendi: The court held that the GST liability arose at the time of payment, as per Section 13(2)(b) of the GST Act. The court also ordered Saifee Developers to pay the remaining GST and interest within 15 days, failing which Shanklesha Constructions would not be required to register any additional flat purchase agreements.
Final Decision: The court dismissed the Review Petition and allowed the Interim Application by Shanklesha Constructions. The court also ordered Saifee Developers to pay the remaining GST and interest within 15 days, failing which Shanklesha Constructions would not be required to register any additional flat purchase agreements.
JUDGMENT
G S Patel, J.
A. PROCEEDINGS BEFORE THE COURT
1. This is an order on both the Interim Application No. 5946 of 2020 and the Review Petition (L) No 4687 of 2020.
2. The original Petition under Section 9 of the Arbitration & Conciliation Act, 1996 is in the Commercial Division of this Court. The Interim Application and the Review Petition are, consequently, also in that Division.
3. The Section 9 Petitioner is a private limited company ("Saifee Developers"). The 1st Respondent in the Section 9 Petition is a partnership firm ("Shanklesha Constructions"). Respondents Nos. 2 to 6 in the original Section 9 petition are partners of Shanklesha Constructions.[1]
4. Interim Application No 5946 of 2020 is by Shanklesha Constructions (and its partners). It seeks a recall or vacating of interim or ad interim reliefs granted by an order of 15th July 2019 to Saifee Developers.
5. The Review Petition is by Saifee Developers. It seeks a review of my order of 28th February 2020. Specifically, Saifee Developers asks to be relieved of a statement it made regarding payment of Goods & Service Tax ("GST"). The order of 28th February 2020 noted, recorded and accepted that statement made on instructions by counsel then engaged by Saifee Developers.
B. SUMMARY OVERVIEW
6. I have heard Mr Andhyarujina for Saifee Developers and Mr Khandeparkar for Shanklesha Constructions at length. I have considered the rival submissions, including on interpretation of Section 13 of the Central Goods and Services Tax Act 2017 ("GST Act").
7. The sole issue is whether or not Saifee Developers is liable to pay GST on what has metamorphosed (from its earlier manifestation as a joint venture agreement) into an agreement for the sale of flats in a project being undertaken by Shanklesha Constructions. There is some discord about the number of flats this new agreement contemplates, but that is of no consequence. According to Mr Andhyarujina, on a correct interpretation of the GST Act, and particularly Section 13 of that Act, as no 'service' has as yet been rendered - the flats not having been delivered - in the peculiar facts of this case, Saifee Developers is not required to pay any GST at all to Shanklesha Constructions. He does not dispute that, in law, the liability to pay GST into revenue is that of Shanklesha Constructions; he does contend that Shanklesha Constructions cannot demand that GST, let alone any interest, until Saifee Developers is provided the promised flats. He submits that the correct position in law was not communicated to the Court by previous counsel for Saifee Developers. This resulted in the 28th February 2020 order, when Saifee Developers made a commitment to pay Shanklesha Constructions the GST for the flat purchase agreement (computed on the amount of consideration); and that, in turn, has yielded an error of law apparent on the face of the record warranting a review.
8. This interpretation is contested down the line by Mr Khandeparkar. He points out that on any rational and reasonable reading of the plain language of the statute, Mr Andhyarujina's position is wholly untenable. Not only is there no error at all, but the previous order of which review is now sought fully protected Saifee Developers, reflected the correct position in law, and, moreover, recorded a solemn statement by its counsel on instructions. This is not, he says, a case where some sort of concession was made by counsel without instructions. Therefore, in his submission, the review petition must fail.
9. Axiomatically, Mr Khandeparkar submits, his Interim Application on behalf of Shanklesha Constructions must succeed. The entire thrust of that Interim Application is that Saifee Developers has obtained a protective order on 15th July 2019 but wholly failed to abide by one of its crucial requirements, viz., that Saifee Developers would pay the GST. This may even be a fraud on revenue. There is no defence to the Interim Application except the grounds taken in review; and, therefore, if
