Karaikudi Medical Centre And Hospital LTD vs. The State Tax Officer
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The petitioner, Karaikudi Medical Centre and Hospital Ltd., challenged an order dated 29.12.2023 passed by the respondent, the State Tax Officer, Karaikudi Assessment Circle. The impugned order confirmed tax, interest under Section 50 of the TNGST Act, 2017, and penalty under Section 73(9) of the said Act, totaling Rs. 2,59,41,660/-. The demand included tax on difference in turnover, testing tax, RCM towards rent, other income, and RCM towards professional fees. The petitioner argued that its health services and testing charges are exempted under Notification No.12/2017-CT (Rate) dated 28.06.2017. It also contended that rent on reverse charge basis is not applicable for commercial property renting as per Notification No.13/2017-CT (Rate) dated 28.06.2017, and a significant portion of the demand on professional fees pertains to the pre-GST period (April 1, 2017, to June 30, 2017). The petitioner further argued that the respondent relied on a profit and loss account for the whole assessment year and compared it with GST returns (GSTR-9 and GSTR-9C), leading to an erroneous taxation of pre-GST turnover.
Held
The Court held that, prima facie, the petitioner appears to be entitled to exemption under Notification No.12/2017-CT (Rate) dated 28.06.2017 for items listed as Sl.Nos.2, 3, 4 & 5 in the table of the impugned order (testing tax, RCM towards rent, other income, and RCM towards professional fees). Additionally, the Court found that the petitioner might be entitled to exemption under Notification No.13/2017-CT (Rate) dated 28.06.2017 concerning Sl.No.1 in the said table (tax on difference in turnover). The Court considered the petitioner's submission regarding the erroneous consideration of turnover/income in the profit and loss account, which included the pre-GST era, as reasonable. Given that these issues required proper and detailed consideration by the respondent, and many grounds raised before the Court were not adequately addressed by the petitioner before the respondent, the Court set aside the impugned order. The case was remitted back to the respondent for a fresh adjudication and order on merits and in accordance with law within eight weeks. The petitioner was directed to cooperate by filing a proper reply within two weeks, and the impugned order was to be treated as a corrigendum to the Show Cause Notice. The Court expressly left undecided the full extent of exemptions and the precise calculation of tax, interest, and penalty.
Key Issues
1. Whether the petitioner is entitled to exemption under Notification No.12/2017-CT (Rate) dated 28.06.2017 for health services, testing charges, and professional fees? (Question of law) 2. Whether the petitioner is liable to pay tax on rent on a reverse charge basis under Notification No.13/2017-CT (Rate) dated 28.06.2017 for renting of commercial property? (Question of law) 3. Whether the impugned demand is without jurisdiction due to the taxation of pre-GST turnover based on an erroneous comparison between profit and loss account figures and GST returns? (Question of mixed law and fact) Petitioner's Arguments: The petitioner contended that its services, including health services and testing charges, are exempted under Sl.No.74 of Notification No.12/2017-CT (Rate) dated 28.06.2017. Regarding rent on reverse charge, it argued that Notification No.13/2017-CT (Rate) dated 28.06.2017, specifically Sl.No.5AA, does not apply to renting of commercial property. It also asserted that a substantial part of the demand for professional fees relates to the pre-GST period (April 1, 2017, to June 30, 2017). Furthermore, the petitioner claimed the demand was without jurisdiction as pre-GST turnover was taxed due to an erroneous comparison of profit and loss account with GST returns (GSTR-9 and GSTR-9C). Respondent's Arguments: The respondent argued that the Writ Petition is devoid of merits and should be dismissed. They contended that the petitioner could file a statutory appeal under Section 107 of the TNGST Act, 2017, to address the issues raised. The respondent also submitted that there are disputed questions of fact, which warrant the dismissal of the Writ Petition.
Sections Cited
Section 50, Section 73(9), Section 107, Rule 80(3)
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Cause title — parties, addresses and appearances
O R D E R Mr.R.Suresh Kumar, learned Additional Government Pleader, takes notice for the respondent. With the consent of the learned counsel for the petitioner and the learned Additional Government Pleader for the respondent, this Writ Petition is disposed of, at the time of admission.
The petitioner has challenged the impugned order dated 29.12.2023 bearing reference No.GSTIN33AAFCK4391J2ZC/2017-18 passed by the respondent. By the impugned order, the respondent has confirmed the tax together with interest under Section 50 of the TNGST Act, 2017 and the penalty under Section 73(9) of the said Act, under the following heads: Sl. No. Particular CGST SGST 1 Tax on difference in turnover Rs.14,84,800/- Rs.14,84,800/- 2 Tax on testing tax Rs.5,21,197/- Rs.5,21,197/- 3 Tax on RCM towards rent Rs.3,26,795/- Rs.3,26,795/- 4 Tax on other income Rs.1,77,388/- Rs.1,77,388/- 5 Tax on RCM towards professional fees Rs.36,05,765/- Rs.36,05,765/- _____________ Page No. 2 of 8 https://www.mhc.tn.gov.in/judis Interest u/s 50 of the act Rs.62,43,290/- Rs.62,43,290/- 7 Penalty u/s. 73(9) of the act Rs.6,11,595/- Rs.6,11,595/- Total Rs.1,29,70,830/- Rs.1,29,70,830/- Grand Total Rs.2,59,41,660/-
The specific case of the petitioner is that the petitioner is a hospital engaged in providing health services and therefore, not only the services provided by the petitioner but also the doctors/physician who are consulted are exempted from payment of GST under Sl.No.74 to the Notification No.12/2017-CT (Rate) dated 28.06.2017. It is further submitted that similarly, testing charges are also exempted under the same Notification.
