Goa Shipyard Limited, Thr. Its Auth. Rep. Kishore Manohar Samant vs. Shoft Shipyard PVT. LTD., Thr. Its Rep. R Ram Garg

Held

The Court held that the ruling of the Gujarat Authority for Advance Ruling, which stated that the Respondent is not liable to pay GST on "interest awarded under arbitration" and "costs awarded under arbitration," is binding. Consequently, the impugned orders of the Executing Court, directing the Petitioner/Judgment Debtor to pay GST on the part payment of interest, were quashed and set aside. The Court reasoned that since the Advance Ruling Authority has determined that GST is not payable on such amounts, the Petitioner cannot be compelled to make such payments. The Court made the rule absolute in terms of the prayer clause (a) of the petitions, effectively granting relief to the Petitioner. The Executing Court was permitted to proceed with the execution of the arbitral awards in accordance with law, excluding the GST component on interest.

Facts

The Petitioner, Goa Shipyard Limited, is the Judgment Debtor in five execution applications filed by the Respondent, Soft Shipyard Pvt. Limited, to execute arbitral awards. The Respondent sought directions from the Executing Court for the Petitioner to pay GST at 18% on part payments of interest due under the awards. The Executing Court granted this relief in five separate orders. During the pendency of these petitions, the Respondent applied to the Gujarat Authority for Advance Ruling (AAR) on the GST liability. The High Court had previously stayed further execution of the impugned orders concerning the GST payment on interest. The Gujarat AAR subsequently ruled that the Respondent is not liable to pay GST on "interest awarded under arbitration" and "costs awarded under arbitration."

Key Issues

1. Whether the Petitioner, as the Judgment Debtor, is liable to pay GST on the part payment of interest awarded under arbitration, as directed by the Executing Court under Section 51 of the CGST Act, 2017 (or equivalent SGST Act)? The Petitioner argued that the Gujarat AAR's ruling that GST is not payable on awarded interest and costs should be followed, rendering the Executing Court's orders incorrect. The Petitioner relied on the AAR's decision. The Respondent, while initially seeking GST payment, later presented the AAR's ruling. The Respondent did not present any arguments against the AAR's decision or in support of the Executing Court's orders.