M/S Bst Steels PVT LTD vs. The Superintendent Of Central Tax

Held

The Court held that the provision of services by a director of a company to the said company is leviable to tax on a reverse charge basis, as specifically notified by the Government of India vide Notification No. 13/2017-Central Tax (Rate) dated June 28, 2017. The Court noted that Clause 6 of the said notification clearly indicates that services supplied by a director to the company are taxable under reverse charge, with the company being liable to pay the tax. Since this notification was not under challenge and was still in effect, the findings of the Superintendent of Central Tax and the Additional Commissioner (Appeals-II) were deemed not erroneous, arbitrary, or bad in law. The Court found no strong case made out by the petitioner warranting interference with the impugned order.

Facts

The petitioner, M/s BST Steels Pvt. Ltd., filed a writ petition challenging an order dated March 31, 2023, passed by the Additional Commissioner (Appeals-II) and an earlier order dated November 18, 2021, passed by the Superintendent of Central Tax. The dispute concerns the levy of GST on a guarantee/security provided by the Managing Director to the company for availing credit facilities from a bank. The petitioner argued that this activity should not be considered a supply as per Schedule III of the CGST Act. The tax period under scrutiny was July 2017 to March 2019. The petitioner sought to set aside the assessment orders, demand, penalty, and interest.

Key Issues

1. Whether the provision of a personal guarantee and personal properties as security by the Managing Director to the company for availing bank credit facilities constitutes a 'supply' under the GST Act, attracting GST liability? (Section 7(1) of CGST Act, Schedule III of CGST Act) Petitioner's Contention: The petitioner argued that the activities listed in Schedule III of the CGST Act are not considered a supply, and therefore, the guarantee/security provided by the Managing Director should be excluded from the scope of supply, exempting it from GST. Revenue's Contention: The revenue relied on Notification No. 13/2017-Central Tax (Rate) dated June 28, 2017, which specifies that services supplied by a director of a company to the said company are leviable to tax on a reverse charge basis, making the company liable to pay the tax. The revenue contended that this notification was not under challenge and remained valid.