It is submitted that as far as the tax on rent on reverse charge basis is concerned, Notification No.13/2017-CT (Rate) dated 28.06.2017 does not apply for renting of commercial property and the petitioner was therefore not required to pay the tax on reverse charge basis. Specifically, the learned counsel for the petitioner would draw attention to Sl.No.5AA to Notification No.13/2017-CT (Rate) dated 28.06.2017 which reads as under:- _____________ Page No. 3 of 8 https://www.mhc.tn.gov.in/judis Sl. No. Category of Supply of Services Supplier of service Recipient of Services (1) (2) (3) (4) 5AA Service by way of renting of residential dwelling to a registered person Any person Any registered person
It is further submitted that the bulk of the demand on reverse charge basis towards the professional fees apart from being exempted under Sl.No.74 to the Notification No.12/2017-CT (Rate) dated 28.06.2017 pertains to the pre-GST period i.e., for the period starting from 1st April, 2017 and ending with 30th June, 2017. 6. It is submitted that the respondent has relied on the profit and loss account of the petitioner which is for the whole assessment years and which was compared with the GST return filed by the petitioner in GSTR-9, for which, GSTR-9C was also issued under Rule 80(3) of the TNGST Rules, 2017. It is further submitted that the impugned demand apart from being contrary to the aforesaid Notification is also without juri iction as pre-GST turnover has been taxed under the provisions of _____________ Page No. 4 of 8 https://www.mhc.tn.gov.in/judis the TNGST Act, 2017 by erroneous comparison between the incomes in the profit and loss account and in the returns filed in GSTR-9 and GSTR-9C.
The learned Additional Government Pleader for the respondent would submit that this Writ Petition is devoid of merits and is liable to be dismissed. It is further submitted that all the issues which are canvassed before this Court can be canvassed by the petitioner by filing a statutory appeal under Section 107 of the TNGST Act, 2017 and therefore prays for dismissal of this Writ Petition. That apart, the learned Additional Government Pleader would submit that there are disputed questions of fact and therefore on this count also, this Writ Petition is liable to be dismissed.
After considering the arguments advanced by the learned counsel for the petitioner and the learned Additional Government Pleader for the respondent and perusing the Notifications filed before this Court, prima facie, the petitioner appears to be entitled for exemption under the Notification No.12/2017-CT (Rate) dated 28.06.2017 insofar as the Sl.Nos.2, 3, 4 & 5 in the Table in paragraph No.2 of this order are _____________ Page No. 5 of 8 https://www.mhc.tn.gov.in/judis concerned and under Notification No.13/2017-CT (Rate) dated 28.06.2017 insofar as the Sl.No.1 in the said Table is concerned. Insofar as the difference in the turnover which is in Sl.No.1 of the said Table is concerned, the submission of the learned counsel for the petitioner is reasonable as there was an erroneous consideration of the turnover/income in the profit and loss account for the period in dispute which includes the period covered by pre-GST era under the provisions of the Finance Act, 1994. 9. Considering the fact that this issue would require a proper and detailed consideration by the respondent and considering the fact that many of the grounds which are canvassed before this Court were not taken up by the petitioner before the respondent which has culminated in the impugned order, the impugned order is set aside and the case is remitted back to the respondent to pass a fresh order on merits and in accordance with law, within a period of 8 weeks from the date of receipt of a copy of this order.
The petitioner is directed to co-operate with the respondent by filing proper reply, within a period of two weeks from the date of receipt _____________ Page No. 6 of 8 https://www.mhc.tn.gov.in/judis of a copy of this order. The impugned order which stands set aside in this order shall be treated as corrigendum to the Show Cause Notice already issued to the petitioner.
Accordingly, this Writ Petition stands allowed by way of remand. No costs. Consequently, connected Miscellaneous Petitions are closed. 10.04.2024 Index: Yes / No Neutral Citation: Yes / No Speaking Order / Non-Speaking Order JEN Copy To: The State Tax Officer, Karaikudi Assessment Circle, No.54, Alamelu Illam, Aruna Nagar II Street, Karaikudi, Sivaganga District, Tamil Nadu – 630 001. _____________ Page No. 7 of 8 https://www.mhc.tn.gov.in/judis C.SARAVANAN
, J.
JEN and W.M.P.(MD) Nos.8127 & 8129 of 2024 10.04.2024 _____________ Page No. 8 of 8 https://www.mhc.tn.gov.in/judis
Reproduced from the public record of the Madras High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